Death tax repeal would only help rich people???

[Ben E Lou]

Link (http://www.ajc.com/saturday/content/epaper/editions/saturday/metro_049487790155b13500f9.html)



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<!-- AAAD AUTHOR START -->Derrick Henry<!-- AAAD AUTHOR END --> - <!-- AAAD SOURCE START -->Staff<!-- AAAD SOURCE END -->
Saturday, March 6, 2004


<!-- AAAD TEXT START -->J.C. Hyde was an unassuming farmer, land-rich but cash-poor. For virtually his entire life, he plowed by mule on his 127-acre farm along the Chattahoochee River in east Cobb County, land he had lived on since his father bought it in 1920. Surrounded by pricey subdivisions, it had become one of the largest tracts of undeveloped land in metro Atlanta..

The land survived the boll weevil and the Great Depression. Mr. Hyde intended to make sure it would survive developers.

"I remember being there when a real estate developer drove up, as many did, and said: 'J.C. Hyde, I can make you a wealthy man,' " said Rand Wentworth, head of the Atlanta office of the Trust for Public Land from 1990 to 2002. "J.C. answered : 'But then I would not be happy.' "

Mr. Hyde was plenty happy to live the way he did, in the log house he grew up in, with heat from a pot-bellied stove and water from a well.

"I have running water," he joked in a 1991 Atlanta Journal-Constitution article. "I run out to the well and get it."

Working beside his brother, William "Buck" Hyde, he grew sweet potatoes, corn, okra, green beans, peas and tomatoes, selling them from the back of a pickup truck near Marietta Square. In 1996, Mr. Hyde was selling a bushel of his "Gold Nugget" sweet potatoes --- Grade 1 --- for $16.

After a long day's work, he might pick up his fiddle and play some music.

Mr. Hyde was a bachelor, not given to idle talk. "I remember picking sweet potatoes with him for six hours and during that period he never said more than four words," said Kevin Johnson of Atlanta, Chattahoochee River Program coordinator with the Trust for Public Land.

He lived with his brother, also unmarried. While the men tended the fields, their four married sisters took turns cooking and helping with the domestic chores, said Mr. Wentworth.

When Mr. Hyde's brother died in 1987 and left him his share of the farm, the IRS and state revenue collectors arrived. They assessed Mr. Hyde with a debt of $467,000 to the IRS and $96,000 to the state for estate taxes.

"This is all something new to me," Mr. Hyde said in a Journal-Constitution story in 1991. "I never owed anybody nothing."

The private, nonprofit Trust for Public Land worked out a deal in 1992 with the National Park Service to buy 40 acres of riverfront property from Mr. Hyde for $1 million, more than enough to pay the taxes. The deeded land would become part of the Chattahoochee National Recreation Area, safe from developers. Mr. Hyde, meanwhile, could continue living and working there.

J.C. Hyde, 94, of Marietta died Wednesday. The funeral is 2 p.m. today at Roswell Funeral Home.

"I have never met a better conservationist than J.C. Hyde," said Mr. Wentworth, now president of the Land Trust Alliance in Washington, a national umbrella of conservation organizations. "He cared for that land like it was family, like it was part of his body. When he feared he might have to sell part of it, he said, with tears in his eyes, 'Losing part of this land would be like cutting off my arm.' " The future of the nearly 90 acres not owned by the National Park Service remains to be determined, said Mr. Wentworth. "The challenge now is that the land could be lost to subdivisions." Survivors include three sisters, Rosa Lee Stroup of Atlanta, M. Maglee Mitchell of Mableton and Gladys A. Holcomb of Marietta.<!-- AAAD TEXT END --><!-- AAAD ARTICLE END-->
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[Ben E Lou]

To further explain this story for those not familiar with metro Atlanta, in 1920, East Cobb was a rural area. Today, other than the Hyde farm, it is one of the wealtheist suburbs of Atlanta, and the farm is in a prime land area. That's why the value went up so much. Pity that he had to sell a third of his land to pay the Imperial Federal Government.

[Jon]

Well, the value must have shot up dramatically for him to have to pay the estate tax. Because the exemption is so high, the tax does not apply to an overwhelming majority of people who die. My conservative Trusts and Estates teacher (who was opposed to the estate tax but admitted that the phrase "death tax" was designed to make it a wedge issue) told us this as she told us the tragic tale of the Mara family who would be forced to part with the only thing they ever loved, the N.Y. Football Giants, when Wellington passes into the great big owner's box in the sky.

My point is that he is an exception to the rule....

[Ksyrup]

So the argument against repealing this tax is the same as was used against the Bush tax cut - it's unfair to those who never had to pay taxes in the first place?

[QuikSand]

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence.

[clintl]

It sounds like he came out OK on the deal. He still got to use the land, and the buyer is better equipped to keep it from development than he was, if that's really his main concern. And it looks like he probably got to pocket a couple hundred thousand dollars.

FWIW, I think the objections to estate taxes are misleading and overblown. When a person dies, the bases for capital gains of all of that person's assets are reset to the value at the time of death by law. This is probably a good thing, because it would be a hellacious task for the heirs to try to sort through the financial records and try to figure it all out. However, I don't think it's unfair for the government establish a tax to recoup the lost capital gains taxes. I think there's plenty of room for debate with regard to the formula or rates used, or the level that kicks it in. I would be fine with exempting the deceased's residence from the tax, and deferring taxes on family businesses until they're sold, so that families could keep them. But I support the basic concept of estate taxes. There is no reason that families members should get the free ride on capital gains of the deceased's assets.

[Ben E Lou]

It sounds like he came out OK on the deal. He still got to use the land, and the buyer is better equipped to keep it from development than he was, if that's really his main concern. And it looks like he probably got to pocket a couple hundred thousand dollars.By what standards did he come out ok though? By his? I'm rather skeptical of the "conservationist" slant in the story. I didn't get the impression that he was that political. It is fairly safe to guess that whatever money he got to pocket wasn't as important to him as his family land.

[clintl]

By what standards did he come out ok though? By his?

By the standards of reading the information in the story, looking at where he was before, and where he was at the end, and seeing that while he did have to sell 1/3 of his land, he found a buyer that allowed him to pretty much continue living the same lifestyle he had lived before. I'm sure it was not a pleasant time for him, but he was able to continue living the way he wanted after it was all over. So I'll reverse the question. By what standards didn't he come out OK?

[QuikSand]

His deceased brother owned an asset. It skyrocketed in value while he owned it, bringing substantial benefit to him, whether he cashed it out or not. He dies, and wills it to an heir. What is wrong with recognizing that this was, essentially, income that had yet to be taxed?

If you want to say that only working people should pay income taxes, and those who derive their income from investments and other passive forms shoudl be exempt -- that's fine. But I get the sense that's not at all what you're saying here. I sense your argument is that because this guy wasn't walking around with a wheelbarrow full of cash, that he was "poor" and therefore he's being unfairly subjected to taxes. I disagree on both fronts.

[Ben E Lou]

By what standards didn't he come out OK?Obviously I can't speak for him, but land ownership seems so fundamental to me. That he had to give up his family land because of the Government Vultures swooping in when his brother died just seems grossly unfair to this simple-minded S.O.B.

[Ben E Lou]

If you want to say that only working people should pay income taxes, and those who derive their income from investments and other passive forms shoudl be exempt -- that's fine. But I get the sense that's not at all what you're saying here. I sense your argument is that because this guy wasn't walking around with a wheelbarrow full of cash, that he was "poor" and therefore he's being unfairly subjected to taxes. I disagree on both fronts.Actually neither. I don't really have any argument. I just want the government to stay out of my business as much as possible, and this reads to me like an example of them once again sticking their nose where it doesn't belong, and it therefore irks me to no end.

[clintl]

I have the same view as QuikSand. The increase in value was income that had not yet been taxed. It was not a case of "government vultures" swooping in to take what was rightfully his.

[Cringer]

Crap. atleast he didn't have the city take it away from him 15-20 years ago for a Wal-Mart, Wal-Mart is pretty good at talking cities into doing that.

[Ben E Lou]

Crap. atleast he didn't have the city take it away from him 15-20 years ago for a Wal-Mart, Wal-Mart is pretty good at talking cities into doing that.Don't EVEN get me going on Imminent Domain abuses. You're right that Wal-Mart can be one of the worst at using the government to do their dirty work.

[JonInMiddleGA]

SD, you must have missed the memo ... if you own land (or pretty much anything else of any value), you're considered "rich".

[Solecismic]

There is no tax on the sale of a primary residence, and the death tax is separate from future taxes on investments, which would be subject to the capital gains tax.

The death tax is a separate money-grab entirely, and, unless you keep your money in cash or stock form, your heirs are going to have to sell businesses, land, homes, other assets, just to pay it.

It doesn't make a lot of sense, as the money used to pay for those assets was already taxed. The marginal rate of the death tax - 50% - makes it a huge burden. Often, the death of the original owner is also the death of a small business or farm.

Our image of this only affecting idle rich folk living in million-dollar estates with a caderie of chauffeurs, maids and butlers is completely erroneous.

[clintl]

While technically what you said is true, Jim, I think you are leaving out something very important. Because the cost basis of an investment gets reset at the time of death to the value of the investment at the time of death, the taxes from past capital gains is lost. That income was never taxed while the deceased was alive. As I said earlier, while there is plenty of room for debate about the formula, and plenty of good arguments for deferring taxes on some things, and exempting them on others, it is perfectly reasonable to me that an estate tax in principle is a fair way to recoup the lost taxes on this previous income.

[GrantDawg]

There is no tax on the sale of a primary residence, and the death tax is separate from future taxes on investments, which would be subject to the capital gains tax.

The death tax is a separate money-grab entirely, and, unless you keep your money in cash or stock form, your heirs are going to have to sell businesses, land, homes, other assets, just to pay it.

It doesn't make a lot of sense, as the money used to pay for those assets was already taxed. The marginal rate of the death tax - 50% - makes it a huge burden. Often, the death of the original owner is also the death of a small business or farm.

Our image of this only affecting idle rich folk living in million-dollar estates with a caderie of chauffeurs, maids and butlers is completely erroneous.

But they have money and I don't. So I should hate them and hope the government takes stuff from them, right?

[Solecismic]

While technically what you said is true, Jim, I think you are leaving out something very important. Because the cost basis of an investment gets reset at the time of death to the value of the investment at the time of death, the taxes from past capital gains is lost. That income was never taxed while the deceased was alive. As I said earlier, while there is plenty of room for debate about the formula, and plenty of good arguments for deferring taxes on some things, and exempting them on others, it is perfectly reasonable to me that an estate tax in principle is a fair way to recoup the lost taxes on this previous income.

That's true about some investments, not true about just about any other asset, and nothing justifies the enormous tax rate - that's a penalty, not the recouping of anything.

No question that there shouldn't be a switching of the tax basis of the investment in that situation. That doesn't justify, in any way, the rest of the death tax.

The death tax was put in place as an emergency fund-raiser during WWI. At the time, the threshold was comparitively higher, so it affected far fewer people. It was supposed to go away when the emergency was over. Instead, because the threshold has not kept pace with inflation, it's become the death of thousands of family businesses, and has all but eliminated the family farm.

But, what the heck, let's hate the rich. I guess that means we had better start loving major corporations again, because they're the only ones that can afford to provide jobs once the family businesses are gone.

[Ksyrup]

But they have money and I don't. So I should hate them and hope the government takes stuff from them, right?
That's right. What's bad for them is good for me. If I'm miserable, they should be, too.

[QuikSand]

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?

[Fritz]

I wonder how he paid his annual tax assesment.

[Ben E Lou]

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?Well, there's the Fair Tax plan. {ducking}

[Ksyrup]

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?
It's not the people advocating a particular tax system who are being berated for hating whomever would bear those taxes, it's the "class warfare" arguments put forth by those advocates that are being berated. Few and far between are the arguments for a tax system that don't ultimately come down to
"rich vs. poor."

[KevinNU7]

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence. I agree. If he was so concerned he could ask the government to make the land a national park

[Ben E Lou]

I agree. If he was so concerned he could ask the government to make the land a national parkAFAIC, the man shouldn't have to ask the government for jack squat. It is his family's land.

[KevinNU7]

So when my parents die and I get their house I shouldn't pay tax on it?

[Ben E Lou]

So when my parents die and I get their house I shouldn't pay tax on it?Wasn't the income with which they acquired the house already taxed?

[gstelmack]

AFAIC, the man shouldn't have to ask the government for jack squat. It is his family's land.
Agreed 100%. My problem with the death tax is that there is no income involved until the land is sold. If the heirs decide to sell the land, then the value of the land should be taxed, not because someone just died. Much like you aren't taxed on your investments until you cash them in. When the only choice is to cash the investment in order to pay taxes on the investment, something is seriously screwed up (and it acts as a deterrent on investing).

[Fritz]

FWIW SkyDog, I am with you on this. At least in spirit.

[Barkeep49]

I think Kevin is bring up a good point: The idea of an estate tax is to tax people who haven't earned what they are recieving. The idea that a person should succeed or fail on their own, and not on the wealth (or lack there of) of a person's parents seems like a core American value to me.

[CamEdwards]

That's right. What's bad for them is good for me. If I'm miserable, they should be, too.

What's this "them" crap, lawyer boy? :)

[CamEdwards]

Agreed 100%. My problem with the death tax is that there is no income involved until the land is sold. If the heirs decide to sell the land, then the value of the land should be taxed, not because someone just died. Much like you aren't taxed on your investments until you cash them in. When the only choice is to cash the investment in order to pay taxes on the investment, something is seriously screwed up (and it acts as a deterrent on investing).

absolutely right.

[Ben E Lou]

I think Kevin is bring up a good point: The idea of an estate tax is to tax people who haven't earned what they are recieving. The idea that a person should succeed or fail on their own, and not on the wealth (or lack there of) of a person's parents seems like a core American value to me.HUH???????????????????????????????

:confused:

How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!" ;)

[SplitPersonality1]

HUH???????????????????????????????

:confused:

How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!" ;)

Alright SkyDog.

Any credibility you had just went out the window.I never though I 'd see the day where a quote from Sanford and Son would be used to make a point. j/k

:cool:

[Barkeep49]

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

[Buzzbee]

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

So you're argument is that, since people didn't earn that money, they aren't entitled to it? Is that correct? And since they aren't entitled to it, the accumulated wealth should be "returned" to the government?

[QuikSand]

For what it's worth... I really don't have a strong opinion on whether having an estate tax is good public policy. While I think it bears some fair comparison to a tax on income derived from capital gains, it's also perfectly sensible in my mind that we would only tax gains when they are actualy realized. If property stays within the family, and remains in consistent use - I think there is a sensible policy argument that we ought to treat that the same as if its ownership had never changed.

My original point, before being lured a bit off the trail, was that the title of this thread strongy suggests that this tax was being aplied to someone who was far too poor to deserve it. I would still argue that an owner of millions of dollars in net assets (very valuable property and no debt, according to the article) isn't exactly a poverty case, regardless of his other cash flow.

[Barkeep49]

I'm saying that indeed since people didn't earn the wealth that society has a right to use some of that wealth.

[CamEdwards]

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

oh. my. god.

[kcchief19]

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence.I've said it before, I'll say it again -- I heart QuikSand.

[Franklinnoble]

Proper estate planning could have prevented this. There's no excuse for sitting on a piece of property you know to be worth a ton of cash and not preparing for the inevitable.

[Buzzbee]

I'm saying that indeed since people didn't earn the wealth that society has a right to use some of that wealth.

But how can "society" have a right to use that wealth since they didn't earn it?

[Ben E Lou]

My original point, before being lured a bit off the trail, was that the title of this thread strongy suggests that this tax was being aplied to someone who was far too poor to deserve it. I would still argue that an owner of millions of dollars in net assets (very valuable property and no debt, according to the article) isn't exactly a poverty case, regardless of his other cash flow.I see what you're saying...but again that is according to the value that you (and I to a degree) hold. Clearly, the dollar value of the land was meaningless to this guy--otherwise he would have sold a long time ago.

[CentralMassHokie]

I tend to stay out of political discussions on this board, so I'm going to attempt to make less of a political observation and more of a psychological one. I doubt I'll be successful, but it's worth a shot.

It is amazing to me that groups in this country have been able to convince the American public that the estate tax and the top marginal income tax rate of the highest brackets are the biggest tax issues facing them.

The estate tax currently affects, I believe, 2% of all estates. That number has been decreasing as the exemption level rises. Family-owned farms and businesses make up an even smaller portion of that, something like .06% of all estates.

The 3 highest brackets of the marginal tax rate affects a fairly small portion of the American public. In 2001, I think it was just under 5% of tax payers.

However, if you polled the American people on tax issues, I'd be willing to bet a large sum of money that these issues would rank in the top 2 for pretty much everyone polled.

I doubt anyone would mention the regressive nature of payroll taxes as an issue. Of course, this tax issue *does* effect pretty much the entirety of the American tax payers.

I have to believe that it's because everyone wants to believe they will be rich some day, and that the estate tax and top tax rates are going to hurt them come that magic day. In the meantime, they'll give up the large chunk of their pay to payroll taxes without batting an eyelash.

That's what I think of everytime I read an article about the estate tax or see someone complaining about it. It's a non-issue for about 98% of the country. I'm not arguing the validity of the tax itself, simply the fact that somehow people have been able to create an issue out of this since it impacts so few people.

[Ben E Lou]

Proper estate planning could have prevented this. There's no excuse for sitting on a piece of property you know to be worth a ton of cash and not preparing for the inevitable.No excuse? Do you seriously think these ol' salt-of-the-earths had any clue that something like this could happen?

[BigJohn&TheLions]

This is a prime example of how Urban Sprawl is destroying this land. There was a story similar to this in Macomb County Michigan where the city and neighbors were pressuring a guy to sell his farm because the smells of a farm were considered offensive to the people who bought expensive homes in the newly developed land surrounding the farm. His family had been on that property for years and some idiots were quated as that they bought the homes because they though it would be nice to live by the farm, but the smell of a cow pasture soon changed their minds, so the farmer has to go! Ridiculous.

SD, you know how bad the sprawl is in Hotlanta. I read where two-hour car commutes are fairly commonplace down there. And it keeps getting worse...

[cuervo72]

HUH???????????????????????????????

:confused:

How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!" ;)


*fires up Quincy Jones in WinAmp*

[Barkeep49]

Because the organization of our society is what enables a person to accumulate wealth in the first place.

[QuikSand]

No excuse? Do you seriously think these ol' salt-of-the-earths had any clue that something like this could happen?

If you own an estate worth multimillions, you do a disservice to your heir(s) by clinging to pithy nicknames instead of getting some advance preparation done.

I'm not really a big fan of the entire concept of "estate planning" itself, but Franklin is absolutely right. Nobody in this situation actually needs to pay taxes on his estate - only some legal fees to advisors who will help you legally skirt the taxes when you effect the exact same transfers upon your passing.

[JonInMiddleGA]

I'm saying that indeed since people didn't earn the wealth that society has a right to use some of that wealth. from http://www.auburn.edu/~johnspm/gloss/index.html?http://www.auburn.edu/~johnspm/gloss/intro.html (http://www.auburn.edu/%7Ejohnspm/gloss/index.html?http://www.auburn.edu/%7Ejohnspm/gloss/intro.html)

Socialism <dl><dt>
</dt><dd> A class of ideologies (http://www.auburn.edu/%7Ejohnspm/gloss/ideology.html) favoring an economic system in which all or most productive resources are the property of the government (http://www.auburn.edu/%7Ejohnspm/gloss/nationalization.html), in which the production and distribution of goods and services are administered primarily by the government rather than by private enterprise (http://www.auburn.edu/%7Ejohnspm/gloss/private_enterprise.html), and in which any remaining private production (http://www.auburn.edu/%7Ejohnspm/gloss/private_sector.html) and distribution (socialists differ on how much of this is tolerable) is heavily regulated by the government rather than by market processes (http://www.auburn.edu/%7Ejohnspm/gloss/market.html).

</dd><dd> {edited to add: The underlined text is not for emphasis, but rather indicates additional links to definitions at the website}
</dd> </dl>
<dl> <dd>
</dd> <dd>
</dd> </dl>

[JonInMiddleGA]

... where the city and neighbors were pressuring a guy to sell his farm because the smells of a farm were considered offensive to the people who bought expensive homes in the newly developed land surrounding the farm.
FWIW, that same scenario has been going on for quite a while now in the increasingly affluent Atlanta suburbs, particularly in Forsyth County (quite a few horse farms there).

[Ben E Lou]

SD, you know how bad the sprawl is in Hotlanta. I read where two-hour car commutes are fairly commonplace down there. And it keeps getting worse...Depends on your definition of "fairly commonplace." My guess is that 90% or more of the inside-the-Perimeter workforce lives within an hour.

While I agree wholeheartedly that Atlanta has too much sprawl, this is by no means an example of that. This guy's land is barely inside of Cobb County even. (The river is most, if not all, of the Cobb/Fulton border.) During non rush hour, it would be less than a 15-minute drive to downtown Atlanta from his property. He's probably less than 5 minutes' drive away from 15+ story office buildings. This area was rural when the land was purchased 85 years ago, but Atlanta hadn't even fully recovered from General Sherman at that point, I would imagine. This land is barely in what would even be considered "suburban" Atlanta today. That area is practically in the city.

[Solecismic]

So, it's okay to give your children anything other than your money?

I find it hard to agree with the argument that business owners and farmers should be penalized for not hiring accountants to set up tax dodges. If the dodges are legal, the system is unfair.

And, seemingly, only the business owners and farmers too busy working to accumulate the knowledge necessary to set up the tax dodges are penalized. Thus preserving the concept that only the truly privileged should be entitled to pass along their wealth.

I don't think the tax dodges are really available to most who don't have a lot of ready cash at hand (life insurance trusts are popular, for example).

[QuikSand]

Okay, as you all gang up on Barkeep - I see his point. As much as we don't like paying taxes, nearly everyone would agree that there are functions better perforrmed collectively through a government than individually. And if you accept that premise, then you have to have taation of some sort - and therefore you have to find a basis for that taxation?

If you're going to criticize society levying a certain tax on certain wealth because "society... didn't earn that wealth" - then what exactly would be left as a suitable basis for taxation?

We complain about taxes paid when we earn our living, we complain about taxes paid when we make a purchase or transfer, we complain about taxes based on the amount of our wealth. At some point, are we actually saying nothing at all, other than "we hate taxes!" and thereby rendering our arguments basically pointless?

If we're going to have public revenue to deliver public services, it's inevitable that we levy taxes on private transactions, income, and/or wealth. You can certainly argue that one is a better basis for taxation than another... but rejecting all of them as inherently socialist ideas raises a reductio ad absurdum that you cannot escape, other than to advocate the complete abolition of all government and societal order that requires any form of compulsory contribution. (Yes, I realize some of you will hastily sign up to endorse this)

[Ben E Lou]

If you own an estate worth multimillions, you do a disservice to your heir(s) by clinging to pithy nicknames instead of getting some advance preparation done.

I'm not really a big fan of the entire concept of "estate planning" itself, but Franklin is absolutely right. Nobody in this situation actually needs to pay taxes on his estate - only some legal fees to advisors who will help you legally skirt the taxes when you effect the exact same transfers upon your passing.Quik:

I completely understand all of that, and for the most part would agree with you, but somehow blaming these guys, (as I sensed franklinnoble was doing), for not being savvy in the ways of circumventing modern American tax laws just doesn't seem right to me.

[QuikSand]

If the dodges are legal, the system is unfair.

Absolutely agreed. I think our system of estate taxation is deeply flawed, and think both things above are true.

(Probably exceeded only by the egregious ways that people of substantial means now easily "shield" their substantial assets in order to become eligible for Medicaid, the low-income health care "safety net" program, to pay for their long term care)

[QuikSand]

So, it's okay to give your children anything other than your money?

I find it hard to agree with the argument that business owners and farmers should be penalized for not hiring accountants to set up tax dodges. If the dodges are legal, the system is unfair.

And, seemingly, only the business owners and farmers too busy working to accumulate the knowledge necessary to set up the tax dodges are penalized. Thus preserving the concept that only the truly privileged should be entitled to pass along their wealth.

I don't think the tax dodges are really available to most who don't have a lot of ready cash at hand (life insurance trusts are popular, for example).

Actually, if you're willing to do it over a period of time, it's a fairly simple exercise to place your meaningful assets (including cash, by the way) into trusts, LLCs, or other vehicles that can then be passed to your intended heirs without triggering estate taxation. The "gift allowance" enables this sort of thing, by easily disguising a strategic series of intra-family asset transfers as merely non-taxable kindnesses, conveniently up to but not exceeding the amount exempted from taxation under the law. Do this for a few years, and you dodge taxes perfectly legally.

(Admittedly, these strategies do get a shade tougher when the intended heir is someone who may not outlive you)

So, you're right - advocating for the current practice does propagate the notion that those caught unaware pay most of the taxes. I certainly wouldn't say that is fair - but I'd revert back to a properly-imposed estate tax as a concept that might be worth supporting.

[Solecismic]

Okay, as you all gang up on Barkeep - I see his point. As much as we don't like paying taxes, nearly everyone would agree that there are functions better perforrmed collectively through a government than individually. And if you accept that premise, then you have to have taation of some sort - and therefore you have to find a basis for that taxation?

If you're going to criticize society levying a certain tax on certain wealth because "society... didn't earn that wealth" - then what exactly would be left as a suitable basis for taxation?

We complain about taxes paid when we earn our living, we complain about taxes paid when we make a purchase or transfer, we complain about taxes based on the amount of our wealth. At some point, are we actually saying nothing at all, other than "we hate taxes!" and thereby rendering our arguments basically pointless?

If we're going to have public revenue to deliver public services, it's inevitable that we levy taxes on private transactions, income, and/or wealth. You can certainly argue that one is a better basis for taxation than another... but rejecting all of them as inherently socialist ideas raises a reductio ad absurdum that you cannot escape, other than to advocate the complete abolition of all government and societal order that requires any form of compulsory contribution. (Yes, I realize some of you will hastily sign up to endorse this)


I think we all agree that taxation is necessary. And I think we all agree that the rich should pay more than the poor.

A lot of this is reaction, however, to the populist screaming that tax breaks were given to the rich, therefore, by definition, they're unfair.

The problem with that argument is that the rich are still paying a much higher percentage than the poor. Now I don't see that as a problem, per se. What I see as the problem is that not one of these populists recognizes that the rich are still paying an awful lot of money.

The argument should be framed over how to create a fair taxation system. Instead, there's anger and constant worry that some rich guy didn't "earn" a certain amount of income.

And no, I don't believe that private transactions necessarily should be taxed. We give to charity in order to improve society, and that isn't taxed. Is it arrogant to assume that giving significantly to our children wouldn't also improve society (as long as we believe they are good people)?

[Fritz]

The argument should be framed over how to create a fair taxation system.

Do you think that is possible?

[JonInMiddleGA]

And I think we all agree that the rich should pay more than the poor. ... The problem with that argument is that the rich are still paying a much higher percentage than the poor. Now I don't see that as a problem, per se.
Until I got to that last bit, I was about to point out that we most definitely do not "all agree" to your initial statement.

And even with the caveat, I very much see the disparity in tax rates as "a problem", per se. A big problem as a matter of fact.

I'll accept that taxation is a necessary evil. I do not accept that we should continually punish success by taking larger & larger bites of the apples of the successful.

[JonInMiddleGA]

Do you think that is possible?
FWIW, I have grave doubts that it is.

Generally speaking, "fair" seems to be defined these days as "how hard can I screw everyone else while remaining unscrewed myself". As long as that's the case, "fair" really doesn't exist. And I've found that "fair" is pretty much the very last thing hardly anybody wants in any situation, so I see no reason to hope that the situation will improve.

Sucks, sucks very hard, but I believe it to be very true.

[Peregrine]

Proper estate planning could have prevented this. There's no excuse for sitting on a piece of property you know to be worth a ton of cash and not preparing for the inevitable.

Amen. I think the main message of this little story is not pointing out the flaws in the estate tax, but rather in the poor estate management by the people involved.

[Solecismic]

Until I got to that last bit, I was about to point out that we most definitely do not "all agree" to your initial statement.

And even with the caveat, I very much see the disparity in tax rates as "a problem", per se. A big problem as a matter of fact.

I'll accept that taxation is a necessary evil. I do not accept that we should continually punish success by taking larger & larger bites of the apples of the successful.

I support a flat tax rate with an exemption on the first $15,000 or so, adjustments made based on support of dependents.

The system would simply collapse if the tax weren't progressive in some manner. We simply couldn't charge the poor enough to pay for everything that needs to be paid for (police, fire, schools, roads, etc).

[OldGiants]

There is no tax on the sale of a primary residence,

Nope. It is only true if you purchase a home that costs more than the one you sold, or if your are aged 55 (with a cap on protected income, I believe $100,000, last time I looked).

My personal example is moving from Northern New Jersey to Richmond. No way I could spend all the money I got from my Bergen County house in Chesterfield County back then, so I wound up paying about $20,000 in capital gains. And that was after purchasing a five bedroom home about 60% greater in square footage.

this happens to many people moving to areas with cheaper housing.

[Peregrine]

Bill Gates' father, who is a proponent of the estate tax, wrote this article which I found informative. I think it does a good job of pointing out the special interests who are pushing the anti-estate tax movement and some of the reasons that having the tax benefits the country.

http://www.prospect.org/print/V13/11/gates-w.html

[gstelmack]

We complain about taxes paid when we earn our living, we complain about taxes paid when we make a purchase or transfer, we complain about taxes based on the amount of our wealth. At some point, are we actually saying nothing at all, other than "we hate taxes!" and thereby rendering our arguments basically pointless?
There are two arguments getting caught up here (rather than copy Quik's entire post, I'm just capturing the key point, so if I missed something critical I apologize). There is "how should taxes be collected?", and then there is "how much revenue is needed by the government?".

I have no problems per se with an income tax, but I do think too much of my money is taken by the government in an effort to spread the wealth. I worked my tail off to make the money I make, why should much of it go to someone else who hasn't worked their tail off? Spending my money on national defense, a highway system, and the like is fine with me, and I'm willing to pay my fair share for those items.

But this discussion focuses on where the money should come from. And I stand by the fact that if income is what we want to tax, then tax income, don't tax potential income. And the estate tax described originally is taxing potential income, like taxing your mutual fund that has appreciated but you have not cashed in on yet.

[JonInMiddleGA]

The system would simply collapse if the tax weren't progressive in some manner. We simply couldn't charge the poor enough to pay for everything that needs to be paid for (police, fire, schools, roads, etc).
If "progressive" ends with say, the $15k exemption & even deductions for dependents, I imagine I'd find it much more tolerable.

But it seems that the most obvious element of tax reform hasn't really come up in this discussion (quite possible I've just missed it), so I'll go ahead & throw it in there -- If there's a problem with finding a way "to pay for everything that needs to be paid for" then it's time to start being serious about slashing the list of "what gets paid for" by tax dollars.

There's a big difference between "needs" and "wants", and I've yet to see a government budget at any level that indicates the slightest understanding of the distinction between the two.

[Masked]

I'll accept that taxation is a necessary evil. I do not accept that we should continually punish success by taking larger & larger bites of the apples of the successful.
I don't see how is success being punished under the current system? If you earn more, you are still better off than someone who earns less, even if you pay a higher tax percentage on the difference.

[Buzzbee]

I think we all agree that taxation is necessary. And I think we all agree that the rich should pay more than the poor.


I agree that taxation is necessary. I DO NOT agree that the rich should pay more than the poor. I am against a progressive income tax system. Honestly, I'm not exactly keen on a X% across the board income tax, although I think it is a better alternative. I'm sure there are a myriad of issues, but in my opinion a better alternative MIGHT be to tax consumption rather than income. In other words, a sales tax. You would be taxed on what you buy, rather than what you earn.


In regard to the example that started this thread, I am of the opinion that IF there is to be a tax, the value of the land SHOULD be taxed when it is sold. The inheritors aren't gaining the benefit of the value until they sell it or swap it.

The difficulty comes in that it may not be feasible, or even possible, to determine the increase (or decrease) in value of something that is inherited. Take stocks for example. 1000 shares of stock could be divided amongst several heirs. Those could be subdivided even further, sold, or given as gifts, etc. Tracking what was originally paid to determine the tax on the gain could quickly become a nightmare. It poses a tricky scenario. So I don't know if there is a good solution, IF a tax is charged.

[JonInMiddleGA]

I don't see how is success being punished under the current system? If you earn more, you are still better off than someone who earns less, even if you pay a higher tax percentage on the difference.
That's pretty easy to explain in really simple terms -- "better off" or not, I'm allowed to keep less of the fruits of my labor than the lazy/less skilled/unlucky/whatever bastard down the street. Why should I only receive X% of my income while he gets to keep X+1% of his? There's simply not an acceptable justification for this IMO.

[clintl]

I would make this counterargument - we have an economic system that overwhelming favors those with wealth, and therefore, it is not unfair to require them to pay proportionally more to support and maintain that system, and mitigate the problems it creates.

[Solecismic]

We favor wealth and privilege less than any society ever created.

If a poor family teaches its children respect for eduction, they have a great chance of success in America. You can't say the same for similar children in many other countries.

I disagree strongly with the notion that our society unfairly favors those with wealth. That seems a myth designed to divide rather than unite.

[Butter]

I have nothing really to add to this thread, except that Franklinnoble and Quik are right.... if you have sizable assets, to not have at least a trust in place to protect the assets from taxation, then you have failed yourself. Just because these people are bumpkins doesn't exempt them from abiding by the current laws of the land. They could've taken advantage of them. Instead, they're paying the price. Sorry for them, but maybe now they see that selling off an acre to pay for a half decent financial planner isn't the worst thing that could've happened to them.

[Butter]

Oh, and I also wanted to say that this kind of "news" reporting is why people bitch about media bias. This story isn't news. It's an example of the kind of "journalism" that passes for news these days.

[Butter]

Double dola

So I guess I DID have something to add after all. :)

[SunDancer]

I would make this counterargument - we have an economic system that overwhelming favors those with wealth, and therefore, it is not unfair to require them to pay proportionally more to support and maintain that system, and mitigate the problems it creates.

Well I disagree, that a progressive system in unfair in my mind, it seems that we target the wealth, from all aspects. We target them to pay more in taxes, we target them simply for being wealthy. We whine when they have a more "lavish" lifestyle (spending what they have earned on stuff that we all would buy in a heartbeat if we have the money-and no, people like Enron and that are not what I am talking about, people who earned their wealth and did it legally/ethically), we whine when they don't donate the money they have earned (remember Bill Gates on Larry King). I think the general society of Americans whine when the wealthy have wealth, I get a sense it's more about jealously then a reasonable claim.

[CentralMassHokie]

We favor wealth and privilege less than any society ever created.

I'm not sure this is entirely true, but I agree with the sentiment. America, for all of it's faults, has at least tried to make things equitable for the underpriviledged. I'm fairly sure I butchered that spelling.


If a poor family teaches its children respect for eduction, they have a great chance of success in America. You can't say the same for similar children in many other countries.

I disagree strongly with the notion that our society unfairly favors those with wealth. That seems a myth designed to divide rather than unite.

This is where I would love to agree, but have to disagree. There are a ton of kids who grow up respecting and loving education but will never get out of poverty/low income brackets because of the cost of higher education, the need to support a family lacking one or both parents, or any number of other reasons directly attributable to the fact they had the misfortune of growing up with less wealth.

It's not reciprocal, though. Any child from a family with enough wealth to send him/her to college can go to college.

So, in this case, those coming out of families with a moderate amount of wealth (not rich, simply those who can afford to take out the loans necessary to send a child to college) have an advantage over those who don't.

I'm sure there are some people thinking along racial lines here, but it's not. It's people from the very rural areas who are adversely affected as much as those from the inner cities. It's a pretty universal problem in the United States that has been getting worse over the past years rather than better.

I'll readily admit there are a number of sad stories about a middle-class kid who couldn't get into the college of his choice due to having too much money to get financial aid. But those stories pale in both comparison and number to the stories of low-income families who can't said a kid to school because they need him/her to work since the father is out of the picture, or because the farm won't survive without the extra labor.

It's unfortunate, but the higher education system in this country still greatly favors those of means. And until that changes, I don't think it's fair to say that this society doesn't favor the wealthy.

[ice4277]

If "progressive" ends with say, the $15k exemption & even deductions for dependents, I imagine I'd find it much more tolerable.

But it seems that the most obvious element of tax reform hasn't really come up in this discussion (quite possible I've just missed it), so I'll go ahead & throw it in there -- If there's a problem with finding a way "to pay for everything that needs to be paid for" then it's time to start being serious about slashing the list of "what gets paid for" by tax dollars.

There's a big difference between "needs" and "wants", and I've yet to see a government budget at any level that indicates the slightest understanding of the distinction between the two.
Government will only start to control its spending when it has absolutely no choice other choice in the matter. A flat tax, of which I am a very strong proponent, would only ever be possible if we get rid of the pork-barrel politics. And they won't do away with that until they see less money coming in, a result of a flat tax. Kind of a catch-22 that probably won't be solved in our lifetimes.

[SunDancer]

I'm not sure this is entirely true, but I agree with the sentiment. America, for all of it's faults, has at least tried to make things equitable for the underpriviledged. I'm fairly sure I butchered that spelling.



This is where I would love to agree, but have to disagree. There are a ton of kids who grow up respecting and loving education but will never get out of poverty/low income brackets because of the cost of higher education, the need to support a family lacking one or both parents, or any number of other reasons directly attributable to the fact they had the misfortune of growing up with less wealth.

It's not reciprocal, though. Any child from a family with enough wealth to send him/her to college can go to college.

So, in this case, those coming out of families with a moderate amount of wealth (not rich, simply those who can afford to take out the loans necessary to send a child to college) have an advantage over those who don't.

I'm sure there are some people thinking along racial lines here, but it's not. It's people from the very rural areas who are adversely affected as much as those from the inner cities. It's a pretty universal problem in the United States that has been getting worse over the past years rather than better.

I'll readily admit there are a number of sad stories about a middle-class kid who couldn't get into the college of his choice due to having too much money to get financial aid. But those stories pale in both comparison and number to the stories of low-income families who can't said a kid to school because they need him/her to work since the father is out of the picture, or because the farm won't survive without the extra labor.

It's unfortunate, but the higher education system in this country still greatly favors those of means. And until that changes, I don't think it's fair to say that this society doesn't favor the wealthy.

But is the government responsible for higher education? Higher education is a choice one has, but it's not a neccessary. Financial aid and other scholarships are their for assistance who want it. Just curious, what was the kids college of choice? Was it a high-pricey private school?

[CamEdwards]

I'm not sure this is entirely true, but I agree with the sentiment. America, for all of it's faults, has at least tried to make things equitable for the underpriviledged. I'm fairly sure I butchered that spelling.



This is where I would love to agree, but have to disagree. There are a ton of kids who grow up respecting and loving education but will never get out of poverty/low income brackets because of the cost of higher education, the need to support a family lacking one or both parents, or any number of other reasons directly attributable to the fact they had the misfortune of growing up with less wealth.

It's not reciprocal, though. Any child from a family with enough wealth to send him/her to college can go to college.

So, in this case, those coming out of families with a moderate amount of wealth (not rich, simply those who can afford to take out the loans necessary to send a child to college) have an advantage over those who don't.

I'm sure there are some people thinking along racial lines here, but it's not. It's people from the very rural areas who are adversely affected as much as those from the inner cities. It's a pretty universal problem in the United States that has been getting worse over the past years rather than better.

I'll readily admit there are a number of sad stories about a middle-class kid who couldn't get into the college of his choice due to having too much money to get financial aid. But those stories pale in both comparison and number to the stories of low-income families who can't said a kid to school because they need him/her to work since the father is out of the picture, or because the farm won't survive without the extra labor.

It's unfortunate, but the higher education system in this country still greatly favors those of means. And until that changes, I don't think it's fair to say that this society doesn't favor the wealthy.

If a poor family has that great a respect for education, they'll do what's necessary to make sure Junior can go off to attend college for a few years. Nobody said it's easy, just that it's possible.

I'm living proof of that. Seven years ago, when I first got married, I was making $6.50 an hour. I worked my ass off, did more than was expected of me, never complained, took every job that came my way, and now I'm making.... considerably more than $6.50 an hour.

[Fritz]

and cam walked through shit for 10 miles a day to earn that $6.50. That may sound hard to swallow, but there is a lot of roadside shit in Oklahoma.

[CentralMassHokie]

If a poor family has that great a respect for education, they'll do what's necessary to make sure Junior can go off to attend college for a few years. Nobody said it's easy, just that it's possible.

I'm living proof of that. Seven years ago, when I first got married, I was making $6.50 an hour. I worked my ass off, did more than was expected of me, never complained, took every job that came my way, and now I'm making.... considerably more than $6.50 an hour.

Like I said, there are plenty of examples of people who made it. Honestly, I think it's phenomenal that you've been able to achieve what you have *and* that you're a Sox fan :)

Doesn't change the main point. Higher education does favor the wealthy in this country. Not just favors - greatly favors. And it has been trending the wrong direction over the past few years.

It's not the government's job to provide higher education (though I would certainly argue that it would be beneficial to the country if everyone who wanted to had a chance at college, means or not). I was simply pointing out that, contrary to some of the views in this thread, this isn't a means-blind society, and there are still some very important areas (health care, higher education) that disproportionately favor those of means.

[Fritz]

um, anything you spend money on favors those of means. that is what having means is all about.

[CentralMassHokie]

But is the government responsible for higher education?

Nope.

Higher education is a choice one has, but it's not a neccessary. Financial aid and other scholarships are their for assistance who want it.

But financial aid and scholarships aren't always enough, nor are they available to everyone.

Just curious, what was the kids college of choice? Was it a high-pricey private school?

I didn't have a particular story in mind, just the many college stories that come up any time means-based (or race-based) admissions become a topic.

But none of that is the point, really.

[CentralMassHokie]

um, anything you spend money on favors those of means. that is what having means is all about.

Hence my use of the word disproportionately :)

[CamEdwards]

and cam walked through shit for 10 miles a day to earn that $6.50. That may sound hard to swallow, but there is a lot of roadside shit in Oklahoma.

not to mention it was uphill both ways.

[Fritz]

Hence my use of the word disproportionately :)


Could you elaborate on proportional education?

[Fritz]

not to mention it was uphill both ways.


A real trick considering how flat it is there.

[CentralMassHokie]

Could you elaborate on proportional education?

I think it's when they start teaching fractions ...

[sabotai]

I do not beleive taxation is necessary. *ducks*

[gstelmack]

We favor wealth and privilege less than any society ever created.

If a poor family teaches its children respect for eduction, they have a great chance of success in America. You can't say the same for similar children in many other countries.

I disagree strongly with the notion that our society unfairly favors those with wealth. That seems a myth designed to divide rather than unite.
Yup, we have great equality of opportunity here. A point I brought up (here or in another thread?) is that we have more movement up and down the economic chain in this country than anyone is willing to give credit for. The "rich" you talk about today may well have kids that are considered "poor" in 20 years (blew their inheritance/trust fund/whatever), while many "poor" end up with kids who have a fair amount of money. The 90s Internet boom was a classic example of this in action. People who put forth the effort can accumulate wealth, and those who don't can lose it.

[dawgfan]

I do not beleive taxation is necessary. *ducks*

Are you seriously proposing that there be no government at all?

[Ben E Lou]

We favor wealth and privilege less than any society ever created.

If a poor family teaches its children respect for eduction, they have a great chance of success in America. You can't say the same for similar children in many other countries.

I disagree strongly with the notion that our society unfairly favors those with wealth. That seems a myth designed to divide rather than unite.Very, very true. My father was from a very broken home, and grew up in complete poverty, and my mother's family wasn't much better off. They were both poor black folks, born in the South, in the 20's. Not much of a chance for them or their progeny, huh?

Not exactly.

They worked hard, made the most of every opportunity they had, and when things started to get better for black folks in the South, absolutely demanded that their children take advantage of the new doors that were opening up. Those two poor black folks, born in the South in the 20's, put five kids through college.

I'm fairly certain that once my younger brother (the only one of us not married) ties the knot, I'll have the distinction of having the lowest combined husband/wife income of those five children, and I'm also fairly certain that the wife and I are at least a bit above the average household income in the wealthiest nation in the world. (We're not hurting, in other words.)

I guess that's why I really don't get it when folks start in on the line of reasoning that people with little/no means can't turn it around in a relatively short period of time. I saw my parents do it.

[JonInMiddleGA]

I guess that's why I really don't get it when folks start in on the line of reasoning that people with little/no means can't turn it around in a relatively short period of time. I saw my parents do it.
I didn't know your folks, but I'll bet they understood very well the meaning of some key words in this scenario ... words like "dedication" & "sacrifice".
And one of the biggest three-letter words in the English language ... "try".

[Buzzbee]

If you're going to criticize society levying a certain tax on certain wealth because "society... didn't earn that wealth" - then what exactly would be left as a suitable basis for taxation?


To specifically answer your question, (which I think I did above, but not specifically) a tax based on consumption rather than income might be a suitable basis for taxation.

[Ben E Lou]

I didn't know your folks, but I'll bet they understood very well the meaning of some key words in this scenario ... words like "dedication" & "sacrifice".
And one of the biggest three-letter words in the English language ... "try".Yup. My father's story in particular is just amazing. He gave us some glimpses into his growing up, but we sort of knew all along that he wasn't telling us the full extent of how bad he had it growing up, and the full extent of his service in World War 2. I didn't find out a good bit of what I know now until after he died.

[Ben E Lou]

To specifically answer your question, (which I think I did above, but not specifically) a tax based on consumption rather than income might be a suitable basis for taxation.Yeah. That's what I was referring to with the Fair Tax comment--but I'll freely admit that I haven't checked into it enough to endorse it.

[Buzzbee]

Dola - In regard to the wealthy having advantages, I think there are certain areas where the wealthy have advantages, but do not conceed that this is a reason for taxing them at a higher rate. Yes, people who are wealthy GENERALLY have ACCESS to better healthcare, but it doesn't guarantee them better healthcare. The wealthy GENERALLY have access to better legal representation (see O. J. Simpson). I'm not sure I buy the higher education argument, since there are numerous scholarships and loans that provide access to higher education. However, using this as a basis to justify taxing people with higher incomes at a higher rate, to me, is assinine.

[Buzzbee]

Yeah. That's what I was referring to with the Fair Tax comment--but I'll freely admit that I haven't checked into it enough to endorse it.
I figured as much, you Boortz listener, you.

I haven't researched it enough to endorse it either, hence the MIGHT in my statement. However, some of the arguments for it do make some sense. Although I am quite confident that it will never happen because the existing system is too entrenched and because the transition period would be, in my opinion, absolutely petrifyingly scary.

[Ben E Lou]

Although I am quite confident that it will never happen because the existing system is too entrenched and because the transition period would be, in my opinion, absolutely petrifyingly scary.Agreed on all counts.

[Ben E Lou]

I figured as much, you Boortz listener, you.Where do you think I found out about the obit in the first place??? :D

hxxp://boortz.com/nuze/200403/03082004.html (http://boortz.com/nuze/200403/03082004.html)

[Buccaneer]

Just a couple of quips in addition to many fine posts here.

Taxation is a necessary evil but shouldn't an emphasis be on WHAT the taxes are being used for? At the federal level, I see an incredible amount of waste. If such wastes were reduced and eliminated, I think there would be less complaints about taxation, regardless how they are paid.

Yup, we have great equality of opportunity here. A point I brought up (here or in another thread?) is that we have more movement up and down the economic chain in this country than anyone is willing to give credit for. The "rich" you talk about today may well have kids that are considered "poor" in 20 years (blew their inheritance/trust fund/whatever), while many "poor" end up with kids who have a fair amount of money. The 90s Internet boom was a classic example of this in action. People who put forth the effort can accumulate wealth, and those who don't can lose it.I agree with this. This country, in contrast to Britain, was founded upon the principle that, at first, any white male (remember the context of history), can achieve whatever they set out to do - regardless of birth or status - that was the revolutionary part, which take for granted nowadays. Eventually, this same system allowed all, regardless of sex or race, to have the same opportunity. There is not and should not ever be equality of results because no matter the baseline status, you will always have a bell curve. The goal throughout history have been to keep pushing the bell curve upwards the standard of living scale and despite the wide variety of people we had coming to America, it has worked better (not perfectly) than anywhere else in the world. That is why I wholeheartedly fight against govt-induced socialism because gaining favor on one end means that you have to take away from the end, thus reducing the incentive to achieve.

Colleges. In addition to the exhorbant tuitions, I think we need to look at WHY is has gone so high. Do you think that such tuitions are justifiable or are they self-serving to the politics and ego of the universities and their programs and staff?

I also make this same argument on why jobs are moving overseas. Don't complain that jobs are moving overseas but look at why. Why is it so expensive for many companies and industries to operate here? What have driven up labor costs, capital costs, supply costs, etc.? I think you know where much of the blame lies.<!-- / message -->

[Glengoyne]

His deceased brother owned an asset. It skyrocketed in value while he owned it, bringing substantial benefit to him, whether he cashed it out or not. He dies, and wills it to an heir. What is wrong with recognizing that this was, essentially, income that had yet to be taxed?


I would have no problem if the tax is applied when an inherited asset is sold or cashed out. I do have a problem with taxing inherited assets that have been purchased with after tax dollars. This is absolutely double taxation. I think you just dressed it up with a pretty accounting picture. The land wasn't sold or purchased, it was inherited. I think the difference is substantial.

I have a friend whose family owns a bank. Several years ago his father had a stroke, and the family went into overdrive to transfer ownership of the corporation to the children. The reason. If the father had actually died, his heirs would have had to sell his life's work to pay the inheritance taxes. My wife and her brother stand to inherit a few million dollars worth of farm land when their parents die. If they have to sell the land, it would break up a homestead that the family has owned for 130 years. My father-in-law and his father were born on the property. To have the government step in and force them to sell the land because someone died is nearly a crime.

[Mr. Wednesday]

Wasn't the income with which they acquired the house already taxed?If the sole concern is double taxation, my suggestion would be to abolish all taxes and have the government take a cut of the money as it's issued from the Federal Reserve. Then we would know for sure that every dollar has been taxed once and only once.

(Which is to say, the important principle isn't that your parents paid a tax, it's that you are receiving something unearned without yourself paying a tax on it. The tax is on you, the survivor. If estate taxes don't currently reflect this, either they should be modified so that they do, or else the heirs should be taxed for ordinary income/capital gains [with some sort of special arrangement for non-liquid assets]. All IMO.)

[judicial clerk]

random thoughts:

I believe a flat tax is fair. I would even go as far as to say that to be "really" fair, a flat tax should be based on a sum not a percentage. The most fair system, in theory, would be that each person pay the same amount. You can also throw out all deductions. That seems so simple.

I noticed that Solecismic threw in a tax break based on the number of dependants a person has. Lets not be wishy-washy. Why should we subsidize people having kids? If I choose to have a kid, why should skydog or cam or buccaneer have to chip in to help pay for my kid by paying slightly more taxes than me.

Why not tax capital gains? Why even give capital gains special treatment? It is income. It is gain. Waiting until it is realized makes sense, but why give it special treatment. If I buy a piece of land/Microsoft/whatever, and it goes up in value and then I sell it, I make money, right? Why not tax that gain? Why not treat all gain, from whatever source derived, the same once it is realized?

one way to fix the problem for this dude in atlanta is is to not tax him until the gain on the property is realized. That is probably better than giving him a stepped up basis on the portion of the property that his brother gave him. I agree that we should do away with both the stepped up basis at death and the estate tax.

One question that I have no answer to is why do we assume that a person who is dead should get a say over what happens to the stuff they owned when they were alive? My grandparents own a ranch in california. When they die, they are leaving it to my parents. My family loves this land. The property became owned by my family roughly between 1845 and 1865. For 150 years or so, my family has exercised dominion over this land and used it to their exclusive profit and enjoyment and have only allowed others access to the land at my family's pleasure. ( within the bounds of the law). Why is this right?

[Marmel]

Life Insurance companies lobby hard to keep the death tax, because most of these companies make their real money off of policies that allow you to pay the death tax without selling the property.

If somebody owns a 10 million dollar bank, they simply create and fund a trust. The trust uses the funds to but a 5 millions dollar life insurance policy. When the owner(s) dies, the trust receives the money (life insurance benefits are tax free), which is then used to pay the death tax.

[Abe Sargent]

Isn't hypocritical for a country whose court system is set up on the principle that a person is innocent until proven guilty beyond a resonable doubt (a system that makes it more likely for a guilty man to go free then an innocent man to go behind bars) to turn around and praise a tax despite it drastically and aggressively destroying family business and properties in "only" a small percentage of cases? Isn't any percentage a bad thing? Just like the court system, shouldn't the government err on the side of caution?

Let's say I want to spend my money on something of value. I make 33k a year, and my income is taxed. I then go out and buy a roadside property. I spend several years of my slary fixing it up, and soon open up a store and quit my job. Fifteen years later I die and my business is worth 250,000, although most of that money is tied up in inventory and the building - the company has very little liquid assets in the bank. Is it right that my children are forced to have to pay tons of money to get this store?

The money I used to set up the store was taxed. That's the first tax. Then, the goods that I purchased saw me pay a tax. That's the second tax. The company would pay B&O taxes annually. That's the third tax. I would also have to report any income and pay self employment taxes. That's a fourth tax. My family should have to pay 35%-50% of the value of the business because I died? That's stupid on so many levels.

Does it help if I change the numbers? Shouldn't that make no difference at all? What's the difference between bequeathing my children a $50,000 business, a $500,000 business or a $5 million dollar business? It doesn't matter how much I spend, how much the business is worth, or how much my children may or may not "deserve" the company (although many family businesses, where the children worked on it for a long time, are similarly taxed). I can't conceive of anybody actually believing that they have a right to a piece of my business.

-Anxitey

[SunDancer]

With a fair tax or no tax on income, what bout businesses, sales, ect...how do you handle those? Doesn't Hong Kong and Monaco have no income of business taxes, but levy high sale taxes?

[SunDancer]

Very, very true. My father was from a very broken home, and grew up in complete poverty, and my mother's family wasn't much better off. They were both poor black folks, born in the South, in the 20's. Not much of a chance for them or their progeny, huh?

Not exactly.

They worked hard, made the most of every opportunity they had, and when things started to get better for black folks in the South, absolutely demanded that their children take advantage of the new doors that were opening up. Those two poor black folks, born in the South in the 20's, put five kids through college.

I'm fairly certain that once my younger brother (the only one of us not married) ties the knot, I'll have the distinction of having the lowest combined husband/wife income of those five children, and I'm also fairly certain that the wife and I are at least a bit above the average household income in the wealthiest nation in the world. (We're not hurting, in other words.)

I guess that's why I really don't get it when folks start in on the line of reasoning that people with little/no means can't turn it around in a relatively short period of time. I saw my parents do it.

Love this. They worked hard, didn't complain, and were willing to be decidated and make some sacrifices. It seems that Americans in general take things for granted, expected it to be just handed to them. Rich people in general work very hard in building the wealth through whatever, making huge sacrifices.

[Abe Sargent]

SkyDog, I bet in real life we would be amazingly good friends.

-Anxiety



Very, very true. My father was from a very broken home, and grew up in complete poverty, and my mother's family wasn't much better off. They were both poor black folks, born in the South, in the 20's. Not much of a chance for them or their progeny, huh?

Not exactly.

They worked hard, made the most of every opportunity they had, and when things started to get better for black folks in the South, absolutely demanded that their children take advantage of the new doors that were opening up. Those two poor black folks, born in the South in the 20's, put five kids through college.

I'm fairly certain that once my younger brother (the only one of us not married) ties the knot, I'll have the distinction of having the lowest combined husband/wife income of those five children, and I'm also fairly certain that the wife and I are at least a bit above the average household income in the wealthiest nation in the world. (We're not hurting, in other words.)

I guess that's why I really don't get it when folks start in on the line of reasoning that people with little/no means can't turn it around in a relatively short period of time. I saw my parents do it.

[Buccaneer]

With a fair tax or no tax on income, what bout businesses, sales, ect...how do you handle those? Doesn't Hong Kong and Monaco have no income of business taxes, but levy high sale taxes?
That is the best way to go, I think. Instead of a government forcing us to pay a certain amount of taxes (whether we like it or not) and to pay for wastes (whether we like it or not), a sales tax puts the choice on us. The more we buy, the more we pay. This has been working well in those localities with sales tax funding most of local revenues, why can't it work on the state or national level?

[cthomer5000]

I'd be fine with either a sales tax or an income tax. I just detest being taxed at every turn.

[Abe Sargent]

That is the best way to go, I think. Instead of a government forcing us to pay a certain amount of taxes (whether we like it or not) and to pay for wastes (whether we like it or not), a sales tax puts the choice on us. The more we buy, the more we pay. This has been working well in those localities with sales tax funding most of local revenues, why can't it work on the state or national level?


I also like this idea for two major reasons - firstly, in an increasingly credit oriented society where many consumers are spending more than they make, it taxes them at their spend ratio, not their income. It would likely cause credit oriented consumers to slow down and reassess their spending habits.

As these people go bankrupt, it only causes prices to go up for comsumers, credit card fees, and so forth. The frugal, well budgeted person often has to pay more as a result. This would be a good way of changing that system.

-Anxiety

[Buccaneer]

I also like this idea for two major reasons - firstly, in an increasingly credit oriented society where many consumers are spending more than they make, it taxes them at their spend ratio, not their income. It would likely cause credit oriented consumers to slow down and reassess their spending habits.

As these people go bankrupt, it only causes prices to go up for comsumers, credit card fees, and so forth. The frugal, well budgeted person often has to pay more as a result. This would be a good way of changing that system.

-Anxiety
I really, really like that thought. But QuikSand will probably have something say about this. :)

[dawgfan]

That is the best way to go, I think. Instead of a government forcing us to pay a certain amount of taxes (whether we like it or not) and to pay for wastes (whether we like it or not), a sales tax puts the choice on us. The more we buy, the more we pay. This has been working well in those localities with sales tax funding most of local revenues, why can't it work on the state or national level?

The issue with sales taxes is the fact that they hit poorer people disproportionately. Unless you're suggesting sales taxes that only target discretionary spending (i.e. exempting food, prescription drugs, etc.)

[clintl]

Sales taxes are regressive.

[clintl]

Dola...

I quite like green taxes.

[SunDancer]

The issue with sales taxes is the fact that they hit poorer people disproportionately. Unless you're suggesting sales taxes that only target discretionary spending (i.e. exempting food, prescription drugs, etc.)

Yeah, I think sales tax would exempt for basic needs (like certain foods (dont we have that already?)-tax is on junk food, beer, ect.), prescription drugs, ect...

[Buccaneer]

Some of you guys are so stuck in the mud. Food is not taxable. As far as the poor, make the cutoff at $15k or something like we do now. I guess as long as some of you make damn sure the "rich" (like those making $75-125k) pay their "fair share" (as a penalty for their success) to fund wasteful govt programs, there is no need for changes. By the way, how much did you donate last year to private programs for the needy? Oh that's right, it's up to the govt to take money from those who have it, keep most of it for themselves and then dole out some to the poor so you don't have to.

Don't answer, it's just a rant.

[dawgfan]

I'm not an economist, so forgive me if my opinions seem simplistic or inaccurate, but aren't there a couple main points to an income tax vs. sales tax?

1. From a philosophical perspective, my impression is that a tax that is based on income is justified from the perspective that a particular set of societal rules and shared responsibilities create the environment that allow business to take place.

2. From an economic perspective, doesn't the economy prosper when more activity takes place? In other words, if we tax spending directly, isn't that a greater disincentive to spend money than taxing your income on a percentage basis?

[Fritz]

Sales taxes are regressive.

so?

[clintl]

so?

So what?

[sabotai]

Are you seriously proposing that there be no government at all?

Well, first off, government can get money without taxing their citizens. Or at least, directly taxing them.

Second, why not?

[clintl]

Well, first off, government can get money without taxing their citizens. Or at least, directly taxing them.

Second, why not?

Ask the Somalians.

[Mr. Wednesday]

Where I sit, progressive taxes aren't about "making the rich pay their fair share." They're about a fairly simple concept (at least, I think it's simple): With each additional dollar you earn, the marginal utility of that dollar to you goes down*. Therefore, the marginal tax rate should be higher on the less useful dollars as a matter of fairness. (At least, that's my concept of "fair". YMMV.)

* Of course, it doesn't really go down much for a good while, then it starts to tail off, then at some point it starts to level off again, and it never really hits zero.

[Peregrine]

I think people should be a lot more worried about the Alternative Minimum Tax, which is affecting increasing amounts of people each year who aren't even really wealthy, than the estate tax which mainly affects several thousand of the richest estates in the country. The non-inflation indexed aspect of the AMT is rapidly turning something that was originally aimed at the rich into something that can affect large portions of the upper middle class. If you make more than $100,000 a year as is there is a pretty decent chance you'll be hit by this.

[BigJohn&TheLions]

...but Atlanta hadn't even fully recovered from General Sherman at that point, I would imagine. This land is barely in what would even be considered "suburban" Atlanta today. That area is practically in the city.
God bless Bill Sherman...

[Aylmar]

The best quote I've ever heard on taxes (and it's from The West Wing, of all places):

"Henry, last fall, every time your boss got on the stump and said, “It’s time for the rich to pay their fair share,” I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year. Which means I paid twenty-seven times the national average in income tax. I paid my fair share. And the fair share of twenty-six other people. And I’m happy to ‘cause that’s the only way it’s gonna work. And it’s in my best interest that everybody be able to go to schools and drive on roads. But I don’t get twenty-seven votes on Election Day. The fire department doesn’t come to my house twenty-seven times faster, and the water doesn’t come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let’s not call them names while they’re doing it is all I’m saying." -- Sam Seaborn

I don't know how accurate the numbers are...but I love the quote.

[stevew]

I think all taxation is regressive. Buisnesses already have the taxes they will pay built into their profit margins.

Say I buy a 1 dollar soda. Ive spent the equivalent of $1.33 on it(figuring that I basically get 75% of my money I've earned).

And the buisiness is factoring in their 25 cents of tax into the product, which if they werent building in the tax expenses would cost about $0.75.

So basically I just paid both my tax and theirs. This isnt very fair.

[Glengoyne]

I think all taxation is regressive. Buisnesses already have the taxes they will pay built into their profit margins.

Say I buy a 1 dollar soda. Ive spent the equivalent of $1.33 on it(figuring that I basically get 75% of my money I've earned).

And the buisiness is factoring in their 25 cents of tax into the product, which if they werent building in the tax expenses would cost about $0.75.

So basically I just paid both my tax and theirs. This isnt very fair.
There ya go, all we need to do is eliminate corporate taxation!! Problem solved.:D

[JonInMiddleGA]

I can't conceive of anybody actually believing that they have a right to a piece of my business.
You better find a way to conceive it ... and remember it when you go vote.

{I know your statement was likely at least somewhat rhetorical, just borrowing it to make a point}

[JonInMiddleGA]

so?
Dang, you beat me to it.

[Breeze]

These people have already been taxed for what they own. Sales tax, income tax, property tax. When they die why should they be taxed yet again? That's double dipping and a money grab pure and simple.

[Butter]

Well, since SkyDog's parents did it, everybody can!

What a load of crap.

[QuikSand]

This thread is a fascinating mix of genuine insights, well-reasoned opinions (some of which conflict), and complete bufoonery. I'm not sure whether I'm glad that I sifted through it all.

[Fritz]

but if you can't do it, someone should be there to do it for you.

[CamEdwards]

Well, since SkyDog's parents did it, everybody can!

What a load of crap.

How about my grandparents? They moved to Massachusetts from Nova Scotia after WWI, and my grandfather worked two jobs in order to pay for my father to go to Phillips Andover as a day student. They specifically moved to Andover so my father could take advantage of the education offered there. Tiny house, not much money to pay for food and bills, but they did it so that my father could have a better life.

My dad went from a family in poverty to a solid upper-middle class life.

If you believe that you can try as hard as you can throughout your life and still not be a success in life... you're right. But if you're going to blame it on the government or society you're full of it.

[Butter]

I don't really care your view on taxation or the American Dream or whatever, but we should at least kill the myth that those who don't "make it" are just lazy or didn't try hard enough. Because it's not true.

[CamEdwards]

I don't really care your view on taxation or the American Dream or whatever, but we should at least kill the myth that those who don't "make it" are just lazy or didn't try hard enough. Because it's not true.

Would you at least agree that the statement is true for a simple majority of those who don't "make it"?

[Butter]

Would you at least agree that the statement is true for a simple majority of those who don't "make it"?

No.

[CamEdwards]

No.

You're either not trying hard enough to convince me that you're right or too lazy to even try. :)

[Aardvark]

Wasn't the income with which they acquired the house already taxed?

Yes, as was the income on which I bought $10,000 of stocks that are now worth $20,000. I still have to pay the capitol gains taxes. My parents' house cost them about $50,000; after their deaths we sold it for $100,000, but did not pay capitol gains tax (actually took a capitol gains loss) because its value was reset to about $110,000 at the time of my father's death.

[Butter]

too lazy to even try.

That's it! :p

I just feel that there are too many complicated forces at work to write off the underclass as being mostly lazy or apathetic to their lot in life. I think it's an easy way out when you have an argument like this to put it as such.

[Aardvark]

The problem with that argument is that the rich are still paying a much higher percentage than the poor.

A much higher percentage of income tax. A lower percentage of payroll taxes. An only somewhat higher percentage when you combine capitol gains and income taxes (since the poor have virtually now capitol gains.) The rich also have more avenues for converting income into capitol gains.

[QuikSand]

I haven't found "trying to change someone's mind" to be a very effective strategy around here. From time to time, there are simple matters of pure fact that need to be added... but when it comes to personal and political preferences... does anyone here ever respond by saying "oh, you know... you're right, I'm wrong.... thanks" and end the discussion there?

[Butter]

You know why this guy sold off part of his land don't you?

To pay for his gay marriage.

[GrantDawg]

I haven't found "trying to change someone's mind" to be a very effective strategy around here. From time to time, there are simple matters of pure fact that need to be added... but when it comes to personal and political preferences... does anyone here ever respond by saying "oh, you know... you're right, I'm wrong.... thanks" and end the discussion there?
I have. I know that I do not know everything. I think all of us would benefit from admitting that. I learn much from threads like this, at least until idiots start trolling and the smarter among us quite trying.

[GrantDawg]

Dola: That is not to say you should expect to change the mind of person you are discussing with, but you might change the opinion of someone who is reading.

[GrantDawg]

triple dola: I still cannot see how a sales tax is "better" than an income tax. Does someone want to break that one down for me? Don't we want people to consume goods? Isn't that what keeps us in jobs and such?

[Aardvark]

Colleges. In addition to the exhorbant tuitions, I think we need to look at WHY is has gone so high. Do you think that such tuitions are justifiable or are they self-serving to the politics and ego of the universities and their programs and staff?

Labor costs have increased greatly. State and federal funding has decreased. School endowments have shrunk due to the recession. Many schools are not filling faculty vacancies, have cancelled journal subscriptions, are increasingly using poorly paid adjuncts to teach classes, are increasingly weighting research grant monies as a basis for tenure, and have deferred maintainance to a unsustainable level. Many public universities are facing a crisis, since they cannot maintain their current capabilities in the face of state budget cuts and mandates about keeping tuition levels stable (or growing no more than a certain amount).

[SunDancer]

I don't really care your view on taxation or the American Dream or whatever, but we should at least kill the myth that those who don't "make it" are just lazy or didn't try hard enough. Because it's not true.

I disagree. But what would be your defition of "making it"?

[Aardvark]

random thoughts:

I believe a flat tax is fair. I would even go as far as to say that to be "really" fair, a flat tax should be based on a sum not a percentage. The most fair system, in theory, would be that each person pay the same amount. You can also throw out all deductions. That seems so simple.

Sounds reasonable to me. Then we can take all the fast food clerks and nurses aids and ditch-diggers and retired people and unemployed urban youths and throw them into debtor prison or what them try to survive when the taxes are greater than their income. Maybe we can reinstitute serfdom.

[Butter]

I disagree. But what would be your defition of "making it"?

I don't think there is one set definition of when someone has made it, but for me it would be to be at a point where I am not living hand-to-mouth every week. I've already declared bankruptcy, so I'm pretty much starting from scratch as far as bills go.

[Buzzbee]

I'm not an economist, so forgive me if my opinions seem simplistic or inaccurate, but aren't there a couple main points to an income tax vs. sales tax?

1. From a philosophical perspective, my impression is that a tax that is based on income is justified from the perspective that a particular set of societal rules and shared responsibilities create the environment that allow business to take place.

Can't that argument also justify a sales tax? The particular set of societal rules and shared responsibilities create an environment that allow sales to take place.


2. From an economic perspective, doesn't the economy prosper when more activity takes place? In other words, if we tax spending directly, isn't that a greater disincentive to spend money than taxing your income on a percentage basis?

Wouldn't taxing your income on a percentage basis be a greater disincentive to earn money than taxing spending directly?

[GrantDawg]

Wouldn't taxing your income on a percentage basis be a greater disincentive to earn money than taxing spending directly?No. Taxing spending will keep me from spending, but a fair income tax would mean if I earned more money I would still take home more money. I think a flat-tax would make much more sense economically and in the "fairness" factor.

[Ben E Lou]

Well, since SkyDog's parents did it, everybody can!

What a load of crap.Well, not literally "everyone." Those who can't work because of physical or mental disorders are at a disadvantage, sure. However, I strongly believe that if you're able-bodied, there are opportunities aplenty in this nation, (and at varied levels of scholastic ability--just ask my "C" student brother with the six-figure income...the lucky jerk ;)). I can point specifically to other poor blacks from my parents' generation who did just fine (and to plenty who didn't as well). Not everyone will do it, but a whole bunch of people can.

[QuikSand]

Taxes are rife with competing principles of public policy. There exists plenty of room for reasonable people with different priorities to disagree.

The main issues with taxes, as illustrated here, are basically the competing values of fairness and incentive. I use both terms as adopted by their advocates - I'm not trying to take side in this particular post.

The so-called fairness argument is basically: the more means you have, the more you should pay. Taken even further, many would argue that taxes should not just be proportional, but rather progressive -- meaning that those with more means should not only pay more in total, but should pay more as a share of their means.

There are two underpinning for this school of thought. First is the notion that individuals with wealth benefit more from the broad array of public services. This is tough to articulate, in my judgment, but there is some logic behind this. One thing that having a stable society (one that does things like enforce the rule of law and public contracts) accomplishes is enable people to retain the wealth that they have. While it’s true that people who receive direct transfers from the government see their government benefits in a more obvious form, there is at least a logical argument that a millionaire benefits more from a stable and secure environment than does a pauper – he simply would have more to lose from an anarchistic environment without public safety services and the like.

The second basic idea supporting a progressive tax system is that a simple accounting of ability to pay is itself an unfair basis for taxation. Looking at people’s total income, or total wealth, or total expenses, overstates the amount that is a sensible basis for taxation. That’s why we do things like allow personal exemptions from income taxes, and why we exclude things like food and drugs from most sales taxes. In concept – a certain share of every person’s income (and other means) is attributable to what we might consider “basic costs of living” – food, shelter, and the like. Some would sensibly argue that the proper basis for taxation might be the means we have beyond this level – that we ought to be in the business of taxing only people’s disposable income (not intended to be quite as pejorative as it sounds, just a technical term for the income beyond what you really “need”). Tax systems that provide low-end exemptions, carve-outs for certain types of transactions, and higher rates on higher levels of income are all ways to accomplish this goal.


Competing with this general concept of fairness is another completely legitimate policy argument – one of incentive. You have heard this articulated here already, but the concept is pretty clear: in a capitalist society, the main engines of growth are the incentives for individual success. Therefore, a tax system that creates greater burdens on those who succeed and therefore gain greater means provides a reduced incentive for individual economic success. And the logical conclusion of placing this as the top priority would be to suggest that a progressive system – one that places higher tax burdens on the wealthy – is a bad idea.

A related argument is a practical one – that placing higher tax rates on taxpayers with higher means, you also increase the incentive for them to try to evade taxation. We know that there are any numbers of vehicles by which this can be done – and the greater the taxes, the greater the lure of tax avoidance measures. So, there may be a self-defeating element of higher and higher taxes – especially on those who might have the wherewithal to exercise evasion vehicles, legal or otherwise.


Is there a purely right or wrong answer here? Of course not. Both of these viewpoints are perfectly sound, and it’s perfectly reasonable for an individual or a society to decide that one ranks as a higher concern than the other. In our society, we seem to have adopted a mix of the two, basically. We have a variety of taxes, at different levels of government-- some that tend to be borne by everyone nearly equally, and others which bear some degree of progressivity.

[Buzzbee]

No. Taxing spending will keep me from spending, but a fair income tax would mean if I earned more money I would still take home more money. I think a flat-tax would make much more sense economically and in the "fairness" factor.

Taxing spending won't keep you from spending. You will still spend. You just MAY use more discretion in what you buy, and for what price. People with a million dollar a year salary will still buy expensive homes, because they can afford it. The tax on the cost of their home will be no more incentive or disincentive for those with the means than it is now with a tax on income.

[GrantDawg]

Well, not literally "everyone." Those who can't work because of physical or mental disorders are at a disadvantage, sure. However, I strongly believe that if you're able-bodied, there are opportunities aplenty in this nation, (and at varied levels of scholastic ability--just ask my "C" student brother with the six-figure income...the lucky jerk ;)). I can point specifically to other poor blacks from my parents' generation who did just fine (and to plenty who didn't as well). Not everyone will do it, but a whole bunch of people can.
I can too. I'm sure there are many "worked hard, never made it" people out there, but I haven't seen many. I have seen plenty of "I'm a victim so I never tried" people. I also know many people who were not bright, under-educated, yet still were quite successfull. They did it mostly by doing what other things that other people wouldn't (outside labor, long hard hours). Just about anybody can do it, but are they willing?

[JonInMiddleGA]

... does anyone here ever respond by saying "oh, you know... you're right, I'm wrong.... thanks" and end the discussion there?
I've used that a few times, but it usually tends to rile the recipient, so it isn't all that effective in saving muss, fuss, and bother. You just end up with a more general flame war than a topic-specific one.

It actually seems to work much better to dismiss them with something they often aren't quite sharp enough to catch & then move along. (A task that would be made much easier, btw, if we could get that "ignore thread" feature I mentioned recently).

[GrantDawg]

Taxing spending won't keep you from spending. You will still spend. You just MAY use more discretion in what you buy, and for what price. People with a million dollar a year salary will still buy expensive homes, because they can afford it. The tax on the cost of their home will be no more incentive or disincentive for those with the means than it is now with a tax on income.
I just can't see that. "More discretion" means less purchases, which means less production, which means less jobs. How is that better?

[Buzzbee]

I haven't found "trying to change someone's mind" to be a very effective strategy around here. From time to time, there are simple matters of pure fact that need to be added... but when it comes to personal and political preferences... does anyone here ever respond by saying "oh, you know... you're right, I'm wrong.... thanks" and end the discussion there?

Quik - I agree with you that it is pretty rare for debates/arguments such as this one to suddenly change someones mind. Is that a reason not to debate or discuss? While people may not change the side of the fence they are on, they may have a greater understanding of the people on the other side of the fence and their views.

Perhaps someone reading this thread isn't familiar with taxation or the principles behind it. Perhaps this discussion might help form opinions for those who don't have them on this subject.

Oh, I don't even know why I'm arguing with you. I'm not going to change your mind. End of discussion.

[Buzzbee]

I just can't see that. "More discretion" means less purchases, which means less production, which means less jobs. How is that better?

Question - Have you ever not purchased something because the sales tax made it too expensive?

We pay sales taxes already. Have they reduced what is purchased?

When you buy a product, you are paying a total price. Included in that price are various things, including the cost of the raw materials, company overhead, taxes paid by the company making the product, sales taxes, etc. Your decision to purchase or not purchase that product is based on the total price. The THEORY is that if you did away with income taxes, the price of the product would be reduced by MORE than the increase caused by a sales tax.

{NOTE: I am not convinced or trying to profess that a national sales tax instead of an income tax is the answer, or even that it will work. I said above I truly believe it will never happen. I do believe that it is something that is worth consideration, as it MAY be a viable alternative to an income tax.}

[GrantDawg]

Question - Have you ever not purchased something because the sales tax made it too expensive?


I would if the sales tax was 23%. I have not bought a major purchase in one county with a 8% sales tax because the next county over has a 6% sales tax. When I lived in Tennessee (state sales tax) I would often wait to spend large sums of money until I got back to Georgia (which at the time was a good 2-3% lower in sales tax, not so now even though we still have an income tax).

Another factor in all this is collection. I keep reading this would "end the IRS." Well, that is great, but what would it create? Big Bother is still going to want his tax, but now the tax is on anything I buy.

1)Will have to keep receipts to prove I paid tax on an item?

2)If I sell my car to a friend, will I have to prove how much he paid and pay a tax on it?

3)If I can't prove I paid taxes, will they come and take my house just like they do now with an income tax?

4) What about things like ebay, or yard sales? This will create an internet sales tax, will it not?

5) Will this not create a huge black market? I mean, it is hardly with the risk to sell items on a blackmarket to save 5-7%, but if your talking 23-27% it would be well worth it.

I read some of the websites out there that paint a very pretty, pie-in-the-sky picture, but they don't do a very good job at answering these kinds of questions.

[GrantDawg]

Let me add something else. A tax like this would in affect raise taxes on the middle and lower tax brackets, while lowering taxes on the high incomes. I don't have the numbers in front of me, but who, as a precentage of income, consumes more, the weathy or the poor and middle classes. I can guarentee it is the the lower end.

[Buzzbee]

I would if the sales tax was 23%. I have not bought a major purchase in one county with a 8% sales tax because the next county over has a 6% sales tax. When I lived in Tennessee (state sales tax) I would often wait to spend large sums of money until I got back to Georgia (which at the time was a good 2-3% lower in sales tax, not so now even though we still have an income tax).

Another factor in all this is collection. I keep reading this would "end the IRS." Well, that is great, but what would it create? Big Bother is still going to want his tax, but now the tax is on anything I buy.

How do localities keep track of sales taxes today? The system would be much larger, but much less overhead than the current system.

In regard to doing away with the IRS, I imagine the IRS would still exist but on a much smaller scale. However, I am not familiar with the specifics of how it would affect the IRS, so can't provide specifics as to how it would be affected.

I can tell you that corporations have the potential to save big bucks. There are entire departments in large corporations that do nothing but keep up with tax issues and payroll. There are companies that exist solely for the purpose of tracking changes in tax legislation.



1)Will have to keep receipts to prove I paid tax on an item?

Do you now? Responsibility would be on the merchant who sold the goods to collect and remit the taxes. Just like sales taxes today.


2)If I sell my car to a friend, will I have to prove how much he paid and pay a tax on it?

No, the tax was paid when you originally purchased the car.


3)If I can't prove I paid taxes, will they come and take my house just like they do now with an income tax?


Not your responsiblilty. It would be the responsibility of the merchant to collect and remit the taxes. I believe this is the case with sales taxes as they are now.


4) What about things like ebay, or yard sales? This will create an internet sales tax, will it not?

No. The tax would be paid on the initial sale.


5) Will this not create a huge black market? I mean, it is hardly with the risk to sell items on a blackmarket to save 5-7%, but if your talking 23-27% it would be well worth it.

That is certainly possible, and probably very likely. Then again, paying income taxes isn't something that everyone does either, is it? People still break the law and don't pay income taxes. I mean, avoiding paying 23-27% sales tax is one thing, but avoiding paying a 50% inheritance tax would certainly give someone incentive, wouldn't it?


I read some of the websites out there that paint a very pretty, pie-in-the-sky picture, but they don't do a very good job at answering these kinds of questions.

I agree. There are tons of holes that can be poked in the argument for a national sales tax, just as there are holes that can be poked in the argument for a national income tax. As I said, I don't think this will EVER happen because the current system is just TOO entrenched, and the transition period if it did would in my opinion be tremendously ugly. My purpose is just to point out that it is a possible alternative.

[Buzzbee]

Let me add something else. A tax like this would in affect raise taxes on the middle and lower tax brackets, while lowering taxes on the high incomes. I don't have the numbers in front of me, but who, as a precentage of income, consumes more, the weathy or the poor and middle classes. I can guarentee it is the the lower end.

The tax on the purchase of a $100 item would be the same for everybody. How is that not fair?

[CentralMassHokie]

The tax on the purchase of a $100 item would be the same for everybody. How is that not fair?

Right here is the question that divides people who are for progressive taxation from those who are for flat taxation.

Let's set the arbitrary sales tax rate at 15%. So the tax on this item is $15.

The reason I'm for progressive taxation (and against any sort of flat taxation plan) is because it is plainly clear (to me) that $15 is more valuable to someone earning $15k a year than it is to someone earning $150k a year.

The argument gets more obvious as you increase the price of the item.

Most people, who argue for a flat tax, actually realize this point, which is why they often argue for an exemption for those who earn less than a certain amount of money. To me, that's always been illogical. You concede the point that those who earn less are disproportionately affected by a flat tax as their disposable income (in the terms Quik described above) is worth far more to them than the disposable income of someone on the opposite end of the pay scale. Yet the same flat tax proponent will describe it as fair. It's hard for me to rectify that.

[Mr. Wednesday]

...a fair income tax would mean if I earned more money I would still take home more money.Is that not true of the current income tax system, which uses marginal rates?

(My answer is that in the most basic sense, it is true, and I don't know enough about deductions, loopholes, alternative minimum taxes, etc. to say whether it's really true.)

[Buzzbee]

Right here is the question that divides people who are for progressive taxation from those who are for flat taxation.

Let's set the arbitrary sales tax rate at 15%. So the tax on this item is $15.

The reason I'm for progressive taxation (and against any sort of flat taxation plan) is because it is plainly clear (to me) that $15 is more valuable to someone earning $15k a year than it is to someone earning $150k a year.

The argument gets more obvious as you increase the price of the item.

Most people, who argue for a flat tax, actually realize this point, which is why they often argue for an exemption for those who earn less than a certain amount of money. To me, that's always been illogical. You concede the point that those who earn less are disproportionately affected by a flat tax as their disposable income (in the terms Quik described above) is worth far more to them than the disposable income of someone on the opposite end of the pay scale. Yet the same flat tax proponent will describe it as fair. It's hard for me to rectify that.

Interesting. I always thought that $15 was worth $15 no matter how much you earn.

I understand your point. Losing $100 bill may not be as important to a millionaire as it is to someone at the poverty level. However, just because someone may be able to afford paying more, doesn't justify making them. Using your argument, the people who have higher incomes should pay more for goods and services than people with lower income becauses the money is less valuable to the wealthy. In other words, the value of a dollar to a millionaire is less than the value of a dollar to a pauper, so therefore the millionaire should have to give several more dollars than the pauper. Right?

[Buzzbee]

Originally Posted by GrantDawg
...a fair income tax would mean if I earned more money I would still take home more money.

Is that not true of the current income tax system, which uses marginal rates?

(My answer is that in the most basic sense, it is true, and I don't know enough about deductions, loopholes, alternative minimum taxes, etc. to say whether it's really true.)

Not necessarily. Increasing your earnings might put you in a higher tax bracket which could potentially result in you bringing home less, even though your wages are more. Of course at some point if you continue increasing your earnings you would reach a level where you would surpass the bring home pay of the high end of the lower tax bracket.

Also, I THINK what GD intended was that if I earn more pay, shouldn't I bring home the same percentage as before. (Basically a flat tax)

[JonInMiddleGA]

Interesting. I always thought that $15 was worth $15 no matter how much you earn.
Must be that "new math".

Using your argument, the people who have higher incomes should pay more for goods and services than people with lower income becauses the money is less valuable to the wealthy.
For goodness sakes, don't start giving 'em ideas.http://dynamic2.gamespy.com/%7Efof/forums/images/smilies/wink.gif

[CentralMassHokie]

I understand your point. Losing $100 bill may not be as important to a millionaire as it is to someone at the poverty level. However, just because someone may be able to afford paying more, doesn't justify making them. Using your argument, the people who have higher incomes should pay more for goods and services than people with lower income becauses the money is less valuable to the wealthy. In other words, the value of a dollar to a millionaire is less than the value of a dollar to a pauper, so therefore the millionaire should have to give several more dollars than the pauper. Right?

The direct answer is no. In general everyday commerce, items have a fixed price, and if a person cannot afford to pay that price, they don't pay it.

But we're not talking commerce, we're talking taxation. And, in this case, yes, since the value of a dollar to a millionaire is greater, he should pay more. He should also pay more since it's likely that he makes greater use of the central services provided by the government (roads, police, etc.)

But the interesting thing on the "should a millionaire pay more for goods" topic is that, in many cases, the market has already realized that a millionaire will pay more for the same goods. Hence the "luxury" goods market, where items are given different brand names and priced at greatly different prices. From speakers, to watches, to cars, to food, this happens all over society. Even the free market has realized it :)

But like I said above, the whole idea of $15 being worth more to someone at one end of the scale than the other is something you either agree with or don't agree with. And if you agree with it, you usually believe in progressive taxation. If you don't agree with it, you usually believe in flat or no taxation.

[SunDancer]

The direct answer is no. In general everyday commerce, items have a fixed price, and if a person cannot afford to pay that price, they don't pay it.

But we're not talking commerce, we're talking taxation. And, in this case, yes, since the value of a dollar to a millionaire is greater, he should pay more. He should also pay more since it's likely that he makes greater use of the central services provided by the government (roads, police, etc.)

But the interesting thing on the "should a millionaire pay more for goods" topic is that, in many cases, the market has already realized that a millionaire will pay more for the same goods. Hence the "luxury" goods market, where items are given different brand names and priced at greatly different prices. From speakers, to watches, to cars, to food, this happens all over society. Even the free market has realized it :)



But like I said above, the whole idea of $15 being worth more to someone at one end of the scale than the other is something you either agree with or don't agree with. And if you agree with it, you usually believe in progressive taxation. If you don't agree with it, you usually believe in flat or no taxation.


So a millionaire should be punished for having money? Not sure with that argument. I am curious, how does using greater use of central services play into role? I disagree with that statement as well If anything, they use less (no financial aid, less police, no health benefits, ect.) How does one use more police (if anything, less, they would prolly live in a better-crime, gated community). To compare "luxury" goods to regular cars is very differnet. A Rolex is not the same as Fossil. Gold, diamonds, ect. A Ford does not have the level of quality as a BMW.

[Buzzbee]

So a millionaire should be punished for having money? Not sure with that argument. I am curious, how does using greater use of central services play into role? I disagree with that statement as well If anything, they use less (no financial aid, less police, no health benefits, ect.) How does one use more police (if anything, less, they would prolly live in a better-crime, gated community). To compare "luxury" goods to regular cars is very differnet. A Rolex is not the same as Fossil. Gold, diamonds, ect. A Ford does not have the level of quality as a BMW.

SunDancer - CMH's belief is that since money is valued less by the wealthy, you aren't "punishing" them by making them pay a higer percentage of their income. In his eyes, you are making them pay a "fair" amount. That is the crux of the argument.

Of course the counter argument is:

How can a system that charges one person 10% of their income, and another person 20% of their income, and another person 30% of their income be considered fair. Proponents of a flat tax believe that, since you are charging everyone the same PERCENTAGE of their income, that it is fair.

CMH believes that wealthy people value their money less than the poor. I'm not sure I agree with this. There are many examples of poor people who are in debt up to their eyeballs (of their own choosing) and there are many examples of wealthy people who scrimp and save and are tightwads who value money very much. CMH believes that taxes should be based on the impact it will have on the individual.

[dawgfan]

I am curious, how does using greater use of central services play into role? I disagree with that statement as well If anything, they use less (no financial aid, less police, no health benefits, ect.) How does one use more police (if anything, less, they would prolly live in a better-crime, gated community).

The argument, as stated previously in the thread, isn't that the rich use central services more, but that the relative value is worth more to them (especially police/military) in the sense that they have more to lose without the benefit of those services.

[Buzzbee]

The argument, as stated previously in the thread, isn't that the rich use central services more, but that the relative value is worth more to them (especially police/military) in the sense that they have more to lose without the benefit of those services.

To a certain degree it makes sense. However, where it starts to fall apart for me is that it assumes money collected for taxes only goes to "central sevices". It doesn't address the fact that tax money in the U.S. goes to a great deal more than "central services". It goes to school lunch programs, welfare programs, and there are a ton more that could be listed. Those programs do not benefit the wealthy, but in fact benefit the poor. If tax money was collected for "central sevices" and used only for central services, then that argument would be valid and I could see the justification for a progressive tax system. However, they are not, so that argument doesn't hold water with me.

[dawgfan]

To a certain degree it makes sense. However, where it starts to fall apart for me is that it assumes money collected for taxes only goes to "central sevices". It doesn't address the fact that tax money in the U.S. goes to a great deal more than "central services". It goes to school lunch programs, welfare programs, and there are a ton more that could be listed. Those programs do not benefit the wealthy, but in fact benefit the poor. If tax money was collected for "central sevices" and used only for central services, then that argument would be valid and I could see the justification for a progressive tax system. However, they are not, so that argument doesn't hold water with me.

Well, you could argue that the more cared for the poor are the less they're liable to try and eat the rich... :)

[Cuckoo]

I just can't believe that I agree with Jim on something political. I love his games, but that never happens. :)

[Buzzbee]

Well, you could argue that the more cared for the poor are the less they're liable to try and eat the rich... :)

LOL. Yeah, there's no bread, let them eat cake.

[CentralMassHokie]

CMH believes that wealthy people value their money less than the poor.

No, I believe that money has less value as you increase your wealth. $1000 to someone making $1 mill is less impactful than $1000 to someone making $15k.

There are many examples of poor people who are in debt up to their eyeballs (of their own choosing) and there are many examples of wealthy people who scrimp and save and are tightwads who value money very much.

And there are plenty examples of poor people scrimping and saving just in this thread. And there are plenty examples of the wealthy wasting money on a variety of things.

Examples are useless in policy debate. Everyone can whip them out. They basically become apocryphal.

CMH believes that taxes should be based on the impact it will have on the individual.

That's much closer to what I believe. I believe that if we're going to have a tax system that attempts to tax people fairly, we need to take into account not simply the amount of money or percentage of income, but how that loss of money affects both the individual and society.

Now, I've made my argument that any non-progressive tax impacts the poor and middle class more than the upper class.

The argument I haven't made is about how a progressive tax affects society. I'm not even going to claim to be well versed in economics. And I'm not going to debate the laffer curve or supply side (I'll let the hundreds and hundreds of certified economists do that for me). What I will say is that I've come to believe that the economy is often spurred on by the exact opposite of what supply-siders believe. I think more money in the hands of the poor, working poor, and middle class drives the economy because the extra marginal income goes towards buying goods and services (a new pair of shoes, that X-box the kids have been wanting, a vacation) that don't get bought otherwise. Marginal income for the top, say 10%, rarely gets put directly back into the economy. It is often invested, and while that does have an economic impact, I don't believe the effect is nearly as large (simply based on economies of scale - tens of millions of people with an extra $1000 into the economy).

Now, I'm not even going to claim that there aren't holes in this. Like I said, I'm not an economist. But, at some level, it feels like common sense to me. Leave more money in the hands of the people who need it, who'll then buy more goods, which results in more people working at stores and creating those goods, which stimulates and drives the economy, which results in those at the top of the food chain earning more as well. It's win-win.

I think I've made my point enough. Hopefully it was clear. I'm also hoping that I've stayed away from the buffoonery that Quiksand mentioned. Maybe someone changed their mind a bit, or can at least understand a bit more where I'm coming from.

The End.

[Buzzbee]

I think I've made my point enough. Hopefully it was clear. I'm also hoping that I've stayed away from the buffoonery that Quiksand mentioned. Maybe someone changed their mind a bit, or can at least understand a bit more where I'm coming from.
The End.

You're posts have been straightforward, reasonable, well thought out, and in response to questions or points raised by others. I hope my posts have also fallen into that classification. As far as buffoonery, we haven't attacked each other personally, we understand the other's argument, but just happen to disagree. No flame wars, or outlandish claims based on pure emotion or blind perception. Personally, I wouldn't consider that buffoonery, and if QS does that's his opinion and he is entitled to it.

Perhaps our debate has changed some minds, or strengthened existing opinions. If nothing else, perhaps it has upped the level of respect between CMH and Buzzbee.



























Nah. I can't respect you when you're WRONG! :p

[SunDancer]

No, I believe that money has less value as you increase your wealth. $1000 to someone making $1 mill is less impactful than $1000 to someone making $15k.

And there are plenty examples of poor people scrimping and saving just in this thread. And there are plenty examples of the wealthy wasting money on a variety of things.




Just curious, what would they be wasting money on?

[NoMyths]

Just curious, what would they be wasting money on?That belt Paris Hilton wore that said "Sex", for one.

Also, I'm betting lots of hookers. Though whether or not they would be considered a waste would, I'm assuming, depend on quality.

[Buzzbee]

Just curious, what would they be wasting money on?

Kind of a baiting question, wouldn't you say? Is it a waste to pay hundreds of thousands of dollars for a baseball? What if that baseball was the 73rd homerun hit by Barry Bonds? Some would say it isn't wasteful, others might claim it is. No real answer to your question.

[SunDancer]

Kind of a baiting question, wouldn't you say? Is it a waste to pay hundreds of thousands of dollars for a baseball? What if that baseball was the 73rd homerun hit by Barry Bonds? Some would say it isn't wasteful, others might claim it is. No real answer to your question.

For the previous post, Hilton is just a rich snob, who got her money from her dad and does not do anything with it. I consider people who earn their wealth, and I don't mind people inheritencing the money, but they act like they are "top" or daddy's little rich girl, ect.

Reason I ask, is "wasting" money any differenet for a rich person then a regular, middle class one? Sure, they might spend on differenet things, but they both still "waste" money. (whatever wasting money would be to you)

[JonInMiddleGA]

Leave more money in the hands of the people who need it ...
Which is when I counter with "how about leaving more money in the hands of the people who earned it in the first place".

Which probably isn't a bad way to sum up a good bit of the difference in our positions.

[judicial clerk]

Buzbee and CMH, great job of explainig the basic theory behind each of your positions. You prove QS's point that there are two logical, well though out sides to this, and most, issues.

CMH, I happen to side with buzbee on this issue, but I think you do a great job of explaining the rational behind your position. Your rational makes sense and has merit and you fully understand buzbee's argument. The issue then boils down to what is more "fair" and you and buzbee happen to disagree.

I would argue that a flat, percentage based, income tax is still progressive. For example, if the tax rate was a flat 10%, then a person making a million dollars per year would still pay much more in taxes than a person making $100k or $10K. A truly "fair" tax (probably only in my opinion and maybe Ayn Rand if she were still alive) would be a headcount tax where each person actually pays the same amount. Not the same percentage of income. In this example, each person would pay, say, $10K, regardless of their level of wealth or income. Everybody paying the same amount for the same rights and privelages that go along with being a taxpayer, that sounds "fair" to me, if not tenable.

[judicial clerk]

sorry fo the dola,

That being said, i don't think there is any law, in the constiution or otherwise, that says the U.S. tax system needs to be "fair". i suppose it only needs to be rationally related to a legitimate government interest.

[Buccaneer]

Labor costs have increased greatly. State and federal funding has decreased. School endowments have shrunk due to the recession. Many schools are not filling faculty vacancies, have cancelled journal subscriptions, are increasingly using poorly paid adjuncts to teach classes, are increasingly weighting research grant monies as a basis for tenure, and have deferred maintainance to a unsustainable level. Many public universities are facing a crisis, since they cannot maintain their current capabilities in the face of state budget cuts and mandates about keeping tuition levels stable (or growing no more than a certain amount).
This has been going on for many years, well before the current recession. Perhaps the universities have been involved in way more activities than their core businesses and thus, having been stretched too thin? One answer is to do away with the tenure system, thus making jobs and salaries more competitive in the marketplace and reducing the need for expensive programs and grants that don't benefit the students in comparison to the benefits (perhaps much of these just benefits the tenured and trying-to-be-tenured amongst their peers?). I know, I've been there.

[Mr. Wednesday]

Not necessarily. Increasing your earnings might put you in a higher tax bracket which could potentially result in you bringing home less, even though your wages are more.Not true! (A widely-held misconception, though, I believe.) Income tax rates are marginal. As a contrived example, suppose marginal rates of 10% up to $10,000, 15% from $10,000 to $20,000, and 20% above $20,000. Everybody pays 10% on their first $10,000 in income. Those who make more than $10,000 also pay 15% on any amount they make more than $10,000 and less than $20,000. Those who make more than $20,000 pay 10% up to $10,000, 15% between $10,000 and $20,000, and 20% on the balance. Calculated using the percentages, you NEVER take home less despite earning more.

(An interesting note -- I calculated out my example above, and I found that the overall rate doesn't hit 15% until $30,000 income, this despite the fact that the marginal 15% rate was phased out at $20,000.)

As I noted in my post, this is absent factors like deductions and other complexities. Also, with the IRS using tables, it's possible (though not IMO likely) to have a negative effect between table values.

[GrantDawg]

<TABLE cellSpacing=0 cellPadding=4 width="100%" border=0><TBODY><TR><TD class=alt1 style="BORDER-RIGHT: 1px inset; BORDER-TOP: 1px inset; BORDER-LEFT: 1px inset; BORDER-BOTTOM: 1px inset">Originally Posted by GrantDawg
Let me add something else. A tax like this would in affect raise taxes on the middle and lower tax brackets, while lowering taxes on the high incomes. I don't have the numbers in front of me, but who, as a precentage of income, consumes more, the weathy or the poor and middle classes. I can guarentee it is the the lower end. </TD></TR></TBODY></TABLE>
The tax on the purchase of a $100 item would be the same for everybody. How is that not fair?
You missed my point. I was talking about consumption as a percentage of income. I would put money on the fact that the lower income spends more money as a percentage of income on consumables than the wealthy. Say some 40-60% of a middle class income compared to 20-30% of a higher income. It seems like a huge tax increase on the lower classes and a tax break for the upper (in real dollars). Some, notably Jon, would be for such, but I do not think such a severe change in where we get our taxes would be beneficial.
I believe a flat tax would end many of the things discussed earlier (the need to spend huge amount on lawyers hunting loop-holes, a downgrade on the size of the IRS, and a more equitable tax system than the current one). It would do so without the negative of increasing the percentage of tax on higher income brackets (if you make 100,000 dollars you only deserve 65% of your income whereas someone making 50,000 deserves 85%), and not have a negative affect on consumption (which is where most jobs are created).

[Fritz]

gasp. poor people would have to spend all of their money on consumables and rich people would not!

[GrantDawg]

gasp. poor people would have to spend all of their money on consumables and rich people would not!?

Poor people do spend more of their money (as a percentage of income) than rich people on consumables, and changing the tax system wouldn't magically change that.

[Fritz]

?

Poor people do spend more of their money (as a percentage of income) than rich people on consumables, and changing the tax system wouldn't magically change that.




of course. Just a flip reply to you post. I have not been following the thread. Please forgive me for halfassing my hooligan duties.

[clintl]

Question - Have you ever not purchased something because the sales tax made it too expensive?

We pay sales taxes already. Have they reduced what is purchased?

When you buy a product, you are paying a total price. Included in that price are various things, including the cost of the raw materials, company overhead, taxes paid by the company making the product, sales taxes, etc. Your decision to purchase or not purchase that product is based on the total price. The THEORY is that if you did away with income taxes, the price of the product would be reduced by MORE than the increase caused by a sales tax.

{NOTE: I am not convinced or trying to profess that a national sales tax instead of an income tax is the answer, or even that it will work. I said above I truly believe it will never happen. I do believe that it is something that is worth consideration, as it MAY be a viable alternative to an income tax.}

Tying pricing to costs is a tricky business. Prices are determined more by demand issues than cost - vendors will try to charge a price that maximizes their profit, regardless of costs. Costs to provide a product or service have a greater influence on determining how many vendors enter the market, by setting a threshold you have to meet to make it worth entering the market. You would have to look and individual products to determine how eliminating a sales tax would affect prices, but I feel very confident in saying that the sellers would probably pocket most of the tax savings, and the consumers very little. Suppliers would just raise the base price if sales taxes were eliminated.

[Buzzbee]

Tying pricing to costs is a tricky business. Prices are determined more by demand issues than cost - vendors will try to charge a price that maximizes their profit, regardless of costs. Costs to provide a product or service have a greater influence on determining how many vendors enter the market, by setting a threshold you have to meet to make it worth entering the market. You would have to look and individual products to determine how eliminating a sales tax would affect prices, but I feel very confident in saying that the sellers would probably pocket most of the tax savings, and the consumers very little. Suppliers would just raise the base price if sales taxes were eliminated.

I never claimed prices were tied to costs. I merely said that costs were included in the price. I also agree with a great deal that you say.

"Costs to provide a product or service have a greater influence on determining how many vendors enter the market, by setting a threshold you have to meet to make it worth entering the market."

This is an important statement, and very true. By reducing costs to manufacturers you are lowering the threshold to enter the market. As vendors enter the market, prices are driven down due to competition. This is why those who favor a national sales tax feel that prices will eventually settle to a point low enough to offset the added sales tax.

"You would have to look and individual products to determine how eliminating a sales tax would affect prices, but I feel very confident in saying that the sellers would probably pocket most of the tax savings, and the consumers very little."

And this is the VERY reason I feel a transition period would be very painful. It would take time for the prices of goods to be driven down. In the meantime, corporations would attempt to maintain their prices as long as they could while trying to take advantage of any cost decreases. It is at this point where the first of your statement that I quoted comes in to play. Competition will determine how quickly prices settle. For everday items such as paper, pencils, staples, household goods, etc. the prices would probably come down fairly quickly since there is a lot of competition. However, lower volume items, unique items, or items that are otherwise the beneficiaries of less competition would not decrease enough to offset the increased sales tax.

"Suppliers would just raise the base price if sales taxes were eliminated."

And increased profits would likely lure new vendors into the market, increasing supply, and decreasing the price.

[clintl]

Right - I agree with what you said there, Buzzbee. And the reason I said you have to look at how it would affect individual products every product has its own unique short-term and long-term price elasticity of demand, so the effects are going to be different for every product, and different in the short-term vs. the long-term.

[Aardvark]

This has been going on for many years, well before the current recession. Perhaps the universities have been involved in way more activities than their core businesses and thus, having been stretched too thin? One answer is to do away with the tenure system, thus making jobs and salaries more competitive in the marketplace and reducing the need for expensive programs and grants that don't benefit the students in comparison to the benefits (perhaps much of these just benefits the tenured and trying-to-be-tenured amongst their peers?). I know, I've been there.

Universities core business is education and research. I'm not sure how that is being stretched thin. There is waste, for example, why does every college in New Jersey need a Holocaust center, but a major issue is just that the funding hasn't kept up with expenses. Grants are actually revenue in to the college, but the pursuit of grants is a drain on faculty resources (most typically, faculty extra time. The average junior faculty works about 50-55 hours a week during the semester.)

Abolishing tenure isn't much of an improvement for the following reasons.
1. Tenure is sort of like guaranteed contracts. If you abolish it, you have to pay more to attract the same people. If you were to try to abolish it at any level greater than a single state college system, you would probably have a nasty anti-trust case pop up.
2. Tenure also protects colleges against faculty movement. Normally, faculty with tenure is unlikely to move unless granted tenure at the school they are moving to. In general, only real superstar faculty can command that. Most tenured faculty that move have to reapply for tenure at their new job.
3. Faculty salary tends to be based heavily on first year salary, since raises tend to be a fixed percentage (or a small range of percentages.) This has led, in the past, to great gender-based inequities. During times of economic boom, I've seen starting faculty making nearly as much as their department chairs who were hired during a recession.

[Tekneek]

So, the 'death tax' is easy to get around if you have the money to bring in an attorney to arrange things for you before you die? It sounds to me like it provides loopholes for the truly rich to exploit, but can make it impossible for you to pass on your assets if you have little or no cash but a big assessed value on your assets. Very rich = you can pay to exercise the loopholes. Rich on assessed value but no other wealth = can't find the loopholes and have to sell some of those assets. To me, this is wrong and defeats the whole idea. It's not really fair to have loopholes for those who can afford it, but not for those who can't. There should be a little do-it-yourself way, that is very simple, or close the loopholes.