
What Could Raising Taxes on the 1% Do? Surprising Amounts - szx
http://www.nytimes.com/2015/10/17/business/putting-numbers-to-a-tax-increase-for-the-rich.html
======
philh
_Epistemic status: wildly overconfident. "If you don't know how to pronounce a
word, say it loud!"_

This is naive on two counts. You can't raise taxes without affecting people's
behaviour. If someone's tax burden goes from 35% to 45%, they'll put more
effort into avoiding taxes, and you're not going to see the increase that the
obvious calculation says you will.

But let's ignore that for now. The highest number here is $276 billion. That's
a bit less than 10% of the $3 trillion tax receipts collected in 2014.
[https://en.wikipedia.org/wiki/United_States_federal_budget#M...](https://en.wikipedia.org/wiki/United_States_federal_budget#Major_receipt_categories)

That's a significant amount, but it's not really earth shattering unless you
can use it effectively. And if you can use it effectively, you probably could
have used the previous $3t effectively as well.

In reality, when you collect an extra $X billion, you don't get to go "oh
great, we can spend $Y billion of that on paying for college tuition, $Z
billion on a child tax credit, and the rest can reduce the national debt".
What actually happens is the same thing that happened to the rest of your
money. It goes to the military, it goes to subsidies for entrenched interests,
it goes to pork barrels, and a fraction of it goes to actually improving
things.

What could an extra $276 billion do? Surprisingly little.

~~~
nugget
This is exactly the problem. I would be happy paying an extra 10% in taxes if
the money was spent efficiently. But so much of it is wasted (and ends up back
in the hands of ''the 1%'' ironically). After what I've seen I trust wealthy
individuals to invest that extra 10% into efforts that benefit society much
more than I trust the government. I think we'd be better off if we lowered
income taxes, raised property taxes, and raised the death tax in % terms (and
eliminated the perpetual trust loophole). But instead there will be a circus
show as politicians argue over the Federal rate (already effectively at 43.4%
for ''the rich'').

~~~
redblacktree
I was with you up until this part:

> I trust wealthy individuals to invest that extra 10% into efforts that
> benefit society much more than I trust the government.

Those wealthy individuals can, in general, be trusted to do things that
benefit themselves. Corruption be as it may, the government is still in the
business of the greater good, however imperfect.

------
benwerd
This needs to happen.

Not only do removing tuition fees or enacting universal healthcare remove
systemic inequalities, they actually make everyone wealthier. We will have a
stronger economy if we take care of the social infrastructure we need. These
measures lead to growth.

Imagine a world where a startup entrepreneur doesn't have to be terrified of
their health insurance status - it's the same one where a working class family
isn't bankrupted by illness. Imagine a more highly educated workforce with
more potential hires domestically - it's the same one where a high school
graduate can afford to be the first person in their family to get an
education. The things that help the poorest in society help all of us. Even if
you don't care about what happens to poorer members of your community, you can
rest easy in the knowledge that these things benefit _you_. Social
infrastructure works.

The _only_ detrimental effect this would have is that the very richest people
don't get to keep quite as much money, on the face of it. But they would make
more money overall.

I would like to see a fairer America, where more people have opportunities,
and fewer people are living harsh poverty conditions. It's exciting to see
these topics finally get the air time they deserve.

~~~
thadd
You want to see a "fairer America" fueled by a discriminatory taxation policy.
I hope this irony does not escape you.

If your goal is truly to see fewer people living in harsh poverty conditions,
an absolutely noble goal, let the free market be. Capitalism will (and has,
see the extreme poverty figures) bring far more people out of poverty than any
bureaucrat could ever hope to.

~~~
benwerd
That's a very libertarian point of view. Has it been shown to work in practice
over an extended time? I know that in the US growth was stronger with higher
taxation.

I don't believe progressive taxation is discriminatory. The more you earn, the
more the marginal utility of each additional dollar you earn is reduced.
Progressive taxation recognizes this, and therefore eases survival burdens on
lower income workers - who are necessary for any capitalist economy to
function - while continuing to allow higher earners to become wealthy. It's a
good system.

~~~
thadd
I understand your point, but I think you're being too abstract. End of the
day, someone is being taxed (fined by the government) more than another,
simply because they are wealthier. That doesn't sit right with me.

As far as growth being stronger with higher tax rates, I assume you're talking
about post ww2 era? If so, then I think that was probably more to do with the
fact that the rest of the world was destroyed rather than due to our tax code.

~~~
hga
_As far as growth being stronger with higher tax rates, I assume you 're
talking about post ww2 era? If so, then I think that was probably more to do
with the fact that the rest of the world was destroyed rather than due to our
tax code._

And it was a short lived thing, by the mid-late '50s things were sputtering,
and the top tax rate was 91% ("We like Ike?"). JFK-LBJ reduced that to 77%
([https://en.wikipedia.org/wiki/Revenue_Act_of_1964](https://en.wikipedia.org/wiki/Revenue_Act_of_1964))
to great economic effects (unfortunately, the increased tax revenues were not
so much that LBJ couldn't do a guns and butter budget that almost bankrupted
the nation, leading to a decade and a half of malaise).

------
supster
One reason why the 1% pay less taxes is b/c they make their money on
investments rather than income. The yearly capital gains tax (tax on
investment gains) is ~15% while income tax in that bracket is 30-40%. Those in
the 99% pay somewhere between 10-28% income tax. So it would seem obvious that
we should simply raise capital gains tax to 30-40%. However, investments and
income are not equivalent. Making an investment is correlated with a certain
amount of risk. For example an investment in a General Motors corporate bond
has a risk of default (very apparent in 2008). So if we raise taxes on
investment gains, we dis-incetivize investment activity (b/c it therefore
lowers expected gains). So it makes places like GM less able to finance things
like payroll or build factories that employ regular people.

I'm not saying we should or should not raise taxes on 1%'ers. But we should
keep in mind that there is no free lunch. What we do has unintended
consequences that we should keep in mind.

~~~
littletimmy
It is not true that raising taxes on investment gains disincentives
investment.

If you start taxing investments more, it's not like the rich will suddenly
stop investing. You should hear Warren Buffet talk about this. No rich person
is going to go like "Well... I could make money on this, but not going to do
it because the state is going to tax it..." This is something that happens
only in abstract economic models, not in the real world.

In fact, if you raise taxes rich people may be incentivized to work harder to
find better investments with higher gains.

~~~
hga
_No rich person is going to go like "Well... I could make money on this, but
not going to do it because the state is going to tax it..."_

 _Utter_ bullshit, which has been reflected in actual US investment history
since the Capital Strike of 1937. The perception of fairness goes both ways,
you know.

Not to mention reflected in my father's (and others') economic behavior as the
Reagan tax _rate_ cuts took effect, and they put much less effort into
sheltering income from very high tax rates (generally, something with a net
vector sum of zero) and focused more on just, you know, running good
businesses.

Then there's the minor detail that a tax increase can turn a profitable
investment into a loss. The constant chaos of changing tax rates, or at least
serious proposals to do so, also changes the nature of investments, for
example favoring quick gains before the government might ruin it.

------
whatok
It's beyond naive to expect American politicians to do anything remotely
responsible with increased tax revenue. There are countless examples
throughout recent and age-old history that show what happens when you give
government money to spend like drunken sailors but we don't ever seem to learn
from any of them.

And if Hillary Clinton was serious about any of this, she would return
donations from all of these people.

------
xienze
> That would more than cover, for example, the estimated $47 billion cost of
> eliminating undergraduate tuition at all the country’s four-year public
> colleges and universities, as Senator Bernie Sanders has proposed

I would be in favor of this proposal if it could be demonstrated that college
costs could actually stay somewhat stable (i.e. not increase faster than
inflation) for even a relatively short period of time. Otherwise the cost of
this could spiral out of control in short order.

------
ap22213
There seems to be quite a bit of FUD and a lot of apparent guessing in these
comments. Regardless of politics, are there any studies or evidence to back up
or even discount any of these claims?

How does one separate the politics from the rest?

------
another-one-off
The idea of a 'fair share' isn't so important here, because the numbers are
huge and have to come from somewhere. It isn't like $100 billion sits under a
mattress, it will already be out in the economy, invested in something.

Raising tax is one part of the people getting what they need. The other
questions that are just as important are how to provide services as cost
effectively as possible and is it worth the loss of investment in the economy.
Also maybe is existing investment channeled effectively by the existing tax
structures.

------
danteembermage
I think a reasonable metaphor for thinking about this issue is to consider a
grocery store, where is aisle represents a different kind of income and each
store represents a different country. If prices get too high in one aisle,
shoppers that spend a lot of time in that aisle will switch stores if they can
afford the drive. It seems like both people and politicians tend to focus on
the "earned income" aisle because that's what people are familiar with. That
serves as a nice area for politicking because they can "tax the wealthy"
without actually hitting the real donors in any meaningful way since most of
their income comes from other sources. At the same time corporations and high
net worth individuals are more than capable of leaving, hence the double-
irish, etc. If they go, tax revenues go to 0 rather than small, so it would
seem to be in the strategic interest of the United States government (assuming
we want to maximize revenue which is probably not the goal but will work for
this purpose) to be the lowest tax domicile for that kind of income, but just
barely. That way we attract wealthy individuals but still "extract" the
maximum feasible wealth from them. I really don't like the adversarial nature
of this kind of thinking, but you have to at least admit that people are
corporations do venue shop. If that's not brought up at all, someone's being
naiive, or more likely, disingenuous.

------
1971genocide
Because its america - there is a chance it might work.

But the reality is capital flees whenever a country tries to impose higher
taxes.

The solution is a global taxing regime - something that Thomas Picketty
advocated.

Taxes fundamentally is an business expense - and likes all business expenses
companies will try to reduce it as much as they can - naturally due to the
freedom of the market - companies that do not have to pay higher taxes will
produce cheaper goods while maintaining quality and destroying their
competition.

Its a prisoner's dilemma problem. With countries playing off each other to
welcome businesses in their countries - the UK, US, etc.

The solution is for all countries to co-operate and create a global system to
keep a close eye on the flow of capital. A change in america might actually
lead to it, since america is good at bullying other countries to get its way.

Btw the same thing happened with China - its not that the Chinese are somehow
inherently more capable - its just that they did not have the same level of
obligation to their workers - health, pension, etc - as industrialized
nations.

This is why its important to create a even and common playing field before
talking about the "magic of the free market".

------
thadd
Not entirely related, but progressive taxation schemes make me extremely
uncomfortable. It's a shame so many people want to continue even farther down
the rabbit hole.

~~~
Maarten88
Why? I think progressive taxes are the price you pay for living in a civilized
society.

I see paying a high taxes as a privilege since I still get to keep much more
then less fortunate, less talented, or lazier people. I say this as someone
who is living in Europe, where I'm paying almost 50% of my income to taxes.

~~~
thadd
It's discriminatory. It doesn't treat people fairly under the law.

But it also really bothers me that it's just so arbitrary. I can't imagine the
arrogance necessary to think that you know how much to tax a certain segment
of society relative to another.

~~~
dllthomas
_" It's discriminatory. It doesn't treat people fairly under the law."_

"Fairly" is begging the question.

"Discriminatory" isn't necessarily a bad thing, and needs to be further
refined if it's going to be meaningful. Progressive taxation (in isolation)
does not discriminate between people. It discriminates between dollars. My
first dollar is taxed the same as your first dollar; my ten thousandth dollar
is taxed the same as your ten thousandth dollar; my millionth dollar is taxed
the same as your millionth dollar. It is true that my millionth dollar is
taxed differently from my first dollar, and that is discrimination between
dollars, but generally people don't hold "equal treatment of dollars" as a
moral principle.

 _" I can't imagine the arrogance necessary to think that you know how much to
tax a certain segment of society relative to another."_

Roughly the same arrogance necessary to think you know how much to tax in the
first place, or really any other decision making on that level.

~~~
beeboop
God bless you sir for using "begging the question" correctly.

------
littletimmy
No idea why we're still not doing this.

Just tell the 1% that if they want the government to provide them security
from the marauding masses (we're getting there), they need to pay up their
fair share.

~~~
striking
Because then the 1% moves all of its money to a tax haven and invests it
somewhere where the margins are thicker.

~~~
littletimmy
It's not like the US can't legislate against that. Just need a couple of more
pen strokes to stop that from being a possibility.

------
mindcrime
No, just no. Taxation (of individuals at least ) is theft. If one person puts
a gun in your face, or threatens to, and demands your money, you would have no
problem seeing it so. But because of the societal construct we call
"government" some people are deluded into believing that "many men with guns"
have some innate authority that "one man with a gun" lacks. But being robbed
by many men is no less robbery than being robbed by an individual.

Now, if you want to talk about corporate taxes, that's a somewhat different
story. Corporations owe their existence to the State (whether they should
exist or not is a separate question) and since they derive benefits from the
special status granted to them by the State, I can see a reasoned argument
that they should pay for that special status. Of course there are potential,
negative, unintended consequences to raising corporate taxes, but the concept
is more palatable than the individual income tax (which needs to be completely
eliminated).

~~~
aninhumer
> Taxation (of individuals at least ) is theft. If one person puts a gun in
> your face, or threatens to, and demands your money, you would have no
> problem seeing it so.

Property is a fiction made reality by government. Society agrees to let
individuals have exclusive access to particular resources based on a system of
rules. One of those rules is that people pay taxes. It is not "theft", because
it's part of the property system. I could just as well insist the car in your
drive is "mine" and call it "theft" when you try to drive it.

Presumably you have absolutely no issue with the government putting guns in
other people's faces to stop them using "your" stuff. So don't complain when
they try to stop you hoarding "their" stuff.

If you would prefer a different set of rules, then you're free to try and
enforce them yourself.

~~~
mindcrime
_Society agrees to let individuals have exclusive access to particular
resources based on a system of rules._

That's close, but you're missing an essential point. To the extent that we can
speak about "society" in an general sense, it would be more accurate to say
that "society agrees to help you defend your property rights if you play by
their rules". That doesn't mean that property is a fiction that requires
government or society. And by the same token, there's no reason you couldn't
construct a system where everybody helps everybody else defend their property
simply in terms of "mutual aid". Taxation is not an inherent property of all
systems for defending property. In fact, I will continue to argue that
taxation is inherently inimical to the idea of property.

~~~
aninhumer
>there's no reason you couldn't construct a system where everybody helps
everybody else defend their property simply in terms of "mutual aid".

Are there penalties for not providing this "mutual aid"? If so, you're just
describing a highly localised tax system.

EDIT: And if not, I think you might find your system struggles in the presence
of noticeable inequality. (Why should we protect the rich guy's stuff?)

> Taxation is not an inherent property of all systems for defending property.

Of course not, but it is a feature of pretty much all existing such systems.

>In fact, I will continue to argue that taxation is inherently inimical to the
idea of property.

I believe a property system will inevitably trend towards inequality over
time, because those with more money have more power, and thus greater
opportunity to earn more money. Inequality makes the system less efficient at
utility generation, because it diverts production towards more marginal
utility improvements. In order to avoid this, you need some system of wealth
redistribution.

