

Scott Adams: Tax the Comfortable - cwan
http://dilbert.com/blog/entry/tax_the_comfortable/

======
m_myers
Hmm. I wanted to post a link to one of the comments (currently the second-
newest), but apparently his comment system doesn't have permalinks. So here's
a copy-and-paste:

\---

MikeStansky (<http://dilbert.com/users/MikeStansky>)

Dec 27, 2010

I saw an amusing analogy on taxation:

Suppose that every evening, 10 men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it would go
something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

So, that's what they decided to do. The 10 men drank in the bar every evening
and were quite happy with the arrangement, until one day, the owner said
"Since you are all such good customers, I'm going to reduce the cost of your
daily beer by $20". Drinks for the 10 men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the
first four men were unaffected. They would still drink for free. But what
about the other six men? The paying customers? How could they divide the $20
windfall so that everyone would get his fair share? They realized that $20
divided by six is $3.33. But if they subtracted that from everybody's share,
then the fifth man and the sixth man would each end up being paid to drink his
beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by
a higher percentage the poorer he was, to follow the principle of the tax
system they had been using, and he proceeded to work out the amounts he
suggested that each should now pay.

Therefore, the fifth man, like the first four, now paid nothing.

The sixth now paid $2 instead of $3 (33% saving).

The seventh now paid $5 instead of $7 (28% saving).

The eighth now paid $9 instead of $12 (25% saving).

The ninth now paid $14 instead of $18 (22% saving).

The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to
drink for free.

But, once outside the bar, the men began to compare their savings. "I only got
a dollar out of the $20 saving," declared the sixth man. He pointed to the
tenth man, "But he got $10!" "Yeah, that's right," exclaimed the fifth man. "I
only saved a buck too. It's unfair -he got 10 times more benefit than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back, when I
got only $2? The wealthy always win!" "Wait a minute," yelled the first four
men in unison, "we didn't get anything at all. This new tax system exploits
the poor!" The nine men surrounded the tenth and beat him up. The next night
the tenth man didn't show up for drinks, so the nine sat down and had their
beers without him. But when it came time to pay the bill, they discovered
something important. They didn't have enough money between all of them for
even half of the bill!

And that, boys and girls, is how the tax system works. The people who pay the
highest taxes will naturally get the most benefit from a tax reduction. Tax
them too much, attack them for being wealthy, and they just may not show up
anymore. In fact, they might start drinking overseas, where the atmosphere is
somewhat friendlier.

\---

The comment id is 75340, if anyone knows how to hack the URLs.

~~~
luigi
Why do arguments against progressive taxation always involve hypotheticals?
"Suppose that blah blah blah..."

Why can't they use real people and real numbers?

~~~
Vivtek
That would be economics. Nobody in American politics listens to experts like
economists - they only listen to "real people", who are above all that elite
liberal claptrap they teach in schools.

~~~
napierzaza
"guys drinking beer" is highest amount of complexity that american politicians
are willing to use. It's so simple, they're all the same people with the same
opportunities, some are just poorer than others... right? There's not barrier
to entry, plumbers just don't apply for the CEO positions.

~~~
hnal943
There are also barriers to entry to becoming a plumber. And there's no reason
a plumber couldn't easily become the CEO of his own plumbing company.

People are largely in charge of their own destiny in America (as well as many
other countries). No one is made a CEO by birthright.

------
lkrubner
Scott Adams writes:

"Before you break out the tiny violins for my hypothetical doctor, allow
yourself to imagine that he's got a mountain of college loans, his mortgage is
underwater, and he's supporting three grandparents (one on his wife's side)
who all need some form of senior care, and the doctor's parents, and his
wife's parents, have no spare cash. The doctor's parents might also need help
in a few years. Oh, and the doctor has two kids of his own, one of whom needs
some sort of special care. That's what the real world looks like for the so-
called Sandwich Generation. For this imaginary doctor, any extra tax burden
takes money from four generations of his family who needs it and distributes
the cash to strangers."

Imagine that instead of a doctor, we are talking about a hard working
carpenter who makes about $40,000 a year, and of whom we could say "his
mortgage is underwater, and he's supporting three grandparents (one on his
wife's side) who all need some form of senior care, and the carpenter's
parents, and his wife's parents, have no spare cash. The carpenter's parents
might also need help in a few years. Oh, and the carpenter has two kids of his
own, one of whom needs some sort of special care."

Why do the woes of the hard-working doctor demand more sympathy than the woes
of the hard working carpenter?

~~~
bcrescimanno
"Why do the woes of the hard-working doctor demand more sympathy than the woes
of the hard working carpenter?"

If that's what you drew from the article; you've missed the point entirely.
The point Adams is making is that a doctor making $250,000 per year has a lot
more in common with the $40,000 per year carpenter than he does with the truly
rich.

This isn't about having sympathy for the doctor OR the carpenter; it's about
understanding that both of them will be significantly hurt by higher taxes.
Since no one is talking about increasing taxes on the carpenter, it's fair to
question whether we've set the bar of "rich" far too low--or if two categories
even make sense.

~~~
napierzaza
No I think you've missed the point. The doctor is making far more over the
basic rate required to get by than the carpenter. The doctor's cries at night
because he can't afford another Mont-Blanc pen and the carpenter can't send
his kids to school. You have to understand that the doctor's needs are
satisfied, not his wants.

~~~
bcrescimanno
Disregarding, for a moment, that you're completely overestimating the value of
this hypothetical $250k per year income...

The answer is to punish the doctor? This is precisely my problem with the
general tact of liberalism: the answer is always to bring the upper-middle
class down to the level of the lower-middle class while predominantly leaving
the true wealthy untouched. Why shouldn't people be able to get _somewhat_
ahead? Why is the mentality that we all have to be exactly equal so long as we
can lump your income with this mythical middle class?

~~~
lkrubner
bcrescimanno, I'm not sure what you are referring to. There was recently an
effort made in the USA to allow Bush-era tax cuts expire for those making over
$250,000 a year (gross adjusted). Had that gone forward, the doctor making
$250,000 and the carpenter making $40,000 would both continue forward without
facing an increase in their income tax. Only those people with gross adjusted
income in excess of $250,000 who would see an increase in the tax paid on
their income in excess of $250,000, although these affluent people would
continue to enjoy the Bush era tax cuts on the first $250,000 of income they
earn.

As it was, pretty much all of the Bush era tax cuts were extended.

As to this:

"This is precisely my problem with the general tact of liberalism: the answer
is always to bring the upper-middle class down to the level of the lower-
middle class while predominantly leaving the true wealthy untouched."

According to Wikipedia, only the wealthiest 1.5% make in excess of $250,000:

[http://en.wikipedia.org/wiki/Household_income_in_the_United_...](http://en.wikipedia.org/wiki/Household_income_in_the_United_States)

The poorest 98.5% of the USA makes less than $250,000 a year. Are you trying
to define a portion of that wealthiest 1.5% as part of the upper middle class?
If so, which part? Would you go into the top 1% and define that, too, as part
of the upper middle class? Definitions matter, and it would be good if you
could be precise.

I would add, my politically active friends are pushing for much higher taxes
on the rich. Their focus is not on the poorest 99% of Americans, but the
wealthiest 1%. And so, they focus on those making in excess of $350,000. I am
curious if you regard that as within the range of the middle class?

------
gjm11
If the class he's calling "Suckers", in between the Rich and the Majority,
includes Scott Adams -- as he says it does -- then I can't help thinking that
this is just the old, familiar gambit where rich people try to redefine a term
like "middle class" to include themselves, so that they can portray self-
interest as looking out for the poor beleaguered middle classes.

~~~
jerf
The interesting question isn't whether it's a "gambit", the question is
whether it is _true_. Calling people with large incomes and large unavoidable
outflows "rich" isn't necessarily right, and while the stuff Adams said about
that guy may mostly not look like unavoidable outflows, we do saddle all our
doctors with debt and a lot of small business owners do have a lot of
unavoidable outflows like, say, other people's salaries. Just taxing everybody
with a high income is not _necessarily_ a good idea for anybody, however good
it may feel. He is certainly right that not all _rich_ is created equal and
the language here is very impoverished.

It's also worth pointing out that a lot of those outflows are avoidable only
to the extent that they are picked up by taxpayers, like taking care of his
parents or college grants. We don't win if we grab $10,000 more from that guy,
he goes bankrupt, and we incur $30,000 more in liabilities picking up what he
now can't carry. (And yeah, I think those numbers do work, as the government
frequently picks things up inefficiently.)

~~~
gnaritas
> and a lot of small business owners do have a lot of unavoidable outflows
> like, say, other people's salaries

As if that matters. It's not like they are taxed _before_ they pay salaries.
Small business people pay taxes on the amount of money they have left over
_after_ all business expenses are deducted, i.e. profit, not revenue, so what
point exactly are you trying to make here?

> Just taxing everybody with a high income is not necessarily a good idea

Small business people, if near broke after paying all outflows, wouldn't
qualify as people with high incomes even if their business was pulling a
billion dollars a year in revenue, and wouldn't be paying any additional taxes
on the _rich_ because they wouldn't qualify as rich.

The whole _small businesses would be hurt by taxes on the rich_ is a red
herring, it's simply not true, and is just rhetoric from the right meant to
distract from the real issues. It takes advantage of the fact that most people
don't know how taxes work and don't separate gross income from net income.
Businesses don't pay taxes on all they money they make, they for the most
part, pay taxes on profit, which is by definition, _extra money_ above and
beyond operating expenses.

~~~
enjo
There is one coherent argument about large capital expenses for pass-through
entities (LLC's, S-Corp, Sole Proprietorships).

Bob the business owner needs a new gizmo for his lawn care operation. It costs
$500k. Normally he would need to depreciate this gizmo over some period of
time (it depends on what you are buying) spreading the expense out over those
years. If he has a net-profit over $250k then whatever he makes over that rate
will be taxed at that higher rate reducing his ability to afford the gizmo.

Essentially the issue is that under normal accounting rules he would pay the
higher tax rate today, but it would take 5 years for him to fully realize that
expense from a tax perspective. That could, at least in theory, make small
business owners a bit gun-shy about making large capital purchases as their
take-home pay would take a hit even though they bought something for the
business instead.

Thankfully the legislation, as crafted by Obama, contains provisions allowing
the cap on capital purchase deductions to be raised significantly (I think it
would have put it over $1M). Thus you could take the entire expense in the
year you bought the thing and avoid this particular tax issue.

~~~
gnaritas
I agree, as I did say _for the most part_ ; however, in many if not most
cases, this could be easily dealt with by borrowing the money for those items
instead of laying out the capitol and incurring the tax burden of paying taxes
on money you don't actually have. Regardless, this is an exception, but for
the most part, businesses do only pay taxes on profit.

------
petercooper
The most interesting part there, to me, was the currently first comment by
poke111. I'll reproduce it here:

 _Imagine the government found some way to fund itself without any tax revenue
at all. Say, a giant reserve of natural resources were found on federal land,
and now tax revenue isn't needed to fund the government. As a libertarian-
leaning conservative I personally would be delighted to see all federal income
tax go to zero. After all, we've always been told that taxes are needed to
fund the government. But somehow I think some people would not be happy that
even "rich" people wouldn't have to pay taxes anymore.

And here I think is where the real difference lies: libertarian and
conservative type people see taxes as a necessary evil. If the government
wouldn't need the money, the ideal situation would be zero taxation. But I
think liberals tend to see things in the opposite way: Taxes are a way to
acheive fairness, and funding the government is a convenient means to that
end, in the absense of which they would find a different means.

Conservatives want to set the level of taxation to match their preferred level
of spending (at least in theory), and liberals want to set the level of
spending to match their preferred level of taxation. The difference is whether
taxation is the means or the end._

Any truth to this technically? It _feels_ right to me but I'm neither an
economist or much of a politician.

~~~
TomOfTTB
This is a good article by Charles Krauthammer on that topic:
[http://www.washingtonpost.com/wp-
dyn/content/article/2010/12...](http://www.washingtonpost.com/wp-
dyn/content/article/2010/12/09/AR2010120904472.html)

The gist is that President Obama really cut a fantastic deal for liberals yet
many were still livid because it also contained an extension of the tax cuts.
Hence they want to punish the rich above or equal to achieving their own
goals.

Personally I think the left is a sliding scale that goes from Moderate to
Marx. Marx's famous quote "From each according to his ability, to each
according to his need" is in line with the comment you quoted and I think
people on the far left believe just that. I think the further you get away
from the far left on the sliding scale the less that becomes true.

~~~
DanI-S
Punish the rich? I'm sure for most people it's about reducing the deficit.

~~~
TomOfTTB
That's not the question though. The question wasn't "why don't liberals agree
with a tax cut for the Rich" (the answer to that question is exactly your
point). The question is "why would they be so angry that they'd turn on the
most liberal President elected since Carter and perhaps FDR". Or "Why would
this deal make people talk about challenging him in the Primary"

That anger isn't about reducing the already ballooning deficit. There's
something more there (whether that "more" is to punish the rich is debatable)

~~~
DanI-S
I'd say the anger comes from the following line of thought:

"The extremely wealthy are receiving tax cuts which will barely affect their
personal quality of life, yet cost 'the rest of us' billions of dollars. That
money would have a far higher quality of life impact if spent on welfare or
tax cuts for middle/lower income Americans. Our quality of life is being held
down for the sake of theirs, when theirs is already far higher."

------
OstiaAntica
There is a huge difference between the "wealthy"/"rich" and high income
earners. Many high income earners, like young doctors or entrepreneurs, have
negative net worth and are not wealthy at all. The progressive tax system is a
scam rigged by the true rich-- who control assets and take income mostly as
capital gains-- against the next generation of strivers who have earning power
but few assets.

------
wccrawford
Wow, he really had to pile a lot on that doctor to make people feel sorry for
him. College loans, mortgage, and 3 grandparents' nursing homes. Plus, his
parents and his wife's parents also need support.

It's a good thing normal people never end up in that situation! If he wasn't
rich, he couldn't afford it. Wait... I think they do!

He has a good point, but his analogy completely obliterates it. Unfortunately,
he acts like we've never heard of the middle class and that he's delivering us
news that they exist. They have been part of every tax discussion I've heard
in the last few years. It's not news.

~~~
dlnovell
In the example scenario, wouldn't the doctor be able to get tax deductions for
college loan payments as well as dependent care of seniors? The mortgage
underwater scenario sucks, but is he losing his home because it's not worth
what he paid? I no tax expert, but wouldn't the increased taxes only apply to
income that isn't covered by the deductions? If he's still making $250K+ per
year beyond the deductions for those expenses, then I don't see that the sob
story of the poor doctor just trying to get by with all the uncontrollable
expenses is really valid.

~~~
gnaritas
> If he's still making $250K+ per year beyond the deductions for those
> expenses, then I don't see that the sob story of the poor doctor just trying
> to get by with all the uncontrollable expenses is really valid.

Exactly.

------
gst
Tax the ones who use the most resources.

In my opinion an income (or wealth-based) tax systems is not really that
optimal in a globalized world. Instead I propose a kind of resource-based tax
systems: Instead of taxing income tax the amount of scarce resources used. For
example, the amount of land owned, the amount of oil used, or even the amount
of CO2 emitted.

I think that such a system would have several nice implications:

* Businesses would automatically look for ways to save taxes, and thereby help the environment.

* It better reflects the true cost of a business or person to the society: If someone earns a lot of money this does not reduce my standard of living. However, if someone destroys the environment it does.

* As a country you can avoid loosing many of the Internet businesses to tax havens, as there is a lesser advantage of moving away.

Unfortunately, in many countries it's exactly the other way around. For
example, many South American countries endorse usage of scarce resources by
subsidize oil. While this works in the short-term, the consequences in the
long-term will be fatal.

------
drags
Caring for parents and grandparents, paying off college loans and servicing a
mortgage are all tax-deductible activities. I'm not saying it isn't hard to
make ends meet with all those obligations, but a tax hike would
disproportionately affect his _discretionary_ income, not income that ends up
being spent on caring for others or paying off student debt.

~~~
keithwarren
But current policy direction and talk is often focused around capping or
ending deductions...

------
jessevondoom
Am I the only one who thinks "gang rape" is a little extreme here? Granted,
I'm on the low end of the "majority" but I find the perspective all sorts of
wrong.

My family was left penniless just paying the healthcare bill for our first
daughter, and even then I would never compare a broken system to gang rape.
I'm not saying we should discount the woes of middle-class America, but I
think it's irresponsible to act as though the poor don't have it worse — and
even more irresponsible to imply that the poor and the rich are somehow in
collusion to "rape" the middle class.

His initial point is a good one, but it strays really far.

------
TomOfTTB
The solution to the problem he puts forth is actually a simple one: Go
entirely to a consumption tax. Then the doctor with all the family to support
gets taxed very little despite his income and the rich guy going out to buy a
Yacht gets taxed a huge amount. It's as fair as fair could be.

The problem with a consumption tax is getting the Government to agree to a
system that doesn't guarantee them a certain income and getting the people to
accept huge price spikes (which are emotionally jarring even if your income
tax has been eliminated).

~~~
ceejayoz
> It's as fair as fair could be.

The poorer you are, the larger the proportion of your income that gets used
for consumption.

Folks making minimum wage currently pay little or no taxes, so they'd see a
significant tax increase with consumption-based taxation - an increase they
can't afford.

~~~
rick888
"Folks making minimum wage currently pay little or no taxes, so they'd see a
significant tax increase with consumption-based taxation - an increase they
can't afford."

Maybe they would see what it's like to be taxed..and not vote to get everyone
else gouged while their income isn't affected.

~~~
ceejayoz
> Maybe they would see what it's like to be taxed..and not vote to get
> everyone else gouged while their income isn't affected.

Should people from well-off families be made to see what it's like to live off
a minimum wage income so they can not vote to make life harder for the poor?

If no, why one direction and not the other?

~~~
rick888
"Should people from well-off families be made to see what it's like to live
off a minimum wage income so they can not vote to make life harder for the
poor?"

seeing as how the the poor vastly out-number the rich, no. I also don't see
how the rich are making it difficult for the poor.

They pay more than their fair share of taxes (which in turn pays for many
social programs that they don't even use). They also aren't lobbying to take
anything away from the poor, except less of their own money.

~~~
ceejayoz
> They pay more than their fair share of taxes...

Warren Buffet disagrees.

> They also aren't lobbying to take anything away from the poor, except less
> of their own money.

So no one's lobbying for benefits cuts to the poor? Are you posting from an
alternate universe?

~~~
yummyfajitas
Giving the poor less free stuff != taking stuff away from them.

~~~
ceejayoz
If someone's getting food stamps and I legislate the program out of existence,
their food stamp benefits have quite clearly been taken away.

------
known
The top American marginal income rates from 1944 to 1963 were 92%.

[http://news.slashdot.org/comments.pl?sid=1794484&cid=336...](http://news.slashdot.org/comments.pl?sid=1794484&cid=33651716)

------
cmelbye
Wow, finally a voice of reason in this argument. Just because you're in the
highest tax bracket does not mean you have disposable income like Warren
Buffet, Bill Gates, etc do. I'd think that most of the assets of people at the
lower end of the highest tax bracket are illiquid.

------
zdw
So, what would work? A "Millionaire tax bracket" that was bandied around there
for a while? Or increase the tax on capital gains?

I'd love to hear a workable solution to this...

~~~
hnal943
What would work is finding a way to tax wealth instead of income. That would
shut Warren Buffet up.

------
rflrob
Is there some income level where everyone can agree that nobody is a "sucker",
and you're just rich at that point?

I would imagine all but a handful of doctors make less than 2 million dollars
(40 times the median household's income), and those that do I'd be fine
calling rich. If you create a new tax bracket for the rich at that point,
you're losing only 2% of the increased tax income on the 100 millionaires, but
not harming the struggling, debt-ridden doctors of the world.

------
yummyfajitas
Relatedly, we could also tax leisure. This would do a great job at hitting
Paris Hilton, while leaving the doctor alone.

Of course, we'd need to create a big exemption for the poor (most of whom
choose not to work).

[edit: citation for my assertion that the poor choose not to work:
<http://www.bls.gov/cps/cpswp2008.pdf> ]

~~~
ceejayoz
Most of the poor in this country are working poor.

[http://www.cbsnews.com/stories/2008/10/14/national/main45225...](http://www.cbsnews.com/stories/2008/10/14/national/main4522599.shtml)

> The number of jobs with pay below the poverty threshold increased to 29.4
> million, or 22 percent of all jobs, in 2006 from 24.7 million, or 19 percent
> of all jobs, in 2002.

~~~
yummyfajitas
This is simply false. In 2008, 78% of the poor chose not to work (or even seek
work) more than 26 weeks/year. See the link I provided in my edit.

If you bothered to read your link as far as the third paragraph, you would
realize they redefine poverty to be $41k/year. By that definition, more than
half of France lives in poverty, oh noes!

[http://www.insee.fr/fr/themes/tableau.asp?reg_id=0&ref_i...](http://www.insee.fr/fr/themes/tableau.asp?reg_id=0&ref_id=natsos04202)

~~~
ceejayoz
> If you bothered to read your link as far as the third paragraph, you would
> realize they redefine poverty to be $41k/year.

Considering I quoted the _fourth_ paragraph...

$41k is a pretty small sum for a family of four. My family of four's health
insurance premiums would eat up 1/4 of that. Our copays would eat up another
1/4. Not much money left for rent, insurance, food, transport to work,
education, etc., let alone longer term stuff like college and retirement
savings.

~~~
yummyfajitas
I was being charitable and assuming you didn't actually realize that "poverty
threshold" was really code for "2x poverty threshold". It turns out you knew
this but were attempting to mislead people.

My mistake.

~~~
ceejayoz
No, I just know the definition of poverty. One can be poor without being
impoverished.

------
HaloZero
Why not just another higher tax bracket where income is greater than $1
million or something?

------
aresant
There's already a word for the "suckers": HENRY - High Earner, Not Rich Yet

[http://money.cnn.com/2008/10/24/magazines/fortune/tully_henr...](http://money.cnn.com/2008/10/24/magazines/fortune/tully_henrys.fortune/index.htm)

~~~
m_myers
Yeah. Um. Is there a third option?

------
TheSOB88
Interesting how state-funded health care would prevent his doctor example
completely. True, we might need more taxes, but the cost would be evenly
divided among the 'suckers' who have ill family members and the 'suckers' who
don't.

