
People who make $250,000 or more a year can afford a tax hike. - georgecmu
http://www.slate.com/id/2243529/
======
kyro
This is one thing that never fails to irritate me: the stigma against the
wealthy. It's almost as if all the energy, effort, time, sacrifice, and risk
usually taken by many who are now wealthy are completely overlooked, making
them look undeserving of their money as if they were born with golden spoons
in their mouths. My father immigrated to America from Egypt in the mid-80s
shortly after he graduated medical school in Cairo to find a better living.
When he got here, he went to school, took a graveyard shift as a security
guard and worked at a gas station to make ends meet. He moved to four or so
different states to join various medical programs, etc, and finally settled
here in southern California as a fairly successful physician who makes
$250,000+ a year. Knowing all the work that he's put into creating this life,
my blood boils when I read headlines like these as if someone like my father
doesn't/didn't work as hard as others to make a living. He is one example, and
there are myriad of foreigners who have done the same, not to mention
startuppers who literally put EVERYTHING on the line to increase their chances
at success. To say that these types of people can just afford it as if it were
some obligation is idiotic and infuriating.

------
ryanwaggoner
Of course they can "afford" it. But so what? Every single billionaire can
"afford" to be taxed at a 99% rate.

The bigger question: is it in any way fair, just, or moral to tax society's
most successful more heavily just for being more successful?

EDIT: The other salient question that I forgot to mention is: "why do we need
more taxes?" Our government already can't manage what they have with any sort
of reasonable efficiency. Are we really supposed to believe that they'll do
better if we give them more money?

~~~
jfager
Why shouldn't the people who benefit the most from how society is structured
be expected to pay the most for its maintenance?

~~~
ryanwaggoner
Aside from the larger question of why the government has the right to take
people's income by force to begin with, I can think of four practical reasons
off the top of my head:

1) It is a disincentive to others who might try to reach that level

2) It's hardly clear that the success of the wealthy is due to how society is
structured, and not their own effort. Undoubtably some is, but is it 90/10 or
10/90?

3) It encourages relocation of talent, business, and capital to states or
countries where the tax situation is more favorable.

4) It's not clear to me that more tax revenue results in a net benefit to
society. My opinion is that the rich are better at investing their money for
optimum yield than the government, and the end result is more benefit for
society.

~~~
encoderer
Do you truly believe there's anybody out there who wouldn't work to attain
wealth merely because the gov't takes a higher percentage of it? I mean,
seriously?

~~~
SamAtt
The issue isn't "wealth" as much as it's "more wealth". There's a classic
example of a secretary who did her job really well so she got a raise only to
find it bumped her into a higher tax bracket and she actually made less money.
So from that point on Secretaries didn't bother to excel.

This applies equally to the engineer who makes $225,000 and who might be
willing to put in extra effort but won't if the reward isn't worth it.

So the issue is shifting the cost/benefit equation over to where there isn't
enough benefit for people to put in the effort

~~~
encoderer
That story about the secretary? That is completely contrary to the way a
marginal income tax actually works.

There is no way, in the American progressive tax system, to get a raise, be
moved into a higher tax bracket, and end up taking home less money. It's just
not possible.

@ryanwaggoner - correct, ty.

~~~
SamAtt
It can if you combine a marginal Federal Tax with a State Flat Tax. Not all
tax systems are progressive

~~~
encoderer
Ok, I'll bite... How?

A state flat tax will tax this new raise at the same flat rate as all the
existing pay.

The marginal federal tax will tax the new raise, in your scenario, at the new,
higher tax bracket.

But your scenario would have the gov't taxing this new cash into the red,
reducing her take home pay. That's not gonna happen. Period.

------
gyardley
People who make $250,000 or more a year can afford to pay more for a lot of
things. But if you tried to charge one person more for an identical candy bar
or television or movie ticket just because they make more money, everyone
would instantly see this as unjust. Why should government services be any
different?

I'd be a lot more content with differential tax rates if the money I'm saving
to start my next business - and create jobs for Americans - was exempt. Every
dollar I give the government is a dollar they're going to spent a whole lot
less efficiently than I will.

~~~
idoh
That's called a consumption tax, which has a lot of intellectual advantages
over the current regime.

Income = Consumption + Savings. Right now we tax income, but it's possible to
tax consumption instead. That would encourage more saving and less
consumption, which is probably a good thing for the country (but probably
won't happen any time soon because in the short run businesses wouldn't stand
for it).

~~~
Poiesis
Would more saving and less consumption be good for the country? I'm not saying
it's a bad idea for individuals--it's what we do personally--but it seems like
the economy as a whole would stagnate based on my completely unqualified
armchair economist opinion.

~~~
rbranson
You are correct. Consumption taxes are, in effect, tariffs on commerce.
Theoretically, you should try to push these down as much as possible, so that
money flows between economic actors with as little burden as possible. A
"solution" to the economic burden of income taxes that increases the overhead
cost of transactions and encourages hoarding of money is not a solution at
all.

------
rbranson
I make what I consider a middle class salary (around double the household
income in my area), and I'm pretty sure I can afford a tax hike. While I would
not be terribly happy about it, it's not going to hurt me. I'd say for most of
the real middle class, who haven't mortgaged themselves to the hilt, a tax
hike of a few percent will cut into their discretionary income, not anything
truly needed. I'll have to wait another two weeks to get my 52" big screen
television. Oh no.

~~~
elsewhen
is affordability really the unit-of-analysis that you want to use to design
(or make tweaks to) a tax system?

lets assume that $50k per year gives a comfortable lifestyle to a person.
anyone earning less than 50k per year cant afford to pay taxes and therefore
doesnt have to. anyone earning more than 50k can certainly afford it, so they
pay the amount needed to get there income to 50k. so a guy who makes 60k pays
10k per year, and a guy who earns 1MM pays 950k.

do you think entrepreneurs would start businesses in this environment? sure,
some would because they are doing what they love... but what about all those
boring businesses. do you think the dry cleaner LOVES to wash other people's
clothes? do you think the guy who started 1-800-GOT-JUNK loves other people's
trash?

among other things, you need to think about incentives (and the killing of
those incentives) when you devise a tax system.

------
grandalf
Most people in the US pay no taxes at all. The $250K threshold hits lots of
hard working professionals and entrepreneurs who are by no means "rich" and
who work extremely hard.

I'd argue that people earning $250K who are paying off loans and working 60+
hour weeks _cannot_ afford it... and that taxing them is a horrible policy
idea, no matter how well it resonates with voters who themselves pay no taxes
(or people like the author who live in Westport CT).

~~~
gnosis
_"Most people in the US pay no taxes at all. The $250K threshold hits lots of
hard working professionals and entrepreneurs who are by no means "rich" and
who work extremely hard."_

Let's see now... when the median _family_ income in the US is $40,000 per
year, an _individual_ making $250,000 per year is undoubtedly rich.

They might not be super rich, or even very rich. But they're rich.

~~~
grandalf
Also, a family (two adults, 2 children) earning $40K per year will pay next to
nothing in taxes. This is why such people tend to support our oil wars, they
are costless to them. Both political parties like to keep it this way.

------
Mz
"Soak the rich" doesn't work. I recall seeing an interview with Ronald Reagan
when he was a movie star. He stopped working after a certain point each year
because he was taxed so high that he would rather have the free time than more
income. Whenever they create luxury taxes, such as on yachts, the rich just
put off getting a new yacht. Who really suffers? The working stiffs who build
boats. They get laid off.

I don't know what the answer is. But, as I understand it, punishing people who
have the most leeway to make other choices pretty consistently fails to get
the desired result.

~~~
gnosis
Better to just take their money away rather than tax them on their income or
even their consumption.

------
rglullis
Back-of-the-envelope-calculation.

Given:

\- USA population: 300 million

\- percentage of households that make 250k+ in a year (according to the
article): 2.1%

If we assume that we have 2 people per household, that's 150 million * 0.021 =
3.15 million "households" making US$250k+.

Assuming that the average income of the US$ 250k+ group is much larger than
the bottom, something close to US$ 1 million, and assuming that there is a tax
increase will take 5% of your income from your pocket. In practice, we are
saying that we are taking 50 thousand dollars of each household that makes
more than US$250k.

Using these values, the government would get 3.15 million times US$ 50
thousand = 157.5 billion dollars from this tax increase.

According to wikipedia
([http://en.wikipedia.org/wiki/2009_United_States_federal_budg...](http://en.wikipedia.org/wiki/2009_United_States_federal_budget_)
: the net deficit for the 2009 budget was 407 billion dollars.

I know that are tons of other things in a serious model: flow of money and
such. But even so, I wonder if there is any kind of tax increase that would
actually be able to fix the deficit.

~~~
ajross
The 2009 deficit is an outlier, because it's being sampled immediately after a
sharp fall in revenue. In fact the budget was (briefly, before tax cuts and
two wars threw it out of whack again) balanced as recently as 2001. There's no
reason to expect that it's an impossibility.

But no, you can't enact a sudden tax increase (or spending cut) in a down year
and expect it to close the gap. Budget planning is done over decade-scale
timeframes.

Also note that the deficit is bad not because its immediate cost is unbearable
but because its current scale is unsustainable. The marginal cost of any extra
borrowing is actually quite low; the US Federal Government pays very low
interest rates on its debt (check the federal bond rates for current numbers),
and no one is suggesting an inability to pay this year's debt -- it's a drop
in the bucket. So the goal is a steady reduction of deficit spending to a
sustainable level.

------
garethm
This reminds me of the article a few years ago that indicated that Warren
Buffett had a lower effective tax rate than his secretary, even though he made
heaps more.
[http://www.timesonline.co.uk/tol/money/tax/article1996735.ec...](http://www.timesonline.co.uk/tol/money/tax/article1996735.ece)

~~~
byrneseyeview
That was because he's counting capital gains. Capital gains are the tax you
pay based on the price of a stock, which is based on the net present value of
the company's dividends (taxed at 15%), which are paid out of its profits
after taxes (35%). So it looks like the taxes he's paying on the extra
earnings of Coca-Cola are about 53%.

At least he doesn't pay FICA taxes on that. On the other hand, the capital he
invests _does_ allow companies to hire more people, who _do_ pay taxes.

The utility-maximizing way to tax Mr. Buffett is at 0%. He'll invest it
effectively, it will grow the economy, more jobs will be created, and we'll
end up with more wealth to squander through silly redistributive schemes.

~~~
rbranson
Nice try Ronnie, but I highly doubt Mr. Buffet is ignorant enough to take
profits he intends to re-invest as income. These likely stay within a holding
corporation that re-invests this money and does not pay taxes on the gains.
This is the way the system exists now and the way it should work.

------
charlesju
Here is what this author doesn't understand. People who make much more than
$250,000 a year rarely let that money touch income taxes. The tax game is all
about creating trusts, funneling through shelter companies, long-term capital
gains, expensing the heck out of everything, etc.

------
steveplace
The US federal income tax exists to raise revenue for the federal government.
It does not exist to level the playing field, make things fair, or to hinder
high-producers.

This whole debate is framed wrong, on both sides.

------
uptown
Why does a married couple still have the same 250k threshold? Does marriage
immediately cancel out all the expenses one person in a relationship might
encounter?

------
rms
<http://wiki.lesswrong.com/wiki/Politics_is_the_Mind-Killer>

------
bwh2
Doctors, lawyers, and other paycheck people making $250k pay around the 35%
rate. They get hit hard. Meanwhile, professional investors earning the same
amount pay the capital gains rate of 15%, which is less than a paycheck family
earning $80k. I don't want paycheck people to pay more taxes, I want the
capital gains rate to go up.

~~~
ryanwaggoner
Yeah, let's disincentive the wealthy to invest in new companies that create
jobs during a recession. Excellent.

I much prefer the idea floated to ditch capital gains altogether for small
companies.

~~~
bwh2
So you should be in favor of dropping capital gains to 0% then for everyone,
right? Probably income tax too for that matter, because that discourages
people from working, and unemployment is the last thing we want to have.

~~~
ryanwaggoner
Actually, yes. I prefer a flat tax on consumption.

~~~
bwh2
Fair enough. I also prefer a consumption tax, not flat though. But if we're
going to have an income-based tax, I'd rather have all types of income
treated/taxed equally.

------
hexis
In the words of Betty Draper, Daniel Gross should stop counting other people's
money.

------
drewcrawford
The question is not "Can they afford a tax hike?" The question is, "Will they
continue to gross $250,000 and take home less of it, or will they find a
lower-stressed job and make less?"

The answer is probably the latter, for a lot of folks.

~~~
modoc
I'm right there on that line. Honestly I pay a TON of taxes already. Very high
rate, lots of taxable income. Cutting back to be under 250k would probably
make more sense than making 255k and paying a lot more in taxes.

I don't mind taxes and social programs. I do mind paying for unending wars in
the Middle East (not making a political statement, just a budgetary one). Cut
some of the crazy expenses, and I'll be happier paying my taxes, and you
probably won't even have to jack them up.

~~~
Eliezer
> Cutting back to be under 250k would probably make more sense than making
> 255k and paying a lot more

What kind of job do you have that makes >$250K and doesn't require you to
understand how income taxes work? I'm skeptical.

~~~
modoc
My bad. I was confused. Actually I have my companies accountants handle all
the taxes, so I don't have to keep much awareness of how income taxes work. I
probably should, but I don't need to, since I pay them to do it:)

------
eplanit
Why is Politics such a predominant topic on HN?

