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Alexandria Ocasio-Cortez Wants to Raise Taxes on the Rich and Americans Agree (fivethirtyeight.com)
81 points by iron0013 28 days ago | hide | past | web | favorite | 154 comments



> It’s perhaps not surprising that Americans would support higher taxes on top earners given that tax rates on high income brackets were once much higher than they are today.

The nominal rates were much higher once, but the effective rates were never that high. Before the '86 tax reform, there were many "investments" available to wealthy people that entailed zero risk but yielded guaranteed tax benefits — we now rightly call these "tax shelters".

We should shed no tears that they are gone today, but we should also remember that the economic effects we saw previously were based on the effective tax rates (factoring in the sheltering activity), not the nominal rates. Now that these passive tax shelters are not available, the effective rates would be much closer to the nominal rates.

Also, as a tax-lawyer-turned-startup-founder, I can guarantee that if we saw rates like this again, the biggest beneficiaries would be the lawyers and accountants who would restructure contracts to avoid these taxes.


I've seen this point before, but it's not an argument for keeping rates low. "If we raise rates, the rich will just find ways to avoid them!" People find new ways to try to murder and steal all the time; that doesn't mean we throw up our hands and make it legal to do so.

The solution is to raise rates and fix loopholes, difficult a political lift as that may be.


Show me how high taxes in France have made them better off at the median. US wages are far higher at the median, US wage growth has been far higher for decades, US unemployment is routinely 1/2 their rate, US growth is routinely 3x-4x higher. They've seen nearly zero inflation adjusted growth for 20 years and have among the world's highest tax rates.

Their people are rioting week after week, because their system of high taxes has failed them, their middle class is being crushed anyway. What are they going to do, raise taxes further? The only thing left is to begin confiscation of wealth directly and then they're just the next Venezuela in waiting, accelerating their collapse.

I've seen zero evidence the US Government can be responsible with spending and allocate it to proper use as things are now. They've been wildly irresponsible for 40-50 years running, including in stealing trillions of dollars from Social Security over decades (and then lying about it) and on wasting trillions on unnecessary military spending. Why would I give them more money until they prove they can be good stewards with the $4.x trillion they get to spend now? Let's see them take the $750 billion in military spending down to $450 billion where it should be and redirect those resources to infrastructure et al.


> I've seen zero evidence the US Government can be responsible with spending and allocate it to proper use as things are now.

It's hard to argue one can get the same performance - on the same scale - as US government in projects it does.

How, for example, you measure overall lack of wars and general growth in prosperity, health etc.? What's the US part in that? Even if, say, Sweden manages lots of projects more efficiently per capita, how would you argue scaling that won't be worse than what US is doing?

It's a rather common opinion that governments are less efficient than private organizations. Still for some things we keep governments and keep trying to make them efficient, having headwinds which aren't typical in private world. Not sure if starting with "first reach efficiency..." won't get us to the same situation as US government is in right now - i.e. a prolonged shutdown.


That’s not the point being made at all (that we need to force people to pay the high rate). The point this commenter is making is that you cannot point to the nominal tax rate and use it as evidence that high tax rates don’t cause harm, because it is not the nominal tax rate that matters, it’s the effective rate.


My primary point is that we can't look to the past and say "rates were super high before, and look how great we did". We need to realize those were nominal rates that no one ever really paid. It may make sense to raise rates on high-earners, but we can't justify it based on the past economic results during periods of high nominal rates.


Sure, but isn’t there something to the argument that we should fix those loopholes and go after offshore evaders first before we crank up rates? Seems that ensuring the existing tax code is tidy and evaders are held accountable should be done first before making changes with potentially dramatic macroeconomic effects.


I can't edit my post anymore, but I should apologize for implying that gnicholas made that argument. As others have pointed out, they were just making a point above effective rates versus nominal rates. My mistake.


If you actually succeed in doing that, those people will turn in their passports and go somewhere that doesn't.


This is a distortion of what actually happened. The reason why there was a massive expansion of benefits granted to top employees in the mid 20th Century is exactly because the 90% taxes on income over $100,000 (adjusting for inflation, roughly $1.6 million in today's money) -- and this was necessary because that $100,000 limit felt real to the employees.

This is when the era of travel on corporate expenses became lavish, because it was a tax-free way to offer an extra gift to top employees. If a company can not pay its top executives more than $100,000, then the company might as well put together a lavish bash in Las Vegas -- this can function both as a sales opportunity, but also a way to reward top employees, since the company can not really offer them more cash.

If you like, you can refer to the growth of benefits as a tax shelter, but that distorts the original meaning of the word.

The big era of tax shelters, in the regular sense, does not get going till the end of 1960s, and then goes wild in the 1970s, then comes to an end in the 1980s (with obvious exceptions such as "horse farms" which allow the rich to avoid paying real estate taxes, while also enjoying their horses).

But during the first 30 years of those high taxes, from the 1930s to the 1960s, those high nominal rates lead to high real tax rates. This is the main reason that income inequality shrank dramatically during this time. Read the vicious attacks that the wealthy expressed towards these high taxes and you realize that these high taxes were very real.


> If you like, you can refer to the growth of benefits as a tax shelter, but that distorts the original meaning of the word.

Just to be clear, I wasn't talking about employee benefits at all.


If I recall correctly, there were more deductions available to the middle class at that time as well. Credit card interest was tax deductible until the ‘86 tax reform that you mentioned.


This is a very common argument, but aren't the rich already doing as much as possible to avoid the 39.6% rate?


Nope, taxpayers do as much as is efficient. If a tax lawyer says "I can save you $50k in taxes by setting up a new corporate structure, but it will cost $25k to set up and another $10k per year to maintain", then the taxpayer probably won't do it.

But if rates go up, then it turns into saving $100k, but with the same costs of implementation and upkeep. Basically, as rates go up, it makes sense to do more tax planning.


Sure, but we're talking about a $10M bracket. They're already at enough savings that it's worth spending $1M on tax avoidance even with a 39.6% rate...


Yes, Defined Benefit Pension Plans, 401K profit sharing, etc. There are an enormous amount of vehicles to use to legally lower your effective tax rate for wealthy individuals - especially small business owners.


This is my complaint too. People rant about the rich “paying their fair share”, but the problem here isn’t the tax rate applied to the rich, it’s that they don’t pay anywhere near it.


> People rant about the rich “paying their fair share”, but the problem here isn’t the tax rate applied to the rich, it’s that they don’t pay anywhere near it.

Yes, but the rich nonetheless pay the lion's share of income taxes:

The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.

from https://taxfoundation.org/summary-latest-federal-income-tax-...


And they receive the lion's share of benefits from getting privileged access to legislators, better policing, lighter sentencing in the rare case they are charged with an infraction. The poor basically get scraps, no legislative voice, higher risk of death by police, higher rate of incarceration, and basically all the worst parts of America. The rich are doing just fine, seeing as we're effectively in the second gilded age.


"Also, as a tax-lawyer-turned-startup-founder, if we saw rates like this again, I guarantee that the biggest beneficiaries would be the lawyers and accountants who would restructure contracts to avoid these taxes."

That makes sense, but I have to ask, how is that different than what we have now?

And, if that is true wouldn't it be a short term benefit for attorneys that would settle back to what's the current norm now after a few years?

Finally, doesn't that assume the changes in the tax code would provide a means to accomplish that?

The goal is to move more of the profits of and gains in productivity back to the working class and there no reason to change anything if that's not wired into the new laws.


> And, if that is true wouldn't it be a short term benefit for attorneys that would settle back to what's the current norm now after a few years?

It would lead to a higher steady-state amount of work because taxpayers would get more bang-for-buck from their tax planning dollar. See my other comment for an example of how an increase in the nominal rate leads to more tax planning activity.


The effective tax rate has been steady at 17 +/- 2% since World War II regardless of how the government changes the nominal rates. Totally agree that lawyers and accountants would ensure that this remains true. Good luck taxing rich people.


Controversial, but I’ll say it anyway: the fairest tax is a flat tax. Take, say, 15% across the board for anyone making above a threshold. Then combine that with eliminating most if not all of the current tax deductions, so that everyone actually pays the amount they should. Someone who makes $100k/year pays $15k in taxes. Someone who makes $1M/year pays $150k. That’s fair.

I’m certainly not the first to propose this, and I seem to recall that Intuit and others (H&R Block likely) lobbied hard against any attempt to simplify the tax code, as their services wouldn’t be needed any more.


I heartily disagree. The value of a dollar to a billionaire versus someone making minimum wage is drastically different. When you are scraping by, that 15% comes out of money you need to survive or to prepare for emergencies. When you are making 10 million + that 15% is for luxuries, you're not going to be going to bed hungry or skipping medication because of it.

The defense I always see brought up for a flat tax against this, and I see in this thread already, is to implement a floor. If you've done that you've already got tax brackets with different names.

I am for getting rid of all exceptions and just making brackets based on income coming in which would include wages, capital gains, inheritance, etc.


I’m not comfortable with the idea that you should just take more of someone’s money just because someone thinks they don’t need it.

There’s nothing wrong with implementing a floor, either. We effectively have one today. If everyone above the floor, extending all the way to infinity, pays the same % it’s a stretch to call that a bracket.


If you believe that, why do you believe a percentage tax is reasonable in the first place? Shouldn't it be an absolute flat number of dollars taken from each citizen (or, perhaps, a percentage with an absolute cap), recognizing that regardless of how many dollars you generate, the services you're obtaining from the government don't scale with that revenue?


I think that’s a different definition of fair than I was using. I think that logically what you are saying (perhaps sarcastically) is correct - the fairest of all taxes would be a flat amount. I don’t think that’s necessarily the goal here. So perhaps I should restate my comment as “A fairer tax is a flat tax”.

Ultimately, I think that the tax structure that AOC is proposing is punitive. If you’re successful, we will punish you for that success. I am not anywhere near a tax bracket that would be impacted by her proposal. I don’t really expect to be in my lifetime. But I don’t think it’s fair to punish someone for achieving success in life. Everyone should pay their fair share, but a flat percent-based tax already does that.

One other idea that I like (although haven’t studied enough to determine its feasibility), is to do away with the income tax altogether (or make it very low) and tax consumption. Exempt the necessities of life, like food, but everything else has a national sales tax applied to it. This has the nice benefit of rewarding people for saving rather than spending.


A private equity partner who makes $10,000,000 a year and pays 30% on it pays $3,000,000 to the government. A custodian who makes $50,000 a year and pays 30% on it pays $15,000, just 0.05% of what the investor does --- the investor pays 200x more than the custodian, simply for being more successful. By your logic, how could a flat 30% tax (really, a percentage tax set at any level) possibly not be "punitive"?


Perhaps it’s just my perspective, but I don’t think a flat % is punitive. Maybe it is, but it’s surely less punitive than a progressive tax plan.


Could you please clarify how it is less punitive? We have given reasons why we think a flat tax is not fair given the marginal value of a dollar compared to low income vs high income. I would like to hear your reasoning


I don't see it as a stretch, it's putting people into different buckets which is just another word for a bracket.

>I’m not comfortable with the idea that you should just take more of someone’s money just because someone thinks they don’t need it.

I understand that view and believe I share it. The modifier is that I don't think you can ascend to the uber rich tier of society without having had siphoned off value from society. At that point I don't think you should be taxed more just because you don't need it but because you are obligated to pay back into society and you are the one who can shoulder the burden.


> The modifier is that I don't think you can ascend to the uber rich tier of society without having had siphoned off value from society.

That's cart before the horse.

Siphoning implies stealing. Then you're justifying your theft from those individuals. Value is created, and of course theft is possible, but you'ren't talking about theft, you're claiming that people just should pay more because of the virtue of having more.


> just should pay more because of the virtue of having more.

First off, is having more really a virtue? Secondly, is it a bad thing that we expect people that have more to pay more? They'll still end up with more in the end - someone who makes $10m a year and pays 80% of it still ends up with quite a bit more money than someone who only makes $15k a year.


> First off, is having more really a virtue?

It's an expression in English. It means "as a result of"[1].

> Secondly, is it a bad thing that we expect people that have more to pay more?

Yes, very bad thing. You mess this up and millions of people die, you get this right and millions of people will emerge out of poverty. Please at least acknowledge that.

> They'll still end up with more in the end.

Here's the problem though. At a higher tax bracket, I now have an incentive to find ways to avoid it. At 10% income tax on a $100K income I might not care, but at $10 million and an applicable 70% tax rate, I am willing to spend upto $5 or even $6 million to keep more of my money with me. (Personally I would even spend $7.5 million to avoid paying the taxes as a moral issue).

1. https://www.macmillandictionary.com/dictionary/british/by-vi...


> It's an expression in English. It means "as a result of"[1].

Yeah, I realized that upon re-reading, but wasn't in a place to edit my comment. I wonder if it's more common in Britain, though, as it didn't sound completely natural in that sense to my American ears.

> Yes, very bad thing. You mess this up and millions of people die, you get this right and millions of people will emerge out of poverty. Please at least acknowledge that.

This doesn't follow. So because people who have more pay more (as a proportion of their money, yet still have more in the long run), millions are going to die? And by making these people who have more pay less (as a proportion of their money), millions are going to emerge out of poverty? Seems to me that it'll basically end up with the increasing wealth inequality we're already seeing, except 10-fold.

> (Personally I would even spend $7.5 million to avoid paying the taxes as a moral issue)

Ah, there's the truth. Heaven forbid somebody else pay less (as a proportion of their money) than you, even though it affects them far, far more. Flat taxes hurt the poor and will do nothing but increase inequality.


>> Secondly, is it a bad thing that we expect people that have more to pay more?

> Yes, very bad thing. You mess this up and millions of people die, you get this right and millions of people will emerge out of poverty. Please at least acknowledge that.

Please explain how increasing the percentage of income tax paid as income grows causes millions to die?


> It's an expression in English.

The expression is “by virtue of” not “becauase of the virtue of”.

I don't know that most English speakers would recognize the latter as a mangled attempt at the former rather than having the normal meaning of the individual words.


Well I think 640K ought to be enough for anybody.


I see your 640K and raise you Manhattan.


That's certainly fair in some senses, but if you consider money per household to be of decreasing marginal utility (your first 10k of income is a much larger jump in quality of life than your 15th 10k) then a tax that is fair based on utility rather than percentage or dollar amount is progressive.


The reason 17% is so often raised as the right flat tax is that it has been the effective tax rate since the 1950s.

https://cdn.theatlantic.com/static/mt/assets/business/margin...


A flat tax of 17% on incomes would not net the government 17% of GDP. The flat tax would have to be much higher (close to 2x) to achieve that same income.


Why? Looking at a sample year, like 2011, you find that total personal income was $13T, the GDP was $15.5T and total tax revenue collected was $2.3T. Probably need some more data to tease out corporate vs personal tax revenue but I don't think it will be too far from a ~20% effective tax rate to reach the required revenue.


Most flat tax proposals include a fairly generous deduction so the tax only starts above a certain level of income. That pushes up the % a lot.

I agree that if you start the flat tax on the first dollar of income, then it doesn't have to be so high.


97% of federal income taxes paid are by people in the top 50% of income today (above 36K, as of 2012), you would probably have to at least match that. Given that, I think I agree. It would have to be 34% for the bottom 50% to pay nothing.


Thanks for that link - I didn’t realize that was the case. I remember 15% as the number that Malcom Forbes proposed when he ran for president in the ‘90s.


That was one of the references for 17% I was talking about:

https://en.wikipedia.org/wiki/Steve_Forbes#Campaigns_for_pre...


But not really. If the person who now makes 85k is struggling to survive on that amount of money (ignore the fact that it's 85k... it could be 40k after taxes for example), then while its "fair" in that they both pay their percentage, the person who is struggling to survive gets the worse end of the deal.


Kind of. You could leave in the current credits you get for dependents, for example, so that a person making $85k with a wife and three kids doesn’t pay quite as much as someone making $85k and single.

It’s hard to imagine how a single person making $85k would be struggling if they weren’t mismanaging their money, but I’m willing to be convinced otherwise.


It's not the brackets that make taxes complicated, it's the exemptions. And all current exemptions are in there for a reason, so once you start cherry-picking some exemptions, it'll be hard not to bring across most of them...


You can implement it with a floor if you want, although that makes it less "fair" in a sense as well, I suppose.


>(ignore the fact that it's 85k... it could be 40k after taxes for example)

According to the GP's scheme, it would be over $70K after taxes.

Not the best example :-)

Anyone earning $85K who has $40K after taxes really needs to get someone else to do their taxes.


Why exactly should taxes be "fair"?

I think that whole line of argument is what gets us into the world that Intuit and H&R Block love, where we say, taxing charitable donations is "unfair," but who counts as charitable, but what about donations to your own foundation; taxing medical expenses is "unfair," but only in certain ways; taxing married couples is "unfair," but what about couples whose marriage isn't federally recognized but is state recognized, taxing the value of a research grant paying for a grad student's tuition is "unfair" if they're not even making as much money as the tax, but taxing in-kind donations generally is fair, etc. etc. etc. (It also carries with it the assumption that whatever wage you make in the first place is "fair" - that if you make $10/hour making food or $1000/hour laying people off, some process has already called that "fair" and you trust its results. There are, of course, arguments that this is right, but personally I think that's a little questionable.)

The purpose of tax policy IMO is to engineer the society we want to see. We want to see a society where government is funded decently. Not too little, presumably not too much either. We also want to see a society where people who do productive things do not say "Forget this, I'm out" and move elsewhere, so (for instance) a 100% wealth tax on assets over $1M is out. This clause starts to resemble a fair tax, because the most effective emotional argument is "You can't tax me like that, it's unfair." But that's not actually the practical argument. The practical argument is "If you tax me like that, I would prefer to uproot my life and move to another country" or "If you tax me like that, I will instead choose not to be productive in ways I would have otherwise been productive, and the cost to society is a net negative."

Once you think about it like that, it turns out you can tax the person who makes $1M/year significantly more than 15% before they threaten to move out, and certainly before they threaten to be less productive in meaningful ways (underemploying themselves, hiring fewer people, etc. - they're still going to have an inherent drive to do well for a while). So you have relatively little downside up to some percentage, and you have steadily increasing revenue for society. (Plus, as a bonus, you mess with the income inequality curve.) So you may as well increase that tax rate.

And there's an argument that this is, indeed, the most "fair" - otherwise you are letting money go underused, because the person making $1M/year doesn't strongly care, and an effective government program is underfunded.


I heartily agree.

Suppose a 20% flat income tax. One fifth of everyone's working hours ostensibly goes to the public good.

Now consider progressive schemes: Why should some folks send one tenth of their time to the government while others send (incrementally) four tenths?

Time is what matters. We're all dying here.


I'm for an approach closer to the Fair Tax, in which every taxpayer receives a stipend back that is an amount reasonably useful to a lower-class household and utterly useless to the super rich. Totally flat taxes tend to be regressive due to ignorance (not stupidity, very big difference) of those in the lower brackets of how to effectively handle money, and the much larger number of choices the rich have to spend their money. The more money you have, the more you can pick and choose how to spend it effectively. It's tough to do that when you are paycheck to paycheck.

It's not a perfect solution, but it would tamp down considerably on loopholes. It's hard to bypass a tax paid upon consumption/service.


That’s not really enough to fund the government at the current scale. I’m in support of a flat tax too, but to be revenue neutral (and still have a carve out for low incomes) it’s have to be like 30%.


Super curious why you support a flat tax over our current progressive system.


I think the “tax the rich to pay for services for the middle class” trend in our politics is not conducive to unity and stability. A flat tax would lessen the desire to increase taxes since everyone would have to bear an increase.


Wait, isn't that sort of empirically untrue? We were less polarized when our tax code was much more complex and onerous than it is now.


Wasn’t the reason for higher taxes at that time to pay for the war effort and defense? Not to get rich people to pay for healthcare and education for middle class people?


Maybe for health care, but tuition at, for example, the University of California used to be entirely funded by rich people's tax dollars. This ended with the tax revolts of the late '70s.


Wouldn't that only work if there were some difficult-to-overcome mechanism (like a constitutional amendment) mandating a flat tax but letting the percentage vary easily?

If you don't have that, a flat tax is going to lessen the desire to increase the flat tax rate, but it isn't going to do a thing to the desire to re-implement a progressive tax.


We’ll never get a flat tax, so this is kind of under the assumption that we somehow get and maintain one.


Your proposal is unfair because it lets poor people mooch off everybody else. What would be fair is if everybody pays exactly the same amount of tax. (If that seems impractical, cap it at 50% of income and treat the unpaid portion as debt, to be paid back later, with interest.)


Whatever anyone thinks about this policy proposal, most articles on this are really shallow, and e.g. don't mention:

1) That the French backed out of a similar tax recently[1]. Not discussing another major economy's recent experiment with this (well, 75% not 70%) seems strange.

2) The lack of discussion about how those subject to this tax might restructure their assets to avoid it. If you earn more than $10 million/yr you can hire a team of accountants to restructure things for you, has anyone speculated as to how the tax code will stand up to that if only this single variable is changed?

1. https://www.theguardian.com/world/2014/dec/31/france-drops-7...


raises hand Uh, I know where we can find money before we start adding more taxes.

China, Russia, Saudi Arabia, India, France, United Kingdom, and Japan, combined, spend less on their military than we do.

I get that she's a politician and all politicians have to play to their base, but can we not all agree, in any political arena, that the 674 Billion dollars spent on the military (over half of federal discretionary spending) is perhaps too high?

I mean, what the actual fuck? How can anyone justify this? We're not even fighting any real wars, our Navy is in fucking shambles, our brand new fighter planes are a joke, and we're soon going to hire more contractors than actual soldiers. Just replace heating oil with $100 bills from the military industrial complex's pockets, it'll do more good for us.


DOD is 27% of the US budget. Using the "discretionary spending" trick is being disingenuous. Let's fix SSDI and other entitlement abuse spending first.

And the Navy needs more ships, but it's not "in shambles", and the JSF is the best aircraft that's ever been built, even if it did cost too much and take too long to get to IOC.


What frustrates me about income taxes (and really taxes in general) is that proponents often automatically presume that a larger amount of money flowing into the government is a wholly beneficial effect. I trust current US government officials to effectively use my tax dollars about as far as I can throw it. Entirely too much money is squandered on things that do no benefit whatsoever to those who pay into it, rich or poor. It's a deal-breaker for me, without even going into the problem of tax evasion available to the obscenely rich.


I imagine it like being in a boat. There are people in the boat running around drilling holes in the bottom and then there are those trying to cover the holes, the Leak Fixers, but they do this very poorly, and sometimes their efforts create just as much water leakage as the hole drillers.

Then there are those who are bailing water out of the boat. Most of them have small cups, some have nothing but spoons, but some have enormous buckets, and all are bailing as much as they can.

Then the Leak Fixers turn around and see that their efforts are not yielding the results they expected. Rather than stop the hole drillers, or improve their hole fixing, they turn to the Large Bucket Bailers, and demand that they double the hours they spend bailing water.

If I was holding a large bucket when that happened, I would be very very angry.


I'd add one more layer of abstraction. There are also people in the boat actively following Leak Fixers and taking their tools to plug the holes.


And then there is Amazon selling all the buckets and the drills in a water proof bubble.


stop down voting me Jeff you got better things to do.


Proponents don't automatically presume this. It isn't axiomatic. We just look at the data and disagree with your assessment. Yes, there is a tremendous amount of inefficiency in the entire process. Some people look at this and think that taxes are therefore not a good plan. Other people look at this and think that despite the inefficiency taxes solve such an important need that it is worth it.

The other problem with this sort of argument is that it works at literally every tax level. If federal income tax rates were 1% then your argument would work just as well at discouraging any tax hike. There is clearly an inflection point but it is worth examining where that point is.


> Proponents don't automatically presume this

I respectfully disagree. Dogmatic clinging to political and economic ideals is rampant in society. People do this all the time. That doesn't apply to EVERYONE who holds the opposed opinion, though. Nor was it my intention to imply that.

> Yes, there is a tremendous amount of inefficiency in the entire process.

It's not just a matter of inefficiency. Inefficiency is intrinsic to any economic system as large and complex as that of the US, and that's to be expected. What isn't to be expected, or at least condoned, is the ACTIVE measures taken by those in office/places of power to squander money that is not naturally misappropriated by that complexity. Our current political/economic client is rife with this.

> The other problem with this sort of argument is that it works at literally every tax level.

The fact that an argument is right at every level isn't a problem, nor does it make it invalid. I'm of the opinion that no tax is going to be truly utilized correctly until the underlying problem of corruption is fixed.

And please don't take my tone as accusatory. I do appreciate people taking a critical look at an issue and still coming up with the opposite of my stance.


That's a very black and white way of thinking about it.


IMO, its very close to a black and white problem. Corruption is an extremely cancerous thing to a state, and I'm not convinced things will get better with the current level that's present.


I think this is a good way of looking at the problem but unfortunately it doesn’t resemble the public debate at all. It would be great if the conversation were about the inflection point and not ad hominems (“people who don’t want to raise taxes hate the poor!”).


Nobody holds the position that "more money flowing into the government is wholly beneficial." When Democrats argue for increased taxes it's not because they think it's good to have high taxes, but to fund particular programs: in this case, a Green New Deal to address climate change.

As for "entirely too much money is squandered", what did you have in mind? The combination of defense, Medicare/Medicaid, Social Security/SSI, and debt interest make up around 85% of the budget.


> When Democrats argue for increased taxes it's not because they think it's good to have high taxes, but to fund particular programs

What does the concept of the government having more taxpayer money have to do with thinking it's good to have high taxes? I made no such connection, you did. My concern is with the lack of accountability to actually use the funds gathered to put into effect the types of programs you mention.

> 85% of the budget

Sure, yeah. They do. A tremendous amount of money gets wasted/misappropriated in these sectors, much of which is manipulated back into the pockets of those in office, and those whose backs the people in office must scratch to keep the gravy train moving along. I'm not sure I see the argument you are trying to make, unless you were agreeing with me.


Matt Yglesias’s podcast has a great segment in this. One point they make that isn’t mentioned in the article is that it wouldn’t raise all that much money, certainly not enough to fund broad social programs. Not enough people make more than $10 million a year to raise that much money from higher marginal rates. Its’s really more about punishing billionaires than raising money for social programs.

https://art19.com/shows/the-weeds


There is a strong argument to be made for the usage of taxation to purposefully break up extreme fortunes, especially self sustaining ones. Although for that usage, the wealth tax and estate tax would be much more effective, even if politically heavy lifts.


Piketty's Capital in the Twenty-First Century essentially argues this, but more from a perspective of forcing investment back into the market to stay ahead of tax and inflation losses.


Doesn't Piketty advocate for a wealth tax, not simply high income tax rates? Wealth taxes target accumulated fortunes, not earned income.


I'm not sure about Piketty per se, but I know that estate taxes are a common trick to break up self sustaining fortunes. The basic theory being that it might be ok for someone to amass quite a bit of wealth during their lifetime from their own labor, but it's not ok for their progeny to be permanently wealthy because of who their parents happened to be.


Piketty specifically proposes an international financial transaction tax. That's his suggestion to get at invested wealth.

He also cautions that his suggestion is likely never feasible. You'd have to get most of 180+ countries on board, else capital will flow through the markets without the tax.


It's not about punishing anyone. It's about restructuring the tax code to incentivize paying workers more. It sets an effective salary cap of ~$10m.


Tim Cook made $12 million in total comp last year. Apple has 132,000 employees. If he made $0, that would be an extra $90 per year for each employee. And, after taxes, that would mean more like an extra $60 per year per employee. Basically an extra $2.30 per paycheck.

Want to increase worker pay? Cut taxes.


> Want to increase worker pay? Cut taxes.

Sure, because worker pay has been increasing so much (adjusted for inflation) since the 80s.


Even if income over $10m is taxed at 90%, you still make more money when you get a raise.


Why the focus on income as opposed to capital gains?

It's always struck me that only the very-very rich count on investment income.


Income includes capital gains. No one has given enough detail on how this particular tax would be implemented, but surely it would capture both (and therefore be an even bigger tax increase on LTCG).


I don't like the idea of taxing capital gains.

Buy-and-hold (and eventually sell) is one of the few paths to financial independence that are available to the common wage-earner. Many people have adapted the strategies suggested by Buffet, Bogle, etc. Many have succeeded.

Don't kill one of the few publicly availble golden geese, please.


I wouldn't say it's available to the "common wage-earner", given that they live paycheck to paycheck.


So many politicians confidently propose solutions to complex systems such as the economy, yet some do not even understand basic things, such as the three branches of the government. [1]

I saw recently on Paul Graham's twitter feed a paper that made the case for a 29% tax rate.

From the paper: "the rate that incorporates innovation and maximizes a utilitarian social welfare function is just 29%." [2]

I'm not saying I agree with the paper, but at least it provided a mathematical framework for studying taxation and considered important things such as incentives, innovation and economic growth, which in my view is a good starting point.

[1] https://www.youtube.com/watch?v=N2xDm-Y4l_4

[2] https://www8.gsb.columbia.edu/faculty-research/sites/faculty...


I think raising taxes is a good idea but arbitrarily making up the number is not. The idea that this would cover some 'Green Deal' ignores the 800 lbs gorilla in the room- a trillion dollar deficit year after year. We really need to figure out how to make the government more efficient and work in the allotted funding for it. Every politician wants to spend a whole bunch of money trying to push their agenda but it's always on credit.


Trillion dollar deficit means there are a trillion dollars extra floating around in the private sector. Trillion dollars more in people's bank accounts. If there was no deficit spending, there would not be money floating around in circulation that isn't debt issued bank notes.


Once the deficit eclipses the total GDP it won't matter if there is extra money floating around because inflation will spiral.


Did you mean debt? The deficit is nowhere close to GDP.

Japan has a much higher debt to GDP ratio than the US, and inflation of <1%.


Exactly. And all this money sloshing around is what leads to inflation, so the central bank has to make up for it by doing things like "tapering" QE, raising interest rates, and generally crashing the economy.


>ignores the 800 lbs gorilla in the room

the defense budget?


Partially, yes.


I'm generally pretty conservative, but I wouldn't mind higher rates on the very top earners. (Say 500k and above. When you get to the 1M tier, put taxes into the 90s.)

But there's a catch: I'd also like decreased spending, at least until the Golden Fleece Awards stop finding easy targets. It would be nonsense to raise taxes on anyone unless the money is put to good use.


Sure - raise rates to 100% on wealthiest 5%. It still wont pay for what she wants.


I think it's common for people to want to tax people that have more, especially when the wealth gap is only widening. The state of things is the ever increase of the poor unable to break out of their class and the rich only getting richer.

Maybe it would be a good idea to provide the ability to have an option to suggest where/how the funds will be used based on some of the nation/state level priority needs.



How does that apply? AOC's proposal to raise taxes on the rich would not increase the debt.


[flagged]


https://news.ycombinator.com/newsguidelines.html

"On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups"

I'm a hacker, and I find tax implementation to be a complex, interesting problem worthy of discussion.


Hard to identify with people who find this controversial


Im opposed to providing the government more money when they cannot prove they successfully handle the tax revenue they already receive. I'd much rather see loopholes closed vs punishing people who are successful. I do not believe congress has my best interests in mind when they simply ask for more money instead of addressing their current situation.


Usually when it's hard to identify with someone, even if you still strongly disagree, it may mean you're not familiar with and giving a charitable reading to their best arguments from their most virtuous members.

https://marginalrevolution.com/marginalrevolution/2019/01/ta...


Hard to identify with people who find this to be beyond controversy. Is it that far out of the realm of reality that someone might disagree with this approach?


If they aren't rich?

Yeah.


That's a vacuous, disingenuous argument that implies that anyone who is not rich and disagrees with this type of tax is objectively wrong. This is absurd and detrimental to constructive discourse.


The specifics matter.

Ignore the time value of money for a moment and imagine you work for minimum wage for thirty years, building a business, then sell it and get ten million dollars for a single year, hoping to fund your retirement and pay for college etc. Compare that to getting $333K/year for thirty years - the taxes paid would be considerably different.

Personally, I think that we need to look at taxes and earnings over a whole lifetime rather than on an arbitrary yearly basis.


You might find it more challenging when they will eventually consider you "rich".

There's no way there's enough money in the top 1% to fund the programs and plans she wants. The only way will be through the upper middle class. YOU.


It's not about getting money to fund programs. It's a way to reduce inequality. The programs will be funded by deficit spending like all programs are.


She initially proposed it as a way to pay for a particular program.


The slippery slope is a terrible counterargument.


A slippery slope isn't a good or bad argument on its own. It's just the mapping of a physical model of reality to data. Whether it's a good argument or not depends on its fit! In some cases it's a very strong model. For example, free speech seems to work best historically when there are enshrined rules that are never infringed. Obviously the fit is not perfect (e.g. yelling 'fire' in a theater), but it's a pretty strong fit.

On the other hand, the model appears to fit pretty poorly for gay marriage, where they posit if you move from traditionalism, before you know it, people will be marrying dogs.


My family has slipped on that exact slope.

Before (IIRC) Reagan, the point at which different marginal tax rates apply wasn't adjusted for inflation for decades, perhaps ever. The result was exactly that middle class families (including mine) paid tax rates that were originally intended only for the rich.

iron0013 28 days ago [flagged]

I think you might be surprised how much money is in the top 1%, and would probably find mind-blowing the amount of money in the top .01%

drc37 28 days ago [flagged]

But why do you feel it is your right or the right of the government to take it from them? Because they happen to be more successful than you? I have never understood the logic of taking from the rich because they are rich. That always sparks the idea of true laziness in the person saying this.

iron0013 28 days ago [flagged]

That's kind of a weirdly confrontational tone to take.

If you already believe that "taxes are theft", then nothing I or anyone else can say will change your mind.

However, the fact is that you made your money in one of the most money-making-amenable contexts in the history of this planet, and that's not an accident, and it's not a coincidence. This nation has been investing in itself--and investing in you--since long before either of us were born, in order to provide the societal context that allowed you to exercise the full extent of your god-given abilities in order to make your fortune. That's why you didn't die of cholera when you were 3, it's why you didn't join the job market as a barefoot and illiterate 12-year-old, it's why you can commute to work each day secure in the knowledge that some dude isn't going to pull up in a Toyota Hilux, jack your Beemer and sell you into slavery.

To be a rich person in the United States and think "I made all this money, all by myself, because I'm some kind of genius Randian super-guy" is the pinnacle of deluded, parasitical vanity.


First sentence:

> That's kind of a weirdly confrontational tone to take.

Last sentence:

> To be a rich person in the United States and think "I made all this money, all by myself, because I'm some kind of genius Randian super-guy" is the pinnacle of deluded, parasitical vanity.

You see that as non confrontational?

iron0013 28 days ago [flagged]

Yes. The person to whom I was responding was not speaking rationally, unfortunately.

Could you parse this sentence for me please? "That always sparks the idea of true laziness in the person saying this."


Are there many people who support this policy and don't support it for themselves, should they be upper-middle-class? I personally support a 70% marginal tax on all income over $100,000, and I make well over that.

In particular the primary reason I support this is that the primary reason I want more than $100K income is competing in housing markets like SFBA and NYC. If everyone making over $100K is taxed heavily past that point, then the people competing for the same housing are on the same playing field as I am - if anything, I'm more competitive with people who make more than I do - and it also makes income equality better in general. (I don't actually care if the money goes to the government; you may as well burn it. The effect I'm interested in is changing post-tax incomes, not getting more revenue for the government)


I don't, because I don't make well over that. I make a little over that.

100k just isn't that much in a city nowadays.

I'd support it for 250k, but really we are just arguing about the cutoff not about the idea of raising taxes on high earners.


My argument is that $100K be than that much in a city if everyone who made more than $100K were heavily taxed - it's a lot different making $110K when everyone makes $150K than making $150K when everyone makes $350K.

But, I am happy to concede that not everyone expects this and I am being optimistic :)


are you just trolling for responses? well you got me.

You can't possibly believe that 70% marginal on > 100k is anywhere near reasonable. Here in CA, that means, you're income taxes would be 83% plus medicare and social sec urity which is +8%, and let's not forget the company pays another 7% of your salary on top of that (you don't ever see that 7% - that's the part they pay), and that's not even counting all the other taxes you pay after that. at that point, everyone would have to quit their jobs. to say that it would ruin the economy is the biggest understatement of a lifetime.


> You can't possibly believe that 70% marginal on > 100k is anywhere near reasonable.

Well, that's the rub: it depends on who you ask. If you ask someone making $30K per year, $100K is a fantastic sum worthy of a high tax rate. That's the problem with the "soak the rich" rhetoric: it's all a matter of perspective. Just pray that someone without any insight into your financial situation doesn't deem you "rich"!


They wouldn't be 83%, because it's a marginal rate.


it's more than 83% when you take into account all the other taxes: there's not just federal and state income taxes, please take a look at your pay stub, there's a lot of other stuff on there.


Please take a look at your 1040. My comment was about marginal rate. I would like the portion of my income above $100K to be taxed at 83%, and my income below $100K to be left alone. I would not like all of my income to be taxed at 83%.


Yes, and I live in NY which would also make marginal income over $100K have extremely diminishing returns.

I do not understand your argument that everyone would have to quit their jobs. They just wouldn't fight for raises once they made it to $100K. I started my career making $95K out of college. I can't say I'm more than $5K/year happier now. I just spend more to keep up with everyone else, mostly on housing.


have you ever been laid off for a year? you can't just assume you'll be gainfully employed your entire life. if another huge tech crash comes along, what will you do?

do you have savings? any retirement funds set up? any family? if you have family, your spending will skyrocket and you won't make it with 95K, even in new york. jsut so you know, child care runs about 22K per year per child (not tax decutible) and that's just the tip of iceberg. so don't have any children, if you wanna keep your spending low.

edit: serious question, is that equality worth it, if it means you're homeless and hungry on the street?

also, in SF 117K is considered low income for a family of 4: https://www.nbcbayarea.com/news/local/Annual-Income-of-11740...


I think I'm being unclear about my argument. $95K today is not a great income in NYC. But that's not what I'm asking. In an alternate universe, where all income of all New Yorkers, not just me over $100K is taxed at 70%, is $95K still not a great income?

I suspect that in such an alternate NYC, very few renters (let's ignore buyers, because it makes it more complicated, but I think my argument applies there too) would be motivated to make significantly more than $100K. Therefore most people are going to be paying at most $100K/40 = $2500/month for housing according to the standard NYC rental guidelines. The market for 1BR apartments that cost $3000, $4000, $10,000/month no longer exists. (Double that for 2BRs.) In that housing market, not in the current NYC housing market, would I still end up homeless and hungry on the street if I had to pay rent from savings? I think there's a lot less chance that if I got laid off I'd be unable to make rent in this alternate universe, even if I had the savings of making $95K/year, than that if I got laid off from my current job making >>$100K/year and with my current savings I'd be unable to make rent in this universe.

Obviously in the NYC of current reality, I am not going to donate 70% of everything I make over $100K. The very fact that taxes are a collective activity is what makes them different from voluntary charity.


>not tax decutible

Flexible Savings Accounts can make some childcare tax deductable.


There are quite a few problems with your comment:

Medicare + Social security is 6.2%, and you don't pay it for income above $118.5K.

The 70% is marginal, not on the whole income.

The employer share (what you call 7%) is mostly irrelevant to the employee. It doesn't show up in my tax forms.

The whole point was that the exorbitant cost of living in CA would become unsustainable with such a tax, and the system will shift to account for it.

And finally:

>are you just trolling for responses? well you got me.

Violating HN guidelines.


  Medicare + Social security is 6.2%, and you don't pay it for income above $118.5K.
(Using TY2018 numbers): no, SS alone is 6.2% and Medicare is 1.45% (each to both employee and employer). Cap for SS is $128.4K, but there is not only no cap for Medicare, there is a surtax above $200K, taking it to 2.35% for income over $200K.


   I personally support a 70% marginal tax on all income over $100,000, and I make well over that
You can easily simulate that for your own taxes simply by making the appropriate contribution via pay.gov and/or directing any refund from your existing tax return via the appropriate line on Form 1040.


Please read the rest of the comment thread. I cannot simulate that in that way. I want to live in a world where all income over $100K is taxed at 70%, because that changes the housing market, because the housing market is my biggest motivation for making more money. (And it changes just about every other market, too.) I do not want to live in a world where I alone lose 70% of my income over $100K and nobody else does. That's not even a tax.


I think the real issue is it's easy to find people who like high taxes, as long as it's applied only to people much richer than they are. It comes off as a lot more sincere if people advocate for an increase on their own tax burden.

The amount of revenue this will raise is rather low, compared to increasing the tax on, say, the middle class. You'll gain a lot, lot more if you revert the recent tax reduction on the middle class. I just looked at my numbers, and I thought my taxes wouldn't be impacted (high state income tax and real estate tax that can no longer be deducted). But even I saved quite a bit with the recent tax cuts.

I obviously don't have a problem taxing people who make over $10M. But if I had to choose, I would instead revert the current tax cuts, even thought that would raise my tax burden.


From https://investinganswers.com/ --

The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. In essence, the marginal tax rate is the percentage taken from your next dollar of taxable income above a pre-defined income threshold.

The marginal tax rate includes federal, state and local income taxes, as well as federal payroll and self-employment taxes. This differs from the average tax rate, which is the total tax paid as a percentage of total income earned.


Milton Friedman (who is a few steps above AOC when it comes to economic policy knowledge):

"All things considered, the personal income tax structure that seems to me best is a flat-rate tax on income above an exemption... I would combine this program with the abolition of the corporate income tax, and with the requirement that corporations be required to attribute their income to stockholders, and that stockholders be required to include such sums on their tax returns. The most important other desirable changes are the elimination of percentage depletion on oil and other raw materials, the elimination of tax exemption of interest on state and local securities, the elimination of special treatment of capital gains, the coordination of income, estate, and gift taxes, and the elimination of numerous deductions now allowed."

However, this won't happen because those on the left and the right (i.e. "politicians") use the tax code as a means for punishing and rewarding to garner favor with contributors to their political campaigns.

Here's Friedman speaking on that: https://youtu.be/TruCIPy79w8?t=13


Huh? Many prominent economists support progressive income taxes. Heck even Adam Smith.


> Milton Friedman (who is a few steps above AOC when it comes to economic policy knowledge):

AOC has a degree from Boston University in economics. Friedman was a professional economist, of course, but as in any field there are lots of professional researchers with strong opinions in lots of directions, and we still listen to the folks with bachelor's degrees. You can find many computer scientists with many opinions on programming languages, but you wouldn't ignore people who got a bachelor's in CS simply because the professional researchers exist. (Otherwise we'd just shut down this site and read journals all day.)


You're really arguing that someone with a bachelor's degree is equivalent to one of the foremost researchers in the field, who oh by the way has a Nobel Prize in Economics?

We're not talking about "opinions on programming languages", we're talking about science. And if we're going to argue over CS, I'll take Knuth over any 30 year old with a BSCS.


  AOC has a degree from Boston University in economics. 
Wikipedia says "International Relations and Economics", which is not the same as graduating as an Economics major.


Correct. It's not the same thing. It's a double major. It means she's as qualified as someone who solely majored in economics, but she worked even harder.


This has been done before and it works. Taxes need a correction.

But it’s hard to explain to the public or the ones who are against this because they listen to certain opinions. They need to have a simple message. Like three bullet points that anyone can read and get a message. No percentage comparisons between social classes, no comparison between old and new tax rates. None of that. Public tunes right out.

E.g. (1) If you make over x in a year, you’ll be taxed at the new 70% rate, (2) if you make less than x, your taxes won’t change, (3) that’s it!!


This is insufficient because

a) point 1 is inaccurate, if you make over x in a year the portion over x is taxed at the new 70% rate, and this is already a point of confusion (perhaps intentional confusion)

b) people who understand that worry they personally will be over x, so they don't care about 2

c) people who understand both a and c worry that the systemic effects of raising taxes on the rich is to lower job creation or to make America not-great again or something, so they're less interested in bullet points about the actual change than understanding how it affects the economy.


> They need to have a simple message.

It's hard to imagine a simpler message than "people who make more than $10 million a year should pay more taxes."


Except the top 1% of taxpayers accounted for more income taxes paid than the bottom 90% combined. The top 1% pay almost 40% of all income taxes.


$10 million is in the top .01%, who pay a lower rate than the top 1%.




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