Top Tier Tax Solution

Henning

Henning

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Gone West
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iHenning
So, I was thinking, when America was strongest and most prosperous, there was a >90% tax on the top tier incomes, private and corporate. This works because it spurs reinvestment. The world has moved on from that time and reinvestment needs to be at home, not overseas.

So, I propose a modern variant that favors degenerate hedonism. Standard graduated tax to $500k, above $500k you go to 90% bracket. Here's the bone, any money you spend within the US and/or on US goods, is tax deductible at 1.25:1. Make all you want, just spend it here, and we'll give you a bonus credit for spending.
 
I think you have it backwards. Remove all the stupid and the money won't leave in the first place.
 
Mistake Not... said:
I think you have it backwards. Remove all the stupid and the money won't leave in the first place.
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Remove all what stupid? How do you remove stupid? 80% of the human race is stupid, we launching nukes or something?
 
Nice thought, but we gotta look at tax policy as a whole.

When the top rate was 90%, the tax code was so full of loopholes and exemptions, nobody actually paid 90%.

Eliminating exemptions and simplifying the tax code was part of the reduction in top rate. The goal was zero difference in taxes collected. Just less work for the accountants.

With the massive tax overhaul in 1986, top rates plummeted, and taxes collected zoomed up.
 
Henning said:
Remove all what stupid? How do you remove stupid? 80% of the human race is stupid, we launching nukes or something?
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Heh. No.

I had a whole list typed out, but it's just ... stupid. The reason the money flees the country is because taxes are already too high. Consider the -entire- tax load, not just the theoretical individual and corporate tax rates. Then throw on all the money .gov just wastes, entitlement programs, a "war on terruh" now in it's 11th year, the freakin' Federal Reserve and their campaign to devalue the currency, etc.

Cut spending, cut taxes. Stop devaluing the dollar. Create a climate that encourages reinvestment, not one that punishes you if you try to escape.
 
Non Compos Mentis said:
Nice thought, but we gotta look at tax policy as a whole.

When the top rate was 90%, the tax code was so full of loopholes and exemptions, nobody actually paid 90%.

Eliminating exemptions and simplifying the tax code was part of the reduction in top rate. The goal was zero difference in taxes collected. Just less work for the accountants.

With the massive tax overhaul in 1986, top rates plummeted, and taxes collected zoomed up.
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Exactly, but the loopholes and exemptions got them to spend money to get out of being taxed on it, get it? It actually works.

I'm all for them using my loophole out of the 90% bracket, I even allow them to buy up the $500k limit with the 1.25:1 deduction for spending. I don't care if you bought a case of wine, a G-550, a new yacht, a high rise building, toothpaste, infrastructure projects, hookers & blow,... It's all deductible, no loophole necessary. Hell, I'll give a 3:1 alternative and hydrogen energy spending credit. Heck, I'll make it easy to not pay any tax in the 90% bracket.
 
So, I was thinking, when America was strongest and most prosperous, there was a >90% tax on the top tier incomes, private and corporate. This works because it spurs reinvestment
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I disagree with this entire premise. :)

First, go look here: http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_individual_rate_history_adjusted.pdf

According to that, we only have >90% tax rate from 1944 through 1963. Two world wars which create ready customers for American goods can support an economy with a tax rate that high. For a while. Also, look at those income numbers, inflation adjusted. Quite a bit higher than your $500k, meaning far fewer people affected.

But it doesn't just instantly drop to today's numbers. For an example of a period when high tax rates didn't accompany a healthy economy, check out the period from 1970-1981. Remember those years? And that had a top tax rate over 70%.

In fact, looking at those tables, it looks like things only started to get better once the top tax rate dropped to 50% (1982) and proceeded down. Compare to the chart of the S&P 500 below.

Here's an idea. Let the people keep their money. :)
 

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I cannot imagine a 90% tax rate based on a dollar figure threshold.

GM is a huge corporation and because of that, makes a lot of money in a good economic climate. Huge investment, huge amount of expense, lots on the table to earn that big profit. And based on something as dumb as an arbitrary ceiling, we're going to tax them at 90%?

Personally, I'd simplify the tax codes and end most of the loopholes. You've got a $5 million dollar house with a big mortgage and a big interest expense? That's fine. You chose the lifestyle. But I'm eliminating the interest deduction.

In fact, I'd be tempted to go to the Chinese system where they simply tax individuals at 25% of their paycheck and move on. If the rate needs to move up or down to balance the books, I'm OK with that. If we need to create a new standard deduction (no itemization) at $30k for the head of household and $15k for each additional dependent, fine.

For corporations, just set a 25% tax and be done with it.

Today's system has far too many carve-outs, special interest exemptions and the like that it is ridiculous.
 
kyleb said:
Today's system has far too many carve-outs, special interest exemptions and the like that it is ridiculous.
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Sadly, It will be like these for many years as both parties have their pet deals. I still stand by a flat tax being the best.
 
I think Reagan said the tax code was like a shrub that requires occasional trimming.
I think it is indisputable that tax code carve outs are the "coin of the realm" for politicians.

The cynic in me wonders why the politicians don't collude on a big tax code reform package so they can spend the next dozen terms putting the carve outs back in....
 
Essentially what you're doing is coercing trickle-down economics wih the tax code. Five percent of the population can only consume so much in the way of goods. And by subsidizing the consumption, you're only going to raise prices for a small sliver of luxury goods producers by throwing more money at them.

Those earning $500k can pretty much afford what they want now, and are spending money, just not enough to carry the entire economy. A look at M2 tells the tale.

Better to incent direct employment and investment, not consumption. That's what worked in the post war period.
 
Non Compos Mentis said:
Nice thought, but we gotta look at tax policy as a whole.

When the top rate was 90%, the tax code was so full of loopholes and exemptions, nobody actually paid 90%.

Eliminating exemptions and simplifying the tax code was part of the reduction in top rate. The goal was zero difference in taxes collected. Just less work for the accountants.

With the massive tax overhaul in 1986, top rates plummeted, and taxes collected zoomed up.
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Like the top tax rate is not full of loop holes now?
 
Chip Sylverne said:
Essentially what you're doing is coercing trickle-down economics wih the tax code. Five percent of the population can only consume so much in the way of goods. And by subsidizing the consumption, you're only going to raise prices for a small sliver of luxury goods producers by throwing more money at them.

Those earning $500k can pretty much afford what they want now, and are spending money, just not enough to carry the entire economy. A look at M2 tells the tale.

Better to incent direct employment and investment, not consumption. That's what worked in the post war period.
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No, they can open new production companies as well.
 
Being in the middle of settling my late Sister's estate, and having just sent the IRS a check for over $2MM, I respectfully disagree with any higher taxes ...
 
Henning said:
No, they can open new production companies as well.
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Fine, on a micro basis.

From a macro point of view, you are suggesting that a consumption subsidy for a small number of wealthy consumers will shift the demand curve of the entire economy as a whole. If the debt crisis proved anything, it proved that what moves the economy is putting money in everybody's pocket.

Do that on an equity rather than debt basis and you've got something like we had in the post war period. Trade your 90% tax rate for equity and infrastructure investment.
 
Chip Sylverne said:
Fine, on a micro basis.

From a macro point of view, you are suggesting that a consumption subsidy for a small number of wealthy consumers will shift the demand curve of the entire economy as a whole. If the debt crisis proved anything, it proved that what moves the economy is putting money in everybody's pocket.

Do that on an equity rather than debt basis and you've got something like we had in the post war period. Trade your 90% tax rate for equity and infrastructure investment.
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How do you think trickle down economics works? It only works when the money pumped up to the top of the money fountain spews out back to the bottom and cycles back up again. The problem we have had over the last couple of decades is that the stuff that is being bought is not being produced in the US, therefore the economy that sees the money fountain is not ours. By requiring the goods purchased to be US goods for the bonus tax exemption, that inspires creation of US production of high value items and industries.
 
When America was strongest and most prosperous there was also a much larger percentage of unionized workers as well. When America was strongest and most prosperous there was a very strong middle class. Two things we don't have anymore.
 
Art VanDelay said:
When America was strongest and most prosperous there was also a much larger percentage of unionized workers as well. When America was strongest and most prosperous there was a very strong middle class. Two things we don't have anymore.
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Correct, but we could, all it takes is will and investment. It just isn't tough enough here yet. In a consumer capitalist economy, Wal*Mart is the Opiate of the Masses, that and we are so indoctrinated with fear of change that any substantial change is nearly impossible to implement.
 
Well you know, I was watching a show last night about perfectly mummified bodies found in bog marshes of the UK and Western Europe. Many of the bodies appeared to be individuals of high status, some even thought to be chieftains. It's known that whenever there was a bad year or drought or famine the underlings blamed their leaders and appropriately sacrificed them to their Pagan gods. Maybe it's time to bring this practice back ?

Politicians figured out long ago that you can't let the masses get too miserable or else. Hence a lot of entitlement programs, welfare and such. Question is - how much more will the working poor and middle class take before they snap ?
 
Art VanDelay said:
When America was strongest and most prosperous there was also a much larger percentage of unionized workers as well. When America was strongest and most prosperous there was a very strong middle class. Two things we don't have anymore.
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I represent a large number of trade contractors, many of which were either formerly union shops, or are owned by principals who came up in the union system. Most of them pine for the days of union shops, but left the unions, not because the people were paid too well (these guys wish badly to pay more to their labor), but rather, because the corruption in the union leadership ensured that union shops could no longer be productive or profitable. They lost sight of their mission, training and providing for qualified and productive labor.

There are exceptions, some on the Local level, with one (1) national trade union (in the construction trades) I can cite as "getting it."

Ironically enough, many in the construction trades make more than their union-represented colleagues, on balance. It is complicated, but the market has spoken clearly.

A properly-operated union could, still, be a force for good in its industry, but elected union leadership is much like elected members of congress - the cush living without actual work, in a position of great power and influence, is appealing enough that they sell-out their constituents for the position.
 
There's a simple solution. Get rid of the capital gains tax. i.e. capital gains is taxed the same as income, not a fixed rate < 20%. There is no reason on this planet that a million/billionaire should pay a lower rate on his income than I do simply because it comes from investment sources and not a job.
 
SCCutler said:
I represent a large number of trade contractors, many of which were either formerly union shops, or are owned by principals who came up in the union system. Most of them pine for the days of union shops, but left the unions, not because the people were paid too well (these guys wish badly to pay more to their labor), but rather, because the corruption in the union leadership ensured that union shops could no longer be productive or profitable. They lost sight of their mission, training and providing for qualified and productive labor.

There are exceptions, some on the Local level, with one (1) national trade union (in the construction trades) I can cite as "getting it."

Ironically enough, many in the construction trades make more than their union-represented colleagues, on balance. It is complicated, but the market has spoken clearly.

A properly-operated union could, still, be a force for good in its industry, but elected union leadership is much like elected members of congress - the cush living without actual work, in a position of great power and influence, is appealing enough that they sell-out their constituents for the position.
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I can agree with most of that. I think the key is most of the represented don't want to take the time out and become involved in their own union. Thus they tend to sit back and let the bad players run the show and don't really digest that fact until it's too late. In effect a microcosm of our own system of government.
 
SCCutler said:
I represent a large number of trade contractors, many of which were either formerly union shops, or are owned by principals who came up in the union system. Most of them pine for the days of union shops, but left the unions, not because the people were paid too well (these guys wish badly to pay more to their labor), but rather, because the corruption in the union leadership ensured that union shops could no longer be productive or profitable. They lost sight of their mission, training and providing for qualified and productive labor.

There are exceptions, some on the Local level, with one (1) national trade union (in the construction trades) I can cite as "getting it."

Ironically enough, many in the construction trades make more than their union-represented colleagues, on balance. It is complicated, but the market has spoken clearly.

A properly-operated union could, still, be a force for good in its industry, but elected union leadership is much like elected members of congress - the cush living without actual work, in a position of great power and influence, is appealing enough that they sell-out their constituents for the position.
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It doesn't matter what it is that is good, it doesn't have long before the force has run it's course to corruption. That's why it's important to keep progressing.

In the trades what I see needing to happen is a voluntary guild system that takes funding from industry members and provides training and continuing education as well as administering benefits and organizing personnel dispatch system to fill the needs of the member companies. I have been in several unions in my life, more bad than good, but the good ones really show that the union can be a value for their cost to both the membership and the companies that hire through them.
 
Henning said:
How do you think trickle down economics works?
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It doesn't. Biggest political fraud ever perpetrated. The past five years provide clear and direct evidence of that.
 
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RBeaubien said:
There's a simple solution. Get rid of the capital gains tax. i.e. capital gains is taxed the same as income, not a fixed rate < 20%. There is no reason on this planet that a million/billionaire should pay a lower rate on his income than I do simply because it comes from investment sources and not a job.
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I don't necessarily agree with that. There should be an incentive to step up to the plate and take on risk as equity investment. That's where jobs come from. Now, if you're referring to the carried interest deduction, I agree with you there. Deriving your income from investing other peoples money as your profession should not entitle you to the same tax incentive as the actual risk taker.
 
RBeaubien said:
There's a simple solution. Get rid of the capital gains tax. i.e. capital gains is taxed the same as income, not a fixed rate < 20%. There is no reason on this planet that a million/billionaire should pay a lower rate on his income than I do simply because it comes from investment sources and not a job.
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Actually, it would be better for everyone not driven by emotion if the capital gains rate was 0%.
 
Actually, if you want to encourage investment, yes, get rid of the capital gains tax. As in, don't tax the gains.

Don't look at what it will do for someone you'll never meet. Look at what it would do for -you-. Taxing investment income sucks. That right there... just that... would do more to spur investment than anything else I've seen on here.
 
Taxing any income sucks, but unfortunately it's the price of civil society.
 
Chip Sylverne said:
Taxing any income sucks, but unfortunately it's the price of civil society.
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Federal tax, state tax, local tax, property tax, sales tax, phone tax, employment tax, social security, obamacare (it's a tax, remember)....

There's civil, and then there's socialism. We're not heading there, we're there.

“The problem with socialism is that you eventually run out of other people's money.” -- Margaret Thatcher
 
Mistake Not... said:
Federal tax, state tax, local tax, property tax, sales tax, phone tax, employment tax, social security, obamacare (it's a tax, remember)....

There's civil, and then there's socialism. We're not heading there, we're there.

“The problem with socialism is that you eventually run out of other people's money.” -- Margaret Thatcher
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I was recently reading "Zealot" about the times of Jesus Christ. The author was describing how harsh Roman rule was -- they would take half of what people earned! Not surprisingly, this describes a higher earner in California these days...
 
Mistake Not... said:
Federal tax, state tax, local tax, property tax, sales tax, phone tax, employment tax, social security, obamacare (it's a tax, remember)....

There's civil, and then there's socialism. We're not heading there, we're there.

“The problem with socialism is that you eventually run out of other people's money.” -- Margaret Thatcher
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Don't forget Luxury Tax.

I think the best way to to lower tax's is to get rid of 75% of the politicians. As far as people taking there money elsewhere the wealthy are tired of paying for politicians expensive lifestyles. There are not many politicians that live in middle to low class neighborhoods or drive honda civics. Instead of taking a PJ when they need to travel they should be made to fly in C150's here in the states and if they are preaching the "green lifestyle" they should all be driving Volt's. The bottom line is they do what we the people let them.
 
Clip4 said:
Like the top tax rate is not full of loop holes now?
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Most of the breaks and gimmes go to the bottom 50%. Once the AGI gets into the lower $100's the AMT phases out deductions.
 
RBeaubien said:
There's a simple solution. Get rid of the capital gains tax. i.e. capital gains is taxed the same as income, not a fixed rate < 20%. There is no reason on this planet that a million/billionaire should pay a lower rate on his income than I do simply because it comes from investment sources and not a job.
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They already paid tax on the earned income, or on the inheritance, or whatever.
 
JimNtexas said:
Actually, it would be better for everyone not driven by emotion if the capital gains rate was 0%.
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The politics of envy gets in the way of that premise...
 
Yeah, where are all these loopholes I keep hearing about?

I pay a tax attorney/CPA $500/hr. to find them, and he can't find them.

Not for me anyhow ... :dunno:
 
Chip Sylverne said:
It doesn't. Biggest political fraud ever perpetrated. The past five years provide clear and direct evidence of that.
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But it can work, no worries, granted it requires benevolence among the elite, and that is what is lacking in society.

Any system of economics and governance can work perfectly well if operated benevolently. The problem does not lie in the methodologies but rather the goal. Our goal is to gain more wealth, that is not a goal of any value. The goal should be to live better and enjoy life as well as assure that future generations have a solid foundation, we aren't doing well at that, in fact, we're kinda melting down.
Imagine that we are closing uranium based nuclear plants and reverting back to gas rather than progressing to Thorium, do you believe that is wise? Failing to progress in the natural order of time and even regressing? Does any great advance ever come from stepping back?

Time is advancing, the population is advancing, our infrastructure needs to advance, yet it's not happening because the market is afraid of change and values, it has no vision, that is why it is the market living as parasites off producers and consumers taking their cut every time the money changes hands (the product is irrelevant).

You are correct though, as it has been operated, trickle down is a fraud, a lie, because the benevolence required does not exist in the market, and we hand over our economy to the market like we can trust it to do the right thing; Greenspan finally did figure out that was incorrect. He was so smitten with Ayn Rand's imaginary crap that he forgot to see the reality that people are selfish, stupid, and destructive. It really broke him to admit it in front of congress.

The problem is, we have been feeding that system since the 80s, so that is where all the money is like it or not. So, the options are to just seize the money, leave everyone with no more than $10MM and whatever hard assets they own, Federalize all the gold again, and start over; or we can incentivize those that have accumulated the wealth to insert it back here. Make it attractive to spend the money with tax bonus on it.

"Off shoring" money is of limited value, because money is worthless until you spend it on a tangible product. As many .com millionaire with a Cayman account soon found out, "hey, I have to pay taxes on this money in order to spend it.":rofl:

It's not that difficult to beat to taxation rates anywhere else it's worthwhile to spend money. Heck, with the tax bonus incentive it actually makes sense to bring manufacturing back to the US, especially hydrogen energy industry production. At a three to one credit you can buy a piece of infrastructure and be able to have a billion tax exempt dollars. I'm all for leading the rich with carrots. Spend a billion on H2 Infrastructure and you can have $3 billion tax exempt, not to mention the earnings from the infrastructure.
 
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