Tuesday, April 12, 2011

Rich Pay More, DUH!

While not a fan of the "rich don't pay their fair share" camp, I find it slightly disingenuous for my side to argue that the rich pay too much. One statistic bandied about is how the top 1% of income earners contribute nearly 40% of federal income taxes and how the top 50% pay almost all federal income taxes. Well, color me stupid, but so what.

Let's say Rich Guy III makes $1,000,000 and Poor Joe makes $10,000 and they both pay 10% of their income in taxes. Well, even though the individual percentage is the same, Rich Guy III will pay $100,000 vs. $1,000, or 100 times the amount in taxes. As a fraction of the tax pie, Rich Guy III pays about 99%.

The Right seems to think that because these percentages are so skewed in favor of the rich that it will elicit sympathy. Wrong, it simply points out that these people are rich and furthers resentment from those who don't make lots of money.

The issue with taxes is not how high they are, but how they incentivize behavior. Rich and poor alike work and invest to make money, not to pay taxes. At some point, high tax rates act as a disincentive to produce. That's a bad thing. Taxes are a means to generate revenue, and revenue consists not only of what you get today, but what you get tomorrow as well.

The winning argument for conservatives is that taxes are too high because they generate lower total revenue. Not that the "rich" pay too much. The reality is that most Americans are envious and resentful of the "rich". To win, we must acknowledge that and adapt.


The Skip Bureau said...

Heh. Two observations come to mind:

1) 'Rich' and 'High Income' are two different demographics. 'Poor' almost always implies low income, so the conflation of 'Poor' and 'Low Income' isn't as disingenuous. However, since the income tax is a tax on income, those that pay the highest in income taxes are those with high income, not necessarily rich, as a rich person is a person with a lot of assets, which may or may not imply high income. Tax dodges exist to allow the truly rich to not pay as much taxes as those with high incomes, who are traditionally highly productive people.

2) Many of the lower income brackets do not pay any meaningful taxes. Their employers do, before you start lighting the flame, but the low income people do not. For instance, my wife, prior to being my wife, received huge credits that actually resulted in her getting more back than she paid on her W2. She may or may not have actually dodge all taxes, but it appeared she did. Many people are in this condition. A lot of them do not even know their employers pay taxes on their behalf so it appears to them that they pay no taxes or even receive credits.

So, the soak the rich taxes do not actually soak the rich, but the high income people, who are often highly productive, and will be disincentivized. The low income people do not appear to pay taxes according to statements they have access to, and, when they get massive credits on top of that, it engenders anger in those who have to pay taxes, which leads to class warfare. It also leads to them not having a stake in spending.

Instead, we need to see to it that everyone knows they pay taxes, somehow, so that nobody with income does not pay at least something. If you wish to send them aid afterwards, we can argue about that later, but, at the very least, they must pay taxes.

We also need to lower spending so we can lower taxes, because, as anyone can see, the Laffer curve does, indeed, happen, and lower taxes do lead to higher revenue, but, more importantly, greater affluence for all, making the lot of the less fortunate, well, more fortunate.

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