Is it absolutely necessary that the rich pay their fair share tax-wise?

[LisaA]

I know, but it has been used to justify welfare as we know it.

And the point is that is an INCORRECT interpretation! “General Welfare” does not mean the government should be supporting failing companies, unions, what are IMO silly fluff projects like Harry Reid’s request for support of a Cowboy Poetry show.

Liberals hide behind “fairness” and basically lie about who is REALLY paying the bulk of the taxes to justify continuing to increase taxes rather than give their programs a long hard look and determine which are effective and worth the money.

I don’t resent paying taxes when I feel the money is put to good use. But I completely resent politicians with their little tin cups demanding money for projects and issues that were never supposed to be orchestrated by the federal government.

Lisa

 

[Erich]

I know, but it has been used to justify welfare as we know it.

To understand the phrase “general Welfare” it is important to define the word using the vernacular of the time. The 1828 Webster’s dictionary lists two definitions for welfare: one to be applied to persons, and one to states (political bodies). As the Constitution was written to list the government’s powers and restrictions, the definition for states must be used, which reads:
Exemption from any unusual evil or calamity; the enjoyment of peace and prosperity, or the ordinary blessings of society and civil government.
Note that the definition closely links welfare to protection (from unusual evil or calamity) and security (peace and prosperity). This stands in contrast with the current definition according to Webster’s dictionary:
Aid in the form of money or necessities for those in need; an agency or program through which such aid is distributed.
The difference between the two definitions is striking; indeed, they are wholly disparate. This etymological evolution was commented on by Noah Webster himself (the man responsible for the 1828 dictionary):
In the lapse of two or three centuries, changes have taken place which, in particular passages, … obscure the sense of the original languages…. The effect of these changes is that some words are not understood … and being now used in a sense different from that which they had … present wrong signification of the false ideas. Whenever words are understood in a sense different from that which they had when introduced… mistakes may be very injurious. (Noah Webster, via Quoty)

Once the original intent and definition of the “general welfare” clause is understood, it is important to observe how the phrase can be Constitutionally implemented. James Madison commented on this as follows:
Money cannot be applied to the General Welfare, otherwise than by an application of it to some particular measure conducive to the General Welfare. Whenever, therefore, money has been raised by the General Authority, and is to be applied to a particular measure, a question arises whether the particular measure be within the enumerated authorities vested in Congress. If it be, the money requisite for it may be applied to it; if it be not, no such application can be made. (James Madison, via Quoty)
Madison here refers to the enumeration of powers, the specific list of items stated in the Constitution for which the government is given authority. All other powers not mentioned are denied to the government, as the tenth amendment declares:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

 

[sedonaman]

To understand the phrase “general Welfare” it is important to define the word using the vernacular of the time. The 1828 Webster’s dictionary lists two definitions for welfare: one to be applied to persons, and one to states (political bodies). As the Constitution was written to list the government’s powers and restrictions, the definition for states must be used, which reads:
Exemption from any unusual evil or calamity; the enjoyment of peace and prosperity, or the ordinary blessings of society and civil government.
Note that the definition closely links welfare to protection (from unusual evil or calamity) and security (peace and prosperity). This stands in contrast with the current definition according to Webster’s dictionary:
Aid in the form of money or necessities for those in need; an agency or program through which such aid is distributed.
The difference between the two definitions is striking; indeed, they are wholly disparate. This etymological evolution was commented on by Noah Webster himself (the man responsible for the 1828 dictionary):
In the lapse of two or three centuries, changes have taken place which, in particular passages, … obscure the sense of the original languages…. The effect of these changes is that some words are not understood … and being now used in a sense different from that which they had … present wrong signification of the false ideas. Whenever words are understood in a sense different from that which they had when introduced… mistakes may be very injurious. (Noah Webster, via Quoty)

Once the original intent and definition of the “general welfare” clause is understood, it is important to observe how the phrase can be Constitutionally implemented. James Madison commented on this as follows:
Money cannot be applied to the General Welfare, otherwise than by an application of it to some particular measure conducive to the General Welfare. Whenever, therefore, money has been raised by the General Authority, and is to be applied to a particular measure, a question arises whether the particular measure be within the enumerated authorities vested in Congress. If it be, the money requisite for it may be applied to it; if it be not, no such application can be made. (James Madison, via Quoty)
Madison here refers to the enumeration of powers, the specific list of items stated in the Constitution for which the government is given authority. All other powers not mentioned are denied to the government, as the tenth amendment declares:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

I agree with everything you have said here. I was just stating how general “welfare” was used to justify modern “welfare”.

 

[LisaA]

I agree with everything you have said here. I was just stating how general “welfare” was used to justify modern “welfare”.

The same ridiculous way that the “right to privacy” has magically appeared in the Constitution along with the right to abort unborn babies. Between our no good do gooder Congress and the USSC the Constitution has been beaten, twisted and morphed into something that would be unrecognizable by the Founding Fathers.

Can you imagine explaining Solyndra to James Madison?

Lisa

 

[Nate13]

The same ridiculous way that the “right to privacy” has magically appeared in the Constitution along with the right to abort unborn babies. Between our no good do gooder Congress and the USSC the Constitution has been beaten, twisted and morphed into something that would be unrecognizable by the Founding Fathers.

Can you imagine explaining Solyndra to James Madison?

Lisa

You would first have to explain the idea of autonomous unelected bodies outside of Congress that pass laws and regulations everyday with no direct accountability to the people who live under those laws and regulations.

 

[catholicbuckeye]

Yes, I would think so. Of course, the debate is about how much constitutes a fair share.

For example, the rich pay 15% on capital gains. So do the middle class. So do the poor. The rich, of course, are more apt to have capital gains than the others. Do we increase the tax on capital gains for everyone? (And in the process discourage capital investment?) Or do we tax capital gains at different amounts depending on the total amount received?

Do we tax interest income at the same rate as wages and salaries? A widow living on interest income will be adversely affected by a higher tax rate, a rich person not so much.

But actually, I don’t think that it is a magisterial issue. Tax rates seldom are.

Keep in mind that the 15% on capital gains is essentially “taxed twice.” In other words, the investor earns money which is taxed at the legislated level (say 35% for highest tax bracket) then invests the after-tax money, which earns a return and is taxed again, this time at 15%.

Taxes are a tricky issue. What is “fair?” “Fair” could be reasonably defined as taking the budget in its entirety, then each tax payer pays an amount equal to (budget / total # of tax payers). This obviously is not feasible since those with low/no icome could not possibly pay this amount. Since we allow ourselves to run deficits and earnings which are taxed vary, we could tax each person an equal, level percentage of their earnings; say 20%; thus somebody who makes $100,000 would be taxed $20,000 and somebody making $20,000 would be taxed $4,000. This could be perceived as “fair” since those making more are taxed a proportionately higher amount. Either way, with a progressive tax schedule as we have, it is utterly ludicrous to say that somebody who is taxed 35% is paying an “unfairly” low amount, as compared to somebody paying from 0% to 34% of their income. The only possible way people can rationalize this as unfair is if they are governened by envy.

 

[Texas_Roofer]

…
…Lisa

…
…Lisa

…
…Lisa

…
…Lisa

Would all these points be moot if all taxes were reported on a single form instead of the the current system with 100’s of forms of tax payments?

 

[Texas_Roofer]

Keep in mind that the 15% on capital gains is essentially “taxed twice.” In other words, the investor earns money which is taxed at the legislated level (say 35% for highest tax bracket) then invests the after-tax money, which earns a return and is taxed again, this time at 15%.

…

Is this not true of most taxes? Is sales tax collected on already taxed money? Property tax? Taxes added to utilities? etc., etc.

 

[Texas_Roofer]

1. Interest is taxed at the same rate as other ordinary income (including wages). There are basically two exceptions: a.) Municipal Bond interest (not taxed by the federal government or the state issuing the bond–i.e. California will tax interest paid on Oregon muni bonds.) and b.) Treasury Interest which is not taxed by the states–though it is tax by the federal government.

2.) With regards to the Long-term capital gain tax rate (which also applies to qualified dividends-dividends from a company like Microsoft) --remember Short-term capital gains are taxed at ordinary income tax rates as they do not qualify for the reduced 15% rate–would someone explain to me how the vast majority of LT Capital Gains encourage meaningful capital investment and job creation. I am all for giving Bob a low tax rate when he takes his money, starts a small business, grows it, employees people and later sell it at a gain. I have no problem rewarding the risk he took with a lower capital gains rate. However, the vast majority of those claiming a reduced rate on long-term capital gains are people who are simply trading paper. When I purchase IBM stock from someone–they’re selling me a piece of paper. IBM is not getting any money to grow their business–they got that long ago when they originally issued the stock. When I in turn sell the IBM stock to someone else at a profit and take those proceeds and now by Microsoft stock–I get a reduced tax rate–if I held the IBM stock 12 mo.'s. I’ve done nothing for the economy–except generate a commission for a stock broker. I just swapped some paper. I’ve really done nothing to further the stated purpose of the reduced capital gains tax rate. We need to rethink what kind of investments qualify for this reduced rate and what Long-term really means.

Lets restrict the reduced rate to those who actually take there capital and start a new business, invest in a start up business, or provide additional capital to an existing company to help it expand or stay in business, but lets not give it to people who simply swap existing paper shares.

That’s my two cents.
Mark

Keep in mind that the 15% on capital gains is essentially “taxed twice.” In other words, the investor earns money which is taxed at the legislated level (say 35% for highest tax bracket) then invests the after-tax money, which earns a return and is taxed again, this time at 15%.

Taxes are a tricky issue. What is “fair?” “Fair” could be reasonably defined as taking the budget in its entirety, then each tax payer pays an amount equal to (budget / total # of tax payers). This obviously is not feasible since those with low/no icome could not possibly pay this amount. Since we allow ourselves to run deficits and earnings which are taxed vary, we could tax each person an equal, level percentage of their earnings; say 20%; thus somebody who makes $100,000 would be taxed $20,000 and somebody making $20,000 would be taxed $4,000. This could be perceived as “fair” since those making more are taxed a proportionately higher amount. Either way, with a progressive tax schedule as we have, it is utterly ludicrous to say that somebody who is taxed 35% is paying an “unfairly” low amount, as compared to somebody paying from 0% to 34% of their income. The only possible way people can rationalize this as unfair is if they are governened by envy.

Is this not true of most taxes? Is sales tax collected on already taxed money? Property tax? Taxes added to utilities? etc., etc.

I guess I should have mentioned one of the primary reasons for lowering capital gains taxes was to reduce the taxation of inflation. If $10,000 worth of stock is held for 10 years and nearly doubles to $19,000 the actual income is not $9,000. Roughly $3,000 is inflation and roughly $6,000 is income. So $9,000 at 15% is a real tax of 22.5% of the real income ($6,000)

 

[Nate13]

Is this not true of most taxes? Is sales tax collected on already taxed money? Property tax? Taxes added to utilities? etc., etc.

Yes, but it does make the point that you cannot compare the capital gains tax to an income tax. Income tax v. income tax, rich people pay a lot more and a higher percentage of their income. The fact is the guy sitting with his millions that he earned earlier in life, already paid his share of income taxes when he earned it the first go around. They also pay a lot more taxes on the local and state levels as well because they buy more things in general and have more expensive houses and cars.

 

[Texas_Roofer]

Yes, but it does make the point that you cannot compare the capital gains tax to an income tax.

no, if earned income is taxed multiple times, then either the rate should lowered equally or the double tax arguement is not valid

Income tax v. income tax, rich people pay a lot more and a higher percentage of their income. The fact is the guy sitting with his millions that he earned earlier in life, already paid his share of income taxes when he earned it the first go around.

no, rarely can one “earn millions” the vast majority of the millions are made in investing. Actually this is the core of what people see and lack the ability to put into words.

They also pay a lot more taxes on the local and state levels as well because they buy more things in general and have more expensive houses and cars.

? In mass? Yes, in mass. People who have no money pay no taxes, is that profound or common sense? The wealthest americans pay lower tax rates than many, many other americans that is factual, see the IRS data.

 

[MarkInOregon]

Mark I can’t quote your post because the text is already clipped out but to respond to your comments as I recall them, I thought the examples were interesting as it shows a larger percentage decrease for the lower income taxpayer, which is precisely the opposite of what the “tax cuts for the wealthy” protestors claim. Allthough you are correct that in total dollars the high earners benefitted more, but they also paid more and getting a 62% reduction in taxes means a lot more to a lower income person than the 20% reduction means to a higher income taxpayer.

Sorry about the quote thing. I’ve never learned how to do it properly. You may be right about who the reduction means more too–but that still doesn’t negate the fact that the wealthy did indeed receive the largest tax cuts on a per dollar basis. Also my examples dealt with wage earners.only. If you were to change my examples to qualified dividend income–you’d find the savings rates running from 100% for the $25,000 income to 65% for the $100,000 income to 60% for the $250,000 income. Those are substantial savings and those go to the wealthy. You don’t earn 6 figures in dividend income without a substantial next egg. Again the discussion is much more complicated with many variables and factors. But when you couple in the qualified dividend rate and the LT capital gains rates–I think even on a %age basis we will find a larger amount of the tax cuts went to the wealthy.

I think many studies have demonstrated that despite the various tax benefits of investment income, the high earners still pay a much larger percentage of the total taxes than do the lower income people. It’s some amazing figure like the top 1% pay 37% of the total taxes but have 19% of the income while the bottom 50% only pay 3% of the total taxes although their earning power is certainly higher than 3%. So my overall conclusion is that the high earners pay their fair share, and more.

Of course they do and they always will unless you go to a regressive tax system. I provided an example earlier using a flat tax of 10%–even with that system–the top 50% will still pay roughly 95% of all taxes–it’s because they have most of the taxable income. You could lessen it a little by denying any deductions and exemptions and taxing income starting at $1–but still not by much. Lets face it 10% of $10,000 is $1,000 and 10% of $100,000 is $10,000–yes the large income earners are always going to pay most of the tax–why is that so amazing?

I still think it is fair to ask everyone except the impoverished to pay something, even if just a token amount. Not so much for the revenue it would generate but also in a sense of fairness that everyone benefits from living in this country, so everyone should ‘invest’ at some level.

How do you define impoverished–where is the cut off in $$? I’m currious. As of 2009 the income split point between the top 50% and bottom 50% of taxpayers was $32,396. And I have previously pointed out that a single wage earner with standard deduction and one exemption starts paying income tax at $11,300. (Please note this same taxpayer if his income was from qual divs would pay not tax until his income reached $44,000 – fairness?)

Lisa

P.S. I suspect that the reason you don’t see that many non tax payers is that those are the people who use one of the inexpensive (or free) computer programs… They aren’t likely to be paying for a CPA. Isn’t that basically what I said?

If I had the time and inclination–I’d like to go back and read the arguments for raising and lowering the tax rates in the 30’s through the 60’s when rates were much higher and see how much this fairness argument was raised. Heck I don’t remember it being part of the discussion in the 80’s under Regan–but then I wasn’t paying a lot of attention back then–other priorities in college. Rates on the top income earners have been cut from a high of 94% to 35% today and yet people today are screaming it’s not fair that the rate is so high. During this same time the bottom rate has gone from a low of 1% to todays current 10%–and the not fair crowd is clammering for those people to pay more. And this doesn’t even examine the income level where the tax kicks in. Go figure.

Peace,
Mark

 

[catholicbuckeye]

Is this not true of most taxes? Is sales tax collected on already taxed money? Property tax? Taxes added to utilities? etc., etc.

Sure. At 15%, I am guessing this tax is higher than 99% of all other forms of taxes applied to transactions made with after-tax income (perhaps property taxes can be higher but off the top of my head I can’t think of a higher one, besides death tax). The point was more along the lines that this tax is not really a tax on earned income, since that income had already been taxed once. The complaint that I typically here is formed along the lines that the rich are only paying 15% on their income. I probably should have stated that out front.

 

[LisaA]

Is this not true of most taxes? Is sales tax collected on already taxed money? Property tax? Taxes added to utilities? etc., etc.

Wages are not taxed twice so paying a tax on our wages/salaries does not represent double taxation. That’s the issue here, distinguishing between earned income from providing personal services and investment earnings. The point about capital gains is also applicable to dividends…a company makes money, pays taxes and the declares a dividend from the after tax dollars. Similarly the objection to estate tax is that much of that bequest was taxed as it was earned by the decedent. There has always been the theory that double taxation is to be avoided.

You are comparing apples and oranges by saying that property taxes are “taxed twice” because those are very different than income taxes. I pay income taxes because I perform services for my employer. Property taxes, gas taxes and utilities taxes are really more in the line of a fee. I pay property taxes on my home and as I look at the tax bill and see that the taxes paid for schools, police and fire service, street lights etc. Gas tax pays for highway construction and maintenance, etc. Different concepts altogether
Lisa

 

[Scott_Lafrance]

Is it absolutely necessary that the rich pay their fair share tax-wise?

Just wondering, if this is a magisterial issue or if it is not.

I think that it is necessary for EVERYONE to pay their fair share of taxes.

 

[LisaA]

If I had the time and inclination–I’d like to go back and read the arguments for raising and lowering the tax rates in the 30’s through the 60’s when rates were much higher and see how much this fairness argument was raised. Heck I don’t remember it being part of the discussion in the 80’s under Regan–but then I wasn’t paying a lot of attention back then–other priorities in college. Rates on the top income earners have been cut from a high of 94% to 35% today and yet people today are screaming it’s not fair that the rate is so high. During this same time the bottom rate has gone from a low of 1% to todays current 10%–and the not fair crowd is clammering for those people to pay more. And this doesn’t even examine the income level where the tax kicks in. Go figure.

Peace,
Mark

Mark rather than clip your entire post, I want to get back to the issue of this thread, whether the rich should pay their “fair share” of taxes. We will apparently disagree on this issue as I think they ARE paying more than their share in any way of measuring things.

Is it fair that the group earning 19% of the income pays 37% of the taxes? Or conversely is the bottom tier of taxpayers paying their ‘fair share’ when they pay only 3% of the taxes but have a substantially higher percent of the income? I don’t think so but that’s the way it is currently. The point being, I don’t think high income earners are not paying enough.

THe real issue is SPENDING. If we taxed enough to pay our country’s expenses, everyone should/would pay more. I vastly prefer spending cuts than tax increases having seen the “social industrial complex” absolutely explode.

To your final point, I DO remember the days of extremely high tax RATES but the reality was that anyone eligible for those rates had many opportunities (tax shelters etc) to avoid taxes. I worked for a group of very wealthy clients of my former CPA firm and in the 1980s they were making over a million dollars but between all their shelters and investments paid very little tax. So while Reagan cut the rates he also removed the opportunities to “invest” in Arabian horses, railroad cars, bad real estate, etc. That I think was much more of a fair approach…drop the rates but get rid of some of the goodies allowed by the Code. One benefit was that investors started actually putting their money into real companies instead of a bunch of c**p created by sleazy tax shelter salesmen.

Quite honestly I would like to get rid of all income taxes and have a consumption tax, thereby capturing the underground economy, helping to discourage under the table employment of illegals, and making everyone pay SOMETHING for the privilege of living in this wonderful country.

Lisa

 

[sedonaman]

Mark rather than clip your entire post, I want to get back to the issue of this thread, whether the rich should pay their “fair share” of taxes. We will apparently disagree on this issue as I think they ARE paying more than their share in any way of measuring things.

Is it fair that the group earning 19% of the income pays 37% of the taxes? Or conversely is the bottom tier of taxpayers paying their ‘fair share’ when they pay only 3% of the taxes but have a substantially higher percent of the income? I don’t think so but that’s the way it is currently. The point being, I don’t think high income earners are not paying enough.

THe real issue is SPENDING. If we taxed enough to pay our country’s expenses, everyone should/would pay more. I vastly prefer spending cuts than tax increases having seen the “social industrial complex” absolutely explode.

To your final point, I DO remember the days of extremely high tax RATES but the reality was that anyone eligible for those rates had many opportunities (tax shelters etc) to avoid taxes. I worked for a group of very wealthy clients of my former CPA firm and in the 1980s they were making over a million dollars but between all their shelters and investments paid very little tax. So while Reagan cut the rates he also removed the opportunities to “invest” in Arabian horses, railroad cars, bad real estate, etc. That I think was much more of a fair approach…drop the rates but get rid of some of the goodies allowed by the Code. One benefit was that investors started actually putting their money into real companies instead of a bunch of c**p created by sleazy tax shelter salesmen.

Quite honestly I would like to get rid of all income taxes and have a consumption tax, thereby capturing the underground economy, helping to discourage under the table employment of illegals, and making everyone pay SOMETHING for the privilege of living in this wonderful country.

Lisa

Mega !

 

[Texas_Roofer]

Wages are not taxed twice so paying a tax on our wages/salaries does not represent double taxation. That’s the issue here, distinguishing between earned income from providing personal services and investment earnings. The point about capital gains is also applicable to dividends…a company makes money, pays taxes and the declares a dividend from the after tax dollars. Similarly the objection to estate tax is that much of that bequest was taxed as it was earned by the decedent. There has always been the theory that double taxation is to be avoided.

You are comparing apples and oranges by saying that property taxes are “taxed twice” because those are very different than income taxes. I pay income taxes because I perform services for my employer. Property taxes, gas taxes and utilities taxes are really more in the line of a fee. I pay property taxes on my home and as I look at the tax bill and see that the taxes paid for schools, police and fire service, street lights etc. Gas tax pays for highway construction and maintenance, etc. Different concepts altogether
Lisa

The money used to pay “Property taxes, gas taxes and utilities taxes” where to you get it from? If you get it from common earned income then it has already been taxed so anytime you mail that money back to the government as taxes it is clearly a double taxed source. If this occurs to a business they can deduct the later tax to prevent the double tax but not so for common wage earners.

FYI - It seems a couple of you struggle with the concept of a business as a free standing legal entity. If a business makes $100 and pays $40 in taxes that is not taxes paid by the owner. The owner is a separate legal entity and has a separate tax responsibility. This system is chosen by the owners and is not required by law.

 

[sedonaman]

The money used to pay “Property taxes, gas taxes and utilities taxes” where to you get it from? If you get it from common earned income then it has already been taxed so anytime you mail that money back to the government as taxes it is clearly a double taxed source. If this occurs to a business they can deduct the later tax to prevent the double tax but not so for common wage earners.
…

Say my employer pays me a dollar in wages. After taxes are taken out, I’m left with less, assume it is 80 cents. I take my 80 cents and buy something. Now that merchant must pay his taxes, and his employees must pay theirs. Now there is only [say] 64 cents left. The merchant and his employees take that 64 cents and buy things, resulting in a remainder of only 51 cents. If we continue this scenario, we can see that the original dollar evaporates into taxes after only a few more transactions.

 

[Texas_Roofer]

Say my employer pays me a dollar in wages. After taxes are taken out, I’m left with less, assume it is 80 cents. I take my 80 cents and buy something. Now that merchant must pay his taxes, and his employees must pay theirs. Now there is only [say] 64 cents left. The merchant and his employees take that 64 cents and buy things, resulting in a remainder of only 51 cents. If we continue this scenario, we can see that the original dollar evaporates into taxes after only a few more transactions.

Yep,

For guys like me 10 transactions if you start with a $1 plan it goes to $0.60 in delivery
round 2 it drops to $0.36
round 3 it drops to $0.22
round 4 it drops to $0.13
round 5 it drops to $0.08
round 6 it drops to $0.05
round 7 it drops to $0.03
round 8 it drops to $0.02
round 9 it drops to $0.01

In the real world the transactions alternate between individual(earned income) and business (declared profit) so more transactions occurs

btw this is the same method used by the fed to calculate stimulus. lower interest rates increases transactions, and higher interest decrease transactions. So there is a simple method to understand the fed!