Any thoughts on this argument over taxes?

[zeos3]

I posted this in the Economy forum but thought I might get more responses if it was posted here in GD. Sorry if this causes problems.


I got the "tax system explained in beer" email from a friend of mine. I sent the debunk that I found on DU as a reply. Here's the link:

http://www.democraticunderground.com/discuss/duboard.ph...

Here is the response I got back:

"The problem is, when the rich guy leaves, he takes the jobs he creates with him, so everyone is even worse off.

I am amazingly irritated that I lose over a third of my income and people think I should give more or that is is somehow unfair. I work at least 6 days a week, more than 12 hours everyday (it is not uncommon for me to pull an all-nighter multiple times in a month or even week) and I incurred over $150,000 in loans to make a decent living (not to mention that $100K my parents needed to pay out of their own pocket). If I now need to share even more than what I currently do, what is the motivation for me to work this hard or to incur the debt that I did? Everyone looks at the end salary, but no one is looking to give me credit for the cost (both financially and the opportunity cost of me being out of the work force for 7 years). I could have stopped with a college degree and work a whole lot less and then I can cry that it is unfair that those who do more, have more.

In all seriousness, I had a friend from college who after his pay raise made LESS money after taxes than before. He went to his boss and got his salary reduced to the pre-raise level. So the government actually LOST money because of their unfair tax policy.

And if their tax policy was fair, he would have actually been making more and funneling that back into the economy and created jobs every time he went out to dinner or bought a shirt.

I hate to sound like some of those people on conservative radio, but where did our work ethic go? My parents work every single day other than Christmas and Thanksgiving. They are in the store at 7AM and leave at 10PM. EVERY DAY. And guess what? Because of their work ethic, they have a nice home, savings and have no financial worries. Now, is it fair that their taxes should go up because someone else makes a lifestyle choice to only work one 9 to 5 job? Before this sense of entitlement hit everyone, people worked multiple jobs to have what they had. They did not stand in line waiting for the government to redistribute wealth.

Guess what? If my taxes go up, I start to re-analyze my job. Is my post-tax salary worth the work? Maybe, maybe not. It is going to depend on the final number. If I move to a lower tax bracket where my after-tax salary will be close, it is a NO BRAINER. And If I make a little less (either because I have to pay more in taxes or because I take a lower paying job deciding its not worth it), I'll just spend a little less. So, that corner store that waited for me and my kind to pay the bills will be screwed.

The problem with tax policy, especially liberal tax policy, is it assumes all other things are equal, without taking into account human emotion. Obama and company think "hey if we raise taxes, we will net more money." NOT TRUE. Like what happened with my friend, they may make less. I may quit and work at a smaller firm with less hours because my end salary may not be worth the stress, time and effort. Companies leave (and leave behind their workers) because they can save by moving to England or Ireland. Businesses that can't leave start to see where they can cut costs (usually the biggest cost for a company is rent and salaries - so guess what happens). You now have what used to be tax-generating workers getting an unemployment check from the government - that is a cash NEGATIVE policy. People who may have sold their stock at one period hold it longer waiting for a bigger gain, because the after-tax reward is not worth the risk they take (or they do not invest at all because they need to make a larger amount than they previously have thought to cover their costs). Look at ANY major company. Deals are often structured for no other reason than to cut back on their costs and taxes."

These are good friends of mine. I just never realized how sensitive tax issues are for them.

[alittlelark]

1. I would like to let this tripe sink like a stone,

But I had to respond w/:puke:

[zeos3]

4. That was my initial response too

but I thought I'd check with DU for inspiration because I'd like to be more diplomatic in this email exchange, they are friends after all

[EVDebs]

2. Obama's better for most American's on taxes

According to Parade Magazine's chart two weeks ago, Obama's plan is better for most taxpayers.

http://www.parade.com/news/intelligence-report/archive/how-much-would-you-pay-taxes.html?archive=true

""If your annual salary is less than $112,000, you’d pay less in taxes under Obama’s plan; if your salary is higher, McCain would cut your taxes more. “While the aggregate tax cut is bigger for McCain, a larger number of voters get more money under Obama,” says Alan Viard, a tax-policy expert at the conservative American Enterprise Institute. “Obama is choosing to emphasize tax cuts for the middle class, whereas McCain’s strategy is to keep rates lower at the top as a way to facilitate long-run growth.” For example, a person with an income of $1 million could see his taxes increase under Obama by as much as $94,000, whereas under McCain’s plan he could save about $48,000. ""

[zeos3]

7. Thanks

I think the friends I'm emailing may each be over the $112,000 mark (married couple, one's a doctor, one's a corporate lawyer) so that argument went out the door. I could tell them to quit bitching because they make very good money but I'd like to be more diplomatic.

[Narkos]

3. Here's a good one

The problem with this analogy is that that #1 poor guy and the #10 rich guy are drinking in the same bar, which would never happen.
In reality, the #10 guy pays more so he can have:
roads built to get him to his swanky bar, public works to clear the snow from the valet stand and clean the streets around the bar, police and fire resources to keep his bar safe, public transit into his downtown bar so his table gets cleared by busboys and so that a nice #2 can hand him a towel to dry his hands, homeless shelters to keep the “bums” out of the alley behind his condo, schools to help the #1’s kids grow up to be #4s that don’t need the help, prisons to keep his #10 family “safe”…
…And all with enough money left over to make sure that high real estate prices and gated communities keeps those #1-#4s out of their neighborhoods.
__________________________________________________________________________

This one is a little longer, but worth the read:

Suppose that every day, ten men go out for beer and they order 10 glasses of beer (or 120 ounces of beer). If they split up the beer the way that wealth is distributed in the U.S.A, it would go something like this:

The first five men (the poorest) would get a sip of beer each or 0.672 ounces.
The next four men would get a small glass of beer each or 8.22 ounces.
The tenth man (the richest) would get 7 glasses of beer or 83.76 ounces.

The ten men went to the bar every day and the tenth man seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Inflationary pressures are rising," he said, "I'm going to reduce the amount of your daily beer by 20 ounces. You will now receive 10 glasses of 10-ounces each, or 100 ounces total."
The group still wanted to split up the beer the way that wealth is distributed in the U.S.A. How could they divide the loss of 20 ounces of beer so that everyone would lose his 'fair share?' They realized that 20 ounces divided by ten is 2 ounces.
But if they subtracted that from everybody's share, then the first five men would have to pay the bartender 1.328 ounces of beer each. So, they decided to only take 0.672 ounces of beer from each of the first 5 men and take the remaining 16.64 ounces from the remaining 5 men.

Each of the first five men would give up the sip of beer (0.672 ounces) that they received (a loss of 100%).
Each of the sixth, seventh, eighth, and ninth men would give up 1.17 ounces each (a loss of 14.2%).
The tenth man would give up 11.95 ounces of beer (or a loss of 14.2%).

The result:

Each of the first five men would receive no beer.
Each of the next four men would receive 7.05 ounces.
The tenth man would receive 71.81 ounces of beer.

Each of the first five was worse off than before, having lost all of their beer. The next 4 were worse off, since they no longer received a full 8-ounce glass of beer. The tenth man still received 71.81 ounces (~ a six-pack), and was still happy.
But once outside the restaurant, the men began to compare their losses.
The first five men said, "We lost a sip of beer each. We don't get beer any more."
"Well, we lost more than a quarter of our beer" said the next four men "It's unfair that you only lost a sip of beer. We lost twice as much as each of you did."
"Wait a minute!" yelled the tenth man. "I gave up a whole glass of beer! I gave up more than all of you combined!!! The poor get all the breaks! First, they get free beer, and then they complain when they lose their free beer! The middle class are always whining about everything because they're too dumb to get as much beer as I do."
The tenth man called security, and the first 5 men were told to leave the premises, since they could not afford to pay for any beer.
The next 4 men stood silently watching, not wanting to risk the loss of any of their remaining beer.
The tenth man got into his chaufferred limo and went home.
The next night the first five men didn't show up for drinks, so the remaining five sat down to have beers without them. But, they discovered something important.

The first five men didn't show up to:

* harvest the grain and hopps to make the beer
* drive the trucks to bring the beer to the bar
* clean the beer glasses and sweep the floor of the bar
* serve the beer
* and, most importantly, work as the security guards to protect the tenth man and his beer

And that, boys and girls, journalists and college professors, wingnuts and supply-siders, big-c and little-c conservatives, is how wealth is distributed in the U.S.A. The people who have the most money get the most beer. Take too much "beer" from the poorest people, belittle them for being poor, and they just may not show up anymore to make and serve your beer.

* statistics from http://www.faireconomy.org/...

Please remember:
There are three kinds of lies: lies, damned lies, and statistics.

However, let's continue this thought experiment:
Let's imagine that the above example happened in 1983. How would the 120 ounces of beer be divided in 1998?

The first four men would have their 0.672 ounces reduced to 0.159 ounces.
The fifth man would have his 0.672 ounces increased to 0.739 ounces.
The sixth man would have his 8.22 ounces increased to 9.04 ounces.
The seventh and eighth man would have his 8.22 ounces increased to 9.92 ounces.
The ninth man would have his 8.22 ounces increased to 10.17 ounces.
The tenth man would have his 83.76 ounces increased to 103.17 ounces.

Or, let's divide the 120 ounces of beer according to the share of total ownership of stocks, mutual funds, and retirement accounts (basically, as a share of the stock market):

The first 9 men would each receive 2.84 ounces.
The tenth man would receive 94.44 ounces.

The most frightening aspect of these statistics is that they are almost 10 years old.

"Some men worship rank, some worship heroes, some worship power, some worship God, and over these ideals they dispute and cannot unite - but they all worship money."
Mark Twain

[zeos3]

8. Thanks for this one, good info eom

[billyoc]

5. "I hate to sound like some of those people on conservative radio..."

I'm not feeling the hate.

[alittlelark]

11. He'd hate to but cannot help it.

It is 'almost' sad.


Actually it's a pizza pie in the oven.

[Mojambo]

6. I'm so sick of hearing how rich people create jobs.

They don't. Demand for products and services creates jobs.

We've got to kill this ridiculous supply side myth.

[zeos3]

9. Exactly

The rich people have been taking the jobs they create overseas to avoid paying decent wages more than to (or maybe along with) avoid paying higher taxes.

[last1standing]

10. Hmmm.... I can think of a few things....

I work at least 6 days a week, more than 12 hours everyday (it is not uncommon for me to pull an all-nighter multiple times in a month or even week) and I incurred over $150,000 in loans to make a decent living (not to mention that $100K my parents needed to pay out of their own pocket).

This is a guy who has the ability to take out $150,000 in loans and has parents financially stable enough to pay out another 100k. More than 95% of the populace does not have parents who can set their kids up with a 1st class education and all the extras. He should be both proud and humbled that he had a leg up that almost no one else gets.

If I now need to share even more than what I currently do, what is the motivation for me to work this hard or to incur the debt that I did?

Does this guy honestly think that if he pays 30% on his $250K instead of 27% that it would no longer be beneficial to make more money? I have to think that a guy who had the benefit of a $100k education must know that isn't the way percentages work. He will still make more when he earns more, just a tiny percentage less. To argue over this is just pure greed.

Everyone looks at the end salary, but no one is looking to give me credit for the cost (both financially and the opportunity cost of me being out of the work force for 7 years). I could have stopped with a college degree and work a whole lot less and then I can cry that it is unfair that those who do more, have more.

Once again, percentages come into play here. I'm having a very hard time believing this guy at this point.

In all seriousness, I had a friend from college who after his pay raise made LESS money after taxes than before. He went to his boss and got his salary reduced to the pre-raise level. So the government actually LOST money because of their unfair tax policy.

Gotta love that anecdotal evidence (ex. I knew this guy who knew this girl who found a dead hooker under the bed in her hotel room). Yes, if this guy's "friend" was at the very, very edge under a percentage change and then got a very small raise that pushed him to the very, very edge over, then he would have made less money. This is rare but every greedy SOB seems to know that poor sod.

I hate to sound like some of those people on conservative radio, but where did our work ethic go? My parents work every single day other than Christmas and Thanksgiving. They are in the store at 7AM and leave at 10PM. EVERY DAY. And guess what? Because of their work ethic, they have a nice home, savings and have no financial worries. Now, is it fair that their taxes should go up because someone else makes a lifestyle choice to only work one 9 to 5 job? Before this sense of entitlement hit everyone, people worked multiple jobs to have what they had. They did not stand in line waiting for the government to redistribute wealth.

I particularly love this argument. It's the one extreme or the other deal. "My parents worked every moment so if yours didn't you don't deserve anything so stop trying to redistribute their wealth". Of course your friend doesn't mention that these hard workers only got their wealth because of the ability of others to shop in their store or that he is only able to cling to every last nickel he gets his paws on because those very low-lifes he talks about taking his money are the ones that pay his bills. Without them he, and his parents, would have nothing.

Guess what? If my taxes go up, I start to re-analyze my job. Is my post-tax salary worth the work? Maybe, maybe not. It is going to depend on the final number. If I move to a lower tax bracket where my after-tax salary will be close, it is a NO BRAINER. And If I make a little less (either because I have to pay more in taxes or because I take a lower paying job deciding its not worth it), I'll just spend a little less. So, that corner store that waited for me and my kind to pay the bills will be screwed.

This guy doesn't seem to understand percentages or the basic laws of supply and demand. If he works less (and makes less) in a fit of pique, there will be someone else willing ot come along and supply the service due to demand. Then the other guy will go buy that shirt or whatever else your friend couldn't afford because of his temper tantrum.

The problem with tax policy, especially liberal tax policy, is it assumes all other things are equal, without taking into account human emotion. Obama and company think "hey if we raise taxes, we will net more money." NOT TRUE. Like what happened with my friend, they may make less. I may quit and work at a smaller firm with less hours because my end salary may not be worth the stress, time and effort. Companies leave (and leave behind their workers) because they can save by moving to England or Ireland. Businesses that can't leave start to see where they can cut costs (usually the biggest cost for a company is rent and salaries - so guess what happens). You now have what used to be tax-generating workers getting an unemployment check from the government - that is a cash NEGATIVE policy. People who may have sold their stock at one period hold it longer waiting for a bigger gain, because the after-tax reward is not worth the risk they take (or they do not invest at all because they need to make a larger amount than they previously have thought to cover their costs). Look at ANY major company. Deals are often structured for no other reason than to cut back on their costs and taxes."

And we finally come to the crux of the entire argument - ignorance and emotion. Obama doesn't plan to raise net taxes, he is looking at a tax neutral plan that merely removes some of the most egregious policies of the bush* years and puts more money into the pockets of those who are most likely to spend any extra they receive, thus reviving the market versus giving even more money to those who are most likely to hoard the cash or send it to overseas investments for larger profits. However, your friend has tied up too much emotion to actually look into the policies he's trashing so he doesn't see this. For him it's strictly a matter of keeping everything he can get his mitts on and let everyone else be Damned.

In the end, you're not going to change his mind and he's going to continue valuing money over people.

[alittlelark]

12. Very nice point by point rebuttal.

I love DU.

[zeos3]

20. Thanks for the reply

I'm going to reply to the email regardless of whether or not I change this persons mind. There were a few others copied on the emails so maybe a response will enlighten them.

You were right on point with with your remark about someone stepping in to fill the position that this person deems detrimental because of a couple % difference in tax rates. If the right wing truly believed in free markets and the laws of supply and demand, they would see this instead of constantly creating a doom scenario of every business packing up and leaving the country. (The "It's my ball and I'm going home" defense) Do they really believe that void would not be filled with someone who doesn't find the taxes so unpalatable?

[riderinthestorm]

13. Look, I'm a small business owner (a farmer - an incorporated one but still a small biz)

Some of the stuff your friend wrote rings true but some doesn't. Here's my take.

Para #1: I also work 7 days/week, at least 16 hours/day. I do what I do because I love it. I love employing people, producing my stuff and selling it. I also realize I am part of a great chain and taxes are a part of that. My taxes fund a whole slew of other "stuff" for people, services and situations in other areas that are necessary to enable our great democratic experiment to continue functioning. I don't begrudge those taxes in the same way I don't begrudge putting bags of food into the food pantry. It's what we do to ensure we have a functioning society. If you're working so much you're resentful, as a small biz owner, then you need to re-evaluate what's happening and YOUR part in that. I give your friend credit for starting his biz and doing his thing but what the fuck is this nonsense about being "recognized" for it. Grow the fuck up! Do your thang cuz you enjoy it. Obviously your friend is successful enough - what a whiner.

Para #2: I want a name, number and email address to contact this person. This is bullshit. Call him/her on it.

Para #3: Your "friend" is saying he is a jobs creator, so I assume he is a small biz owner by his description of himself and his place on the food chain. If he is a small biz owner, I don't know any that aren't working 7 days/week, 12 - 16 hours/day. I know that there are a (rarified) few who do less but most do at least this much. What the fuck is he talking about that there's no work ethic??!! Most Americans DO work 2 jobs. Even if they work 2 jobs, and the SO in the relationship also works 2 jobs - it's a struggle to afford a house, a retirement plan or vacations. I don't know who this person is associating with, but everyone I know is busting their ASS to afford basic necessities and these are salt of the earth folks who aren't into "luxuries". I resent the implication that Americans are somehow slackers. I RESENT that. And call him/her out on that point. This person is obviously only associating with rich assholes who believe in that kind of entitlement. The rest of us working schlubs don't think like this.

Para #4: Okay so screw new bridges, road construction, schools, fire department upgrades, medicare for your grandparents or parents, or (insert your pet project here). You don't like taxes - then don't participate in ANY of the perks you pay for - loser. If taxes are all you care about then you are an anti-democratic loser who doesn't want to participate in this society cuz that's the bottom line. Is there waste? Is there inefficiency? Yes but I would rather there were safety nets in place and responsible people looking after it, then seeing the safety nets like hot-lunches-for-poor-children cut. And I ask again, why the fuck are you working as a small biz owner if you aren't loving your work? Go work for Mega Corp then and stop dicking around with bullshit like this.

Para#5: If your job is causing stress, anxiety and tax headaches - then you SHOULD quit and go elsewhere. If you are THAT opposed to participating in enhancing America's infrastructure, schools etc. then you were never much of a patriot in the first place. Paying your fair share towards helping our fair land prosper and grow is a civic duty in my mind. I don't regret that - never will and I have nothing but pity for those who find that problematic. As for businesses moving overseas - Obama is going to institute penalties for offshoring US businesses to avoid taxes. Put that in your pipe and smoke it. Furthermore if a company is cutting their workforce, it is rarely because of tax policy - it's to take advantage of cheaper overseas labor primarily, with tax considerations as a distant second.

Bottom line is your friend is full of despicable bullshit. I'm sorry you are getting subjected to such unpatriotic tripe. They deserve to be scrutinized like "Joe the plumber" and I'm sure the underpinnings of their arguments would quickly melt like candlewax exposed to a flame. These are no friends of America and I hope you're aware that this kind of Rethug is the most selfish and amoral assholes inhabiting our country right now. I'm not an accountant - just a small Midwestern biz owner and even I can sort through the bullshit.

[Lydia Leftcoast]

19. Also, if that person really IS a small business owner, then he

can lower his taxes by hiring more people or upgrading his equipment.

In 2007, I paid taxes on only about 50% of my earnings, due to legitimate business expenses.

The Republicanites' greatest advantage here is that your average uninformed person imagines that individuals and businesses are taxed in exactly the same way, when businesses get all sorts of tax breaks that are unavailable to individuals and are taxed only on what is left over after they have met their costs of doing business.

[zeos3]

22. She's a corporate lawyer not a business owner

Sorry, I guess I should have made this point in the OP

[zeos3]

21. Let me give a bit more background

First, I agree wholeheartedly with everything you wrote. The reason I was so surprised to receive this email is because it came from my friend's wife. When I was first introduced her, she had written my friend a long email about why it would be the worst thing in the world if W was elected for a second term.

She isn't a business owner, she's some type of corporate lawyer that works for some big firm. Her husband is a doctor.

I think you're absolutely right about working hard and doing what you love. She seems to be very stressed about the long hours that, in a sense, she's imposing on herself.

As to the issue of entitlement that you mentioned about Para #3, I can't for the life of me figure out why she considers it a "sense of entitlement" to work only ONE 9 to 5 job. I guess some people aren't comfortable outside of serfdom or indentured servitude.

[snot]

14. I think the most IMPT. rebuttal is . . .

I don't think there's any Dem plan out there that would raise taxes on folks like this guy -- is there? I think he's been sold a misconception.

This guy is small fry. The ones that deserve higher taxes are making astronomically more.

[zeos3]

24. I think she and her husband might

make more than $250,000 household? I don't know for sure but that would be my guess since the original point was about the rich guy drinking the beer.

[dansolo]

15. How the hell would someone make less money after a pay raise?

This response seems to suggest that once you get into the higher tax bracket, then the higher tax rate applies to all your income. I think that the reason that the tax argument works so well is because so many people have this fundamental misunderstanding of how the taxation works. This response is complete bullshit.

[Eric J in MN]

16. Exactly.

If a higher tax-rate starts at $75,000, then only the amount a person makes above $75,000 is taxed at the higher rate.

People have more money after getting a raise, not less.

[tkmorris]

23. You are exactly right, and saved me the trouble of saying it myself

Anyone who gets a pay raise pays EXACTLY the same in taxes up to their former income, and beyond it to the next cutoff point. Past that point their rate may be higher but they are still making more money. That anecdote about the "guy who gave back his raise" is flat out bullshit.

[zeos3]

25. I was going to ask the board about this

Thanks for clarifying for me. That was one of the things I was unsure of.

[krispos42]

17. It's pretty basic, really

Unless you make more than a quarter-million dollars a year, you're middle-class or less. You don't use very much of the "commons", things like the educated workforce, the courts, the police, the fire department, the end result of the Rural Electrification Act, the roads and bridges, the stable currency, the federally-insured bank accounts, the federally-processed banking system, the security of the Defense Department, etc. So you shouldn't be taxed very much.


But if you do make more then that, then your own business or the business you're a part of is really using massive amounts of the "commons". Wal-Mart owns over two thousand massive stores. Wal-Mart big-rigs move across this country by the thousand, using public roads and polluting the public air. They burn fuel from countries protected by the American military at an annual cost of several hundred billion dollars a year.

They use massive amounts of the public justice systems on federal, state, county, and municipal levels. God knows how many hundreds of millions of dollars a day (or an hour) are processed through federally-regulated banking and financial systems. Their inventory and company communications are done through the federally-developed Internet. And they employ hundreds of thousands of people that were publicly-educated and depend on publicly-maintained roads to get to work, not to mention the millions of more people that use the same roads to get to a Wal-Mart and buy their stuff!

And much of their stuff is brought in from overseas, on giant container ships that burn... fuel from a part of the word that the US taxpayer spends several hundred billion dollars a year protecting via the military.

:shrug:

And ask your friend how both parents working from 7am to 10pm every day is "good family values?" How can the parents be there for their kids after school to help them achieve academically? To keep them stimulated intellectually and emotionally? To provide a proper example of what a proper American parent and citizen should be doing? To keep them from illegal drugs and questionable characters?

Remember, every kid that gets in legal trouble costs taxpayers $40,000 a year to incarcerate. If people "chose" to work merely 9am-5pm five days a week and raise two excellent, trouble-free kids, they're contributing more to society than if they worked 7am-10pm and raised a pair of habitual criminals.

Why?

Because the extra money they pay in taxes will NOT equal (in all probability) the $80,000 a year the Government will spend on keeping their offspring locked up for robbery, theft, rape, assault, drug-trafficking, money-laundering, or murder. Plus, of course, the investigation, trial, appeals, etc., all of which as we discussed before are part of the "commons".

Remember, by "choosing" to work a mere 40 hours a week, that person is raising a pair of tax-paying kids, while the parents "choosing" to work 80 hours a week is raising a pair of tax-consuming kids.




As to the "I got a raise which lower my net to less than before the raise" story, well, what do you want when you cut taxes on the rich and raise them on the middle class? The progressive tax now hits the middle class and it's slope is fairly steep there in order to lower and flatten it out for the wealthy 2%.

The person in the story, before or after the raise, most likely should have been paying very little in taxes regardless. The "hey, we need to cut taxes" idea first and foremost cuts taxes on the wealthy, who now have millions of dollars extra that they would not have had before.

What do the wealthy do with that extra net income? Well, first off they reward generously the people that gave them the tax cuts, i.e., the Republican party, so they can keep on doing what they're doing. Then they contribute generously to things like pundits and think-tanks and foundations to come up with books and reports about how giving the rich even more tax cuts, deregulation, globalization, and other pro-wealth ideas is good for everybody.

What they don't do is a) pay more for labor than "market value", b) pay more for raw materials than "market value", or c) produce more product when current production is meeting "market demand". Why should they? If you're already working for $40,000 a year, are you really going to quit because the owner got a massive tax cut and didn't give you a spectacular raise "just because?" The owner is, in fact, hoping that you quit so he can hire somebody else new at $30,000 a year to do the same job and save himself 10 grand a year... which would be added to his new, higher, less-taxed net income.




But after all that is said and done, here's the kicker:


WE'VE BEEN DOING EXACTLY WHAT THE WEALTHY AND CORPORATIONS HAVE BEEN SAYING THEY NEED TO BE HEALTHY AND PROFITABLE FOR ALMOST 30 YEARS NOW.

And how that working out for everybody else?

By lowering taxes, tariffs, and trade barriers, the companies still moved overseas. Skilled working-class and lower-middle-class trade jobs decline every month. Average salaries and wages are down. Unemployment is high. Union membership is low. Average time-at-employment is down. Personal savings are down, personal credit card debt is up, personal home equity is down.

The system with it's 71% top tax bracket and protective tariffs worked quite well in this country before Reaganomics and globalization. The difference it that the population that it worked quite well for was not the Corporate Executives and their trans-national corporations but the bottom 98%.

What is forgotten is that many high-powered types are driven to succeed, which is only partly driven by their paycheck size. The people cited in the email who say "Oh, it's not worth it" and leave to take a less-stressful job or decline promotions and such are not the people that rise to the top of the business world, regardless of the tax rate. The ones that lust for power and personal achievement would do so almost regardless of the size of their paycheck. It's mostly about ego and pride, less about benjamins.

Engineers will, if given half a chance, design things as well as they can simply because their personal and professional senses of achievement and accomplishment demands that they do so. I see this (and do this, sometimes) at my manufacturing job. "I'm going to make an adjustment to the machine settings," my boss will say. "Why? Isn't everything in spec?" I would ask. "Yeah, but I can make it better" would be the usual reply.

Just because.

Toyota makes excellent cars because management lets the engineers have a pretty free hand, which has created reliability and economy improvements that have generated long-term profits for the company, far more than if the managers has bean-counted and nickeled-and-dimed the engineering process to death for the sake of short-term profits for the next fiscal quarter. A Toyota may be an appliance, but it's an efficient, safe, and reliable appliance, which appeals to a huge segment of the population that does not view automobiles and their driving as high art.

[zeos3]

27. Excellent reply

Thanks for the ideas. You've taken my response to this email in a different direction and made it broader in scope which may benefit the others that were copied on it.

Your best point was that we HAVE been helping the rich with their taxes for a long time and it has NOT worked out for us.

[serrano2008]

18. Here is my opinion on why an equal tax rate for everyone doesn't work.

It doesn't work because we don't pay an equal percentage of our income for the rest of our basic needs.

What if the price we paid for gasoline was a certain percentage of our income, let's say .5% - hey, it's only fair, right? Instead we all pay the same price for gasoline, so let's say there's two guys with a similar commute (coming from different subdivisions of course) someone who makes $250,000 (Joe) and someone who makes $25,000 per year (Tom). Over the course of a year, Joe will spend about .05% of his salary on gasoline driving to work while Tom spends 1% of his salary going to work.

Take food, let's assume they both have two kids and have similar tastes (discounting eating out, just basic groceries). So, Joe buys nicer, more expensive food and pays about $15,000 pear year on food. Tom spends $5,000 per year on food. Joe is spending 6% of his income on groceries per year for his family while Tom is spending 20% of his income on groceries. Don't you think Tom wishes he could feed his whole family nicely for 6% of his income? Well, he can't! But, that would be "fair" right?

Here's what Tom and Joe pay the exact same price for (approx):

gasoline
groceries
kilowatts of energy
natural gas
public water/sewer
trash service
soap
toothpaste
etc.

Now add all that stuff up. It will account for about 25% of Joe's monthly take home pay and about 65% of Tom's. So after regular living expenses Tom has about $200 each month to go to the movies, take his kids to the zoo, pay for his kids soccer league - and that's if he doesn't have to get his radiator fixed cause he's still driving that 2002 Honda Civic his brother sold to him for $4,000 a few years ago - (yep even a 4 year old car was almost 20% of his annual salary).

Joe on the other hand has about $10,000 left per month after his basic living needs, so he can put about $4,000 of that in savings for retirement or for college, put some in his "Cruise Fund" for their family's annual winter cruise, send his daughter to flute lessons, ballet, and cheerleading camp for a week, pay for his son's football equipment and fees and but him those two new PS3 games that just came out.

So, what's fair? Is everybody paying an equal percentage of their taxes fair? Then, would it be fair for us to all pay an equal percentage of our income on basic living needs so that we all have an equal percentage of our income as "descretionary" each month? Sounds good to me! I'm sure Tom would love to pay 75 cents/gallon for gas while Joe is paying $3.00/gallon to get to work.

How much of Joe's "descretionary" income is even staying in the local/national economy? Sure, probably most of it...now how much is Tom's - all of it!

A society simply cannot work with everyone paying an equal tax rate, or else you'll get what we have going on right now. Energy prices have gone through the roof the past 7-8 years, taking up an "unfair" portion of middle/lower class incomes, which has caused them to not have as much descretionary income and has even caused them to not be able to pay their mortgages among other things.

Now, your friend isn't going to understand any of this, in fact trying to get any of these wacko's to truly understand what "fair" means in our society is damn near impossible.

I think it's great that your friend works 6 days a week for 80 hours total and brings in a good income and I bet that if you asked him if he likes driving his Lexus around town and going to Europe on vacation and having a home theatre room in his 4,000 sq. ft. house he would probably say "Hell yeah!" He won't have less of that stuff with 15% more in taxes, but now maybe Tom can afford to buy a new computer from his company or whatever and he can thank Tom and the thousands and millions of Tom's out there that add the backbone to our economic society that has given him the life he is enjoying.

[zeos3]

28. I remember reading an article a couple of years ago

about a speeding ticket. It made the news because (I forgot which country it was in) the speeder had to pay up wards of a thousand dollars (once again, forgot the amount, but it was A LOT) because the fines were based on a percentage of income.

This got me thinking about exactly what you wrote. For wealthy people to understand what it's like to buy the necessities, it would be quite a learning experience for the to have to fork over an equal percentage of income for a gallon of milk, etc. Every time I've bring this up in these types of discussions, I'm looked at as if I have two heads. Thanks for letting me know that I'm not the only one who's thought about it this way.

[serrano2008]

31. Thank you for responding.

I like that you're taking an ongoing active role in your post.

Really, the toughest thing about my argument as explained above...is explaining it clearly. They'll come back saying "Well you don't have to drive to work, you should take the city bus..." so if you're going to use this argument, I guess the best ones to use are: City water/sewage, Natural Gas, and Power. We don't have a choice of companies to use for any of those in my city and even though I pay "less" because it is just my wife and I and we only have 1 bathroom - the *amount* we pay per gallon or per kilowatt is the same as others in our city that are millionaires.

Talk about "redistribution of wealth"!!! 1% of our city is millionaires who pay the exact same rate as 90% of us who make less than probably $60,000/year. What effect would it have on the water company if those 1% of millionaires stopped paying for water? None, there are plenty of other people out there who need water and will pay whatever they are charging but I doubt prices would go up. What effect would it have if 90% of us stopped paying for water, though? Prices would go up through the roof so the water company could stay in business. The wealthy NEED the 95% of the rest of the country because we truly keep the economy running, particularly the local economies, just as we need them to start new companies and what not.

See, I'm rarely clear on explaing stuff. Let me try this one...

Also, take into consideration the quality of items the lower class buys as opposed to the upper class in comparison to our income. Take a guy who makes $250,000 and takes 5% of his income to put down on a new car - a nice new Mercedes. Now, take the guy making $25,000 who pays 10% of his income each year for payments on a used Chevy Cavalier. Who's car do you think is going to last longer? Will need more maintenance and repairs? Will pay a higher portion of their in come on oil changes, new tires, timing belt, etc? The world just works to favor the rich. They'll eat better, have nicer things, without all the hassle the little guys live with.

Here's a true life example to me. When I got married a few years back, I had about $12,000 of Credit Card debt and my wife had about $9,000. No big deal, most people in their mid 20's have CC debt. Mine was mostly on one card that I was sitting on 4.99% fixed rate with for a couple of years at that time. No missed/late payments, always pay more than the minimum. One day I get a letter from them stating that my new APR was 29.99% because I had violated the terms of the agreement. I called them to find out which term...it seems that after my wife and I got married and our credit card balances started showing up together on our credit statements, my "revolving balances" was now too high on all my cards, so they have the right to change my rate. Now, LUCKILY I had good credit, so I applied for another card with 0% balance transfer and only had to pay $150 transfer fee. Think of all the other people out there that this is happening to though who don't have the "luxury" that I have in a good credit score to get a new card. Is this fair? Sure, my "revolving balances" almost doubled but so did my household income.

Does your friend with the high salary ever has this happen to him? If it did, would it have a bigger effect on him than someone making $25,000 per year? Your friend could probably pay off his balance in 3-4 months if he needed to in a pinch. On the other hand, 90% of the people in the US would be in a major bind. Our entire economic system is not fair to the majority of the citizens but we deal with it cause we realize there's more important things in life than money.

[endthewar]

26. Here's a good point about taxes

Point out that the top income tax bracket used to be 90% in the mid 20th century and that the USA has one of the lowest tax rates on the wealthy out of all industrialized nations. Also, these taxes help to decrease our national deficit and thus decrease inflation.

Also, it should be pointed out that Obama wants to raise the top income bracket by about 3%. 3%!!! People need to stop acting like he's going to a 90% income tax rate.

[zeos3]

29. Right

I knew about the 3%. If I'm not mistaken, he's simply letting the taxes revert back to what they were before W's tax cuts. Am I wrong?

[endthewar]

30. Yep, back to the Clinton rates.

Also, people are viewing the taxes issue from an incorrect perspective. The question should never be who wants to raise or lower taxes. This just describes the candidate's tax philosophy relative to the current president. The question should be where does that candidate think that tax rates should be, period. Obama believes in a more progressive tax structure than President Bush, so yes, Obama is more progressive than Bush. However, Bush has the most regressive tax structure in generations.