The Flawed Concept of "Wealth Redistribution"

[Foxfyre]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

if the middle class had more money then they would pick up the difference imo.... I don't think taxes would just stop flowing in if the wealthiest among us had less of their wealth, and the middle class workers had a little more of the wealth to be had.

But I agree with you on the concept....the successful, the generous wealthy are needed to give charity, to help out those with the least...they are an important part of keeping society together and the poorest among us fed and clothed...

If everyone were poor and there were no generous wealthy, we'd ALL be crap out of luck!

Yes.

This is the part that I think is being missed in what appears to be political tunnel vision.

Some seem to think that the bottom 40% somehow DESERVE what the top 5% have. At least they seem to think that they deserve to have what those in the top 5% who acquired it through commerce and industry and investment have. (They don't seem to resent the multi millions made by prominent Hollywood, TV, and Sports figures.)

But it is from those top 5% that we get patrons of the arts, foundations, grant and scholarship funds, hospital wings, museum expansions and exhibits, new chemistry labs or new buildings for universities, not to mention great corporations who hire and train tens of thousands of employees and who provide at least part of the underpinning of capital, expansion, and market for thousands of small businesses.

The miracle of America is that every natural born and immigrant citizen has opportunity to aspire to be in that top 5%. And no matter how disadvantaged they might have been starting out, those with the ability and ambition to get there, get there.

The reason that the bottom 40% and the middle 55% should be contributing proportionately as much as the top 5% is not because we need their money. Government is already taking in way more money than it needs to do its constitutional responsibilities. It is because the bottom 40% need to have a stake and investment in the process and they need to experience the consequences of what government ordains for everybody else. Otherwise they have absolutely no incentive to make the process more fair, equitable, or better. They have EVERY incentive to keep themselves free of consequence and responsibility and even to keep themselves less prosperous. That can be a very unhealthy and corrupting thing.

 

[boedicca]

Uh oh...you mean the 4 bottles of Dom Perignon Rose`1998 and the case of Crystal 1996 were supposed to be reported on my tax return?

Only if you sell them. Then yes, technically you are required to report the gain.

Good...I plan on drinking them.

^^^ This is the correct motorcycle.

 

[boedicca]

I don't get why you value labor less than capital.

They are not the same thing. Labor is paid a guaranteed rate that is mutually negotiated. The only risk is if the company goes bankrupt without sufficient assets to cover payroll (a Highly Unlikely Scenario). Labor which does take risks, i.e. sales reps who work on commissions are paid more the more they produce.

Why don't you grok that a person who does work with modern technology that is funded with capital has a much better lifestyle than someone who subsists on a dirt farm with manual tools? The Labor benefits from the Capital.

I already said that I do not support our current tax system, so don't ask me to defend it.

Are you saying that someone who speculates in art and wine should pay a lower rate of tax than someone who draws a salary?

Again, long term capital gains apply to any asset held longer than a year (with the exception of certain real estate transactions). I am not going to place a value judgment on the type of asset held. Such value judgments regarding perfectly legal decisions, and the consequential small minded green eyes politicization which naturally follows, are why we have the horrible mess of a tax code we do.

So you are contradicting Fox then? Fox said that labor is "safe."

Define "safe".

Labor has an arrangement which the employer is legally required to honor. Their is no such guarantee for capital investment. You persist in making apple to oranges comparisons.

Its not about guaranteed losing propositions. It is about being compensated for risk capital. Just like if you earn capital gains, you should be taxed on it, if you lose money, you should receive tax credits. Corporations have this too. That's perfectly logical and reasonable. What isn't reasonable is the $3000 limit on losses. It should be much higher.

If the only compensation for taking a risk is to right off losses, that is a very poor incentive.

 

[boedicca]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

Here's a little fable about that:

Suppose that everyday 10 men go to PJ's for lunch. The bill for all ten comes to $100. If it were paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59. The 10 men ate lunch in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." Now lunch for the 10 would costs only $80. The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings between the remaining six so that everyone gets his fair share?

The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth and the sixth man would end up being paid to eat their meal. The restaurant owner suggested that it would be only fair to reduce each man's bill by roughly the same amount that each paid and he started to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man pointing to the tenth, "and he got $7!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!"

"That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks."

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor."

The nine men surrounded the tenth man and beat him up. The next day he didn't show up for lunch, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important: They were $52 short!

And that, boys and girls and college instructors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Switzerland and the Caribbean.

A Tax Fable

 

[beowolfe]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

Wealth re-distribution does nothing more than LOWER EVERYONE'S standard of living, it does ABSOLUTELY nothing to INCREASE ANYONE'S standard of living. It really should be titled '"SHARED MISERY," redistribution.

So, are you saying that Rosewood , Tulsa , or all of the wealth (labor) that was stolen from slaves, or land taken from Mexico didn't make white Americans and the US richer?

Now, I'm not for redistribution of wealth, but I can't sit by while you pretend that the US and white Americans have never benefitted from taking wealth from others. Practically all of the wealth of the US comes from wealth that was taken by force from others.

 

[beowolfe]

They are not the same thing. Labor is paid a guaranteed rate that is mutually negotiated. The only risk is if the company goes bankrupt without sufficient assets to cover payroll (a Highly Unlikely Scenario). Labor which does take risks, i.e. sales reps who work on commissions are paid more the more they produce.

And why do you think that's 'highly unlikely'? This happens quite often with really small businesses.

 

[boedicca]

And why do you think that's 'highly unlikely'? This happens quite often with really small businesses.

If a small business goes BK, payroll is one of the first things settled with the asset liquidation. Yes, small businesses fail - but very rarely do the employees walk away with no pay.

 

[beowolfe]

And why do you think that's 'highly unlikely'? This happens quite often with really small businesses.

If a small business goes BK, payroll is one of the first things settled with the asset liquidation. Yes, small businesses fail - but very rarely do the employees walk away with no pay.

My experiences during my time as a tax consultant disagree with your statement. Employees may not 'walk away with no pay', but I've seen lots of situations where it took some time for them to get it.

 

[The Rabbi]

And why do you think that's 'highly unlikely'? This happens quite often with really small businesses.

If a small business goes BK, payroll is one of the first things settled with the asset liquidation. Yes, small businesses fail - but very rarely do the employees walk away with no pay.

My experiences during my time as a tax consultant disagree with your statement. Employees may not 'walk away with no pay', but I've seen lots of situations where it took some time for them to get it.

My wife is an assistent to a bankruptcy trustee. It happens quite a bit as the employees are unsecured creditors.
But that is besides the point.

 

[boedicca]

It's not the epidemic he's insinuating. The vast majority of people receive their paychecks on time.

 

[The Rabbi]

It's not the epidemic he's insinuating. The vast majority of people receive their paychecks on time.

No question on that.
But it isn't a privileged position of labor over capital. If I lend money to a business, which is a contractual arrangement, and they dont pay I have to sue them just like if I worked for them and they didnt pay. In fact I am usually better off because i can take a secured position on their assets when I lend but can seldom do that as labor (mechanic's lien being the exception).

But so what?

 

[Nonelitist]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

Here's a little fable about that:

Suppose that everyday 10 men go to PJ's for lunch. The bill for all ten comes to $100. If it were paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59. The 10 men ate lunch in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." Now lunch for the 10 would costs only $80. The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings between the remaining six so that everyone gets his fair share?

The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth and the sixth man would end up being paid to eat their meal. The restaurant owner suggested that it would be only fair to reduce each man's bill by roughly the same amount that each paid and he started to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man pointing to the tenth, "and he got $7!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!"

"That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks."

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor."

The nine men surrounded the tenth man and beat him up. The next day he didn't show up for lunch, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important: They were $52 short!

And that, boys and girls and college instructors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Switzerland and the Caribbean.

A Tax Fable

Wow... a very nice way of pointing out the stupidity of the liberal tax mindset.

 

[Immanuel]

I as well enjoy a comfortable living in a recession proof career. But I don't believe that I should be paying less of a percentage of my income than someone making half as much as me.

Well considering the fact that what you said isn't true I can understand why, if it were true...you'd be upset.

Not quite. A large portion of my income comes from capital gains - in total, this year I paid about 20% income tax. Seeing as how someone who makes half of my income pays around 35%, you're quite wrong.

I have no idea what your income level is but I would sure like to know where you come up with that 35% figure. First of all, the top bracket in 2009 is 35%. Meaning that the wealthiest of all of us, are only paying a marginal rate (as opposed to an effective rate) of 35%. If you are in the upper bracket then your marginal rate would be 35%.

No one pays more than 35%.

If your figures are correct, then the person making half as much as you are would have to be making over $372,950 (meaning your income is $750,000) and have zero exemptions, deductions or tax credits. I find that hard to believe. And at $372,950, he would not be paying 35% effective rate on his income either.

Tax Brackets (Federal Income Tax Rates) 2000 through 2009 and 2010

For all the rest of you, I believe in the concept of wealth redistribution. It is called employment. You see when I work for my employer and he/she pays me a salary we are redistributing wealth. Honest wages for honest labor is the way to go. I have no problem with that. My problem lies with forced redistribution of wealth. In other words, the government trying to play Robin Hood.

Immie

 

[boedicca]

It's not the epidemic he's insinuating. The vast majority of people receive their paychecks on time.

No question on that.
But it isn't a privileged position of labor over capital. If I lend money to a business, which is a contractual arrangement, and they dont pay I have to sue them just like if I worked for them and they didnt pay. In fact I am usually better off because i can take a secured position on their assets when I lend but can seldom do that as labor (mechanic's lien being the exception).

But so what?

The germane question is: what would be the condition of Labor without Capital?

Trying to equate the two is an apple and oranges comparison.

 

[beowolfe]

If a small business goes BK, payroll is one of the first things settled with the asset liquidation. Yes, small businesses fail - but very rarely do the employees walk away with no pay.

My experiences during my time as a tax consultant disagree with your statement. Employees may not 'walk away with no pay', but I've seen lots of situations where it took some time for them to get it.

My wife is an assistent to a bankruptcy trustee. It happens quite a bit as the employees are unsecured creditors.
But that is besides the point.

Since the conversation we were having was about employers not making payroll, how is it besides the point?

 

[beowolfe]

It's not the epidemic he's insinuating. The vast majority of people receive their paychecks on time.

No question on that.
But it isn't a privileged position of labor over capital. If I lend money to a business, which is a contractual arrangement, and they dont pay I have to sue them just like if I worked for them and they didnt pay. In fact I am usually better off because i can take a secured position on their assets when I lend but can seldom do that as labor (mechanic's lien being the exception).

But so what?

The germane question is: what would be the condition of Labor without Capital?

Trying to equate the two is an apple and oranges comparison.

Labor w/o capital would be in a better position than capital w/o labor.

 

[boedicca]

No one pays more than 35%.

That is incorrect. Many states of enormously high income tax rates (i.e. 10%) on the top bracket. Not coincidentally, these states are in the worst economic state. And Medicare is added on top.

I posted this in another thread. The impact of the Obamanomics in CA will result in:

- Federal tax rate 41%
- State tax rate 10.55%
- Medicare 2.9%

These combine to a total marginal tax rate of over 54%. The prognostication for the economy is not good when entrpreneurship is punished with such tax rates.

The reductio ad absurdum of "taxing the rich" is that as the supply of "the rich" dwindles, everybody who has anything will eventually be defined as "the rich".

Trying to engineer an equality of outcome always ends up being equality of misery (except for the elites who seize power and exempt themselves from the rules while they enslave the masses).

 

[beowolfe]

It's not the epidemic he's insinuating. The vast majority of people receive their paychecks on time.

Never said it was an epidemic, just that it's far more frequent that you would have everyone believe.

 

[boedicca]

Labor w/o capital would be in a better position than capital w/o labor.

The irony of someone posting this comment on an internet that was Built With Capital, and a computer that was Built With Capital run with software that was Built With Capital is incredibly amusing...and sad.

You have no appreciation of the blessings in your life that are due to the investment of capital.

 

[Immanuel]

No one pays more than 35%.

That is incorrect. Many states of enormously high income tax rates (i.e. 10%) on the top bracket. Not coincidentally, these states are in the worst economic state. And Medicare is added on top.

I posted this in another thread. The impact of the Obamanomics in CA will result in:

- Federal tax rate 41%
- State tax rate 10.55%
- Medicare 2.9%

These combine to a total marginal tax rate of over 54%. The prognostication for the economy is not good when entrpreneurship is punished with such tax rates.

The reductio ad absurdum of "taxing the rich" is that as the supply of "the rich" dwindles, everybody who has anything will eventually be defined as "the rich".

Trying to engineer an equality of outcome always ends up being equality of misery (except for the elites who seize power and exempt themselves from the rules while they enslave the masses).

Except that the discussion is about Federal Tax Rates not Federal and State and sales tax and FICA tax etc. etc. etc.

Immie