Senate Taxation: All I Ever Wanted (now discussing: relative tax burdens)

We're pretty out of whack at the moment. Let's assume for the moment we do all of the following:

1. Progressively increase taxation on higher incomes.
2. Tax capital gains at income rates.
3. Lower corporate tax rates to induce innovation and repatriate offshore money
4. Give everyone universal healthcare

We'd still have pretty massive wealth inequality. It'd probably take (no math done) at least a few decades to fund everything to their logical points, as well as other social financial instruments -- not to mention actually getting around to reparations (which would significantly help not only wealth inequality but racial wealth inequality). You could probably sunset the Wealth Taxes after, say, twenty years and see if people roll it over if still needed.

 

But most wealth as you know if hoarded up in assets which aren't liquid enough to provide income streams - mostly theyre appreciating in value in a portfolio of other assets, yeah?

So their value is abstract. When Pink Floyd drummer Nick Mason bought a Ferrari 250 GTO, one of 33 made, for 35k (pounds) he didn't know it would be worth roughly US$30mil today. But he's driving it and racing it in historic meets, and so that value has no tangible benefit except at sale time.

If you reformed capital gains tax, youd solve the issue of wealth by taxing it when the value goes from theoretical to practical. i.e. as soon as someone can take tangible, realisable benefit you tax it as income.

 

State officials? What did you expect them to say? C'mon. You can do better. Those idiots are as bad as Cuomo for acting like people leave NY because of the weather. Gimme a break. Its not fashionable to blame the BS taxes but its a fact. Sure, the hardcore tax lovers always deflect but its silly.

As for Cali? Go ahead and defend it but its a business quagmire and thats why so many big ones are leaving. Its out there, google it. HP, Tesla, Oracle...do I need to go on?

My math on taxes? Well, income tax in NYS is almost 7%. Then, The federal take adds to that. I wont be sharing my household income so sorry, no numbers there but its another tangible chunk. Then we have the debilitating property taxes here. The average $200K homeowner pays easily $7K++ in property taxes. Sucks. Brutal. So add that in too. Then, you've got sales taxes. 8.0% here on average. Almost every purchase gets this "added" to it. Then we get hit with a utilities tax, a cell phone tax and a whole bunch of mickey-mouse "fees" and taxes. Thats why people are leaving. Simple. The state attacks our wallets relentlessly and for nothing.

So, as you can see. its VERY easy to conclude that your yearly tax burden can easily be half or close to half of your income once you factor in everything.

 

Of course, but on the other hand you also have all declared assets (as you note, we've invented FATCA -- we're pretty terrible about making people try and fess up!)... We roughly know net worths and calculations on a near real-time basis -- it's easy enough to propose a tax on the calculated net worth as of 31-Dec of a given year.

And that's why I say that, with the Cap Gains reform, would probably allow this to be sunset in a couple of decades. I think you and I are roughly aligned, just I don't think you might not grasp just how bad it's gotten here.

 

Oh I can imagine - I just don't see how you tax wealth without forcing selldowns and does the government then get involved in parcel selection? "We've approved FIFO and Min Gain only, no LIFO"

 

Well, it's what your source says. You're the one that picked it, and it was the closest to any statistical statements in there. You should get better sources if your answer to what your own sources say is "you can do better".

Saying "it's a fact" isn't an incantation that makes whatever came before it true.

So your math on taxes is useless because you're not able to actually provide any actual math. Start with an amount, and, with actual detail, explain how you get "over 50%". For example, how is a household that is earning $50K paying more than $25K in taxes? For that matter, how do you get that a household earning $200K is paying over $100,000 in taxes?

A quick calculator here, for example, and using 00501 as the zip code for New York because it's what it defaulted to, estimates that there would be $30,000 in federal income taxes, $11,000 in FICA, and $11,000 in state income taxes. That's $52,000. Add the $7,000 in property taxes and we're at $59,000, leaving $141,000 left over. If they spent *all* of that, then the sales tax would take another $11,000. That's $130,000 they keep, or a tax burden of 35%, which is notably less than 50%, which is what you claimed your math got you.

At $50,000, a household pays $9,000 in income taxes, or just under 20%. You have not explained where their other $16,000 in taxes is coming from. Sales taxes alone would only account for $3,000, and that would be about 25% of income going to taxes. 25% is also commonly known for being less than 50%.

(Edit to add: I noticed after the fact the bottom of that page includes a total estimated tax burden, where they estimate 32% for the $200,000 household and 31% for the $50,000 household)

I don't see how you did your math to get >50% for the amount paid in taxes. I've tried adding the stuff you've specified, and it comes up far short of what you claimed it did when you did the math. So again, provide the math that matches your conclusions. I asked for that math before, but apparently you didn't understand that "include your math" meant to include your math.

 

Comparison of states with and without state income tax:

A key point:

"States without personal income taxes tend to levy higher taxes on low-income people"

"“the more significant finding is that the no-tax states have struggled to add jobs at a rate sufficient to keep pace with their growing populations. Employment growth trailed population growth by roughly 41 percent in the no-tax states, compared to 19 percent in the states with the highest top tax rates.”

 

@dp4m, @Ender Sai,

So, it seems from your discussion that Yellen has a point that it would be a pretty complicated task to calculate wealth tax.

Determining a millionaire's wealth tax, it seems, would sort of like be going through everything involved in calculating an estate tax after someone's death, right? And I know that can be a time-consuming and comprehensive process (and probably a windfall for accountants and appraisers).

But after assessing an individual's wealth tax for that 1st year, wouldn't it become much easier in the subsequent years since most of their assets would remain the same from year to year?

 

It's probably not really that complicated -- because unless you're storing cash under your mattress then it's in a FI somewhere who has to report on it. Yes, individual tax preparers would also be making money -- but if you're paying a Wealth Tax you're gonna be having an accountant. I have one and I'm not anywhere close to that.

 

No, this isn't an apt description for what's happening in California, though housing is a big problem for those in the middle class and below.

There are 2 big factors at play. One is actually sort of hidden away and not well-explained in the article that you cited. As Lowbacca points out: "According to your article: "while it’s fashionable to blame California’s taxes and policies for its recent exodus, state officials say the more likely culprit is the pandemic and the migration patterns of the state’s large community of international immigrants."

The article should've gone into much greater detail on this topic. Much the same as London and NYC have become "international cities", what's happening in much of California is that very wealthy immigrants are moving to California. Many of them are highly educated and highly specialized, and these immigrants are getting jobs in the tech industry or other upper level management positions in large corporations. They're also coming just because Cali is the place to be.

This influx of very wealthy foreigners have pushed up property values, making living expenses harder to handle for families making under $100,000 year. Those are the people leaving the state or re-locating to less expensive areas in the state. Though it sucks for those native Californians, the fact that CA is attracting these wealthy foreigners is a sign of the strength of California's economy, not its weakness. Wealthy people choose to live in areas with thriving economies, not stagnating ones. In short, yes, poorer Californians are leaving, but wealthier people from other countries and other states are becoming Californians. That's good for the economy (if really harsh for those less well off, though these ex-Californians already turned Arizona blue, and Texas is coming next!).


On to your 2nd point about California, California can afford to have some companies leave. It's the home of Hollywood and Silicon Valley, and because of that it has more billionaires than any other state. Silicon valley is so dominant in high tech that its level of innovation, which far exceeds anywhere else in the world, constantly draws top people to CA and that leads to the creation of new tech companies there. CA doesn't have to worry about some older companies like HP leaving (and Tesla hasn't left) when the environment around Silicon Valley is constantly creating new innovative tech companies and when California still has the US headquarters of Facebook, Apple, Intel, Netflix, Visa etc. That's 5 of the world's 10 largest corporations by market capitalization in 1 state, so that in itself probably indicates CA is in pretty good shape.

 

You don't have trusts in the US?

Imagine you've got a family trust, several investment trusts, and you're trying to calculate shares of ownership per a trust deed or similar - it'd be an auditor's nightmare (except for the billing).

 

The math? Taxes in NY and many other states are too damned high. It’s not greater than 50% but can get closer to 50% with one large purchase. Oh and you left out the ticky tack utility bill, cell phone and whatever others are in there. Your math is just guesstimating too. They are too high so people are leaving. So, why you don’t figure out how to spend less tax money instead of looking for ways to take more from people who’ve earned it. Let’s change over to that idea. Of course, I expect that here we won’t get any replies since it’s just tax, tax, tax those mean evil producers.

 

Utility bills are not taxes, though...

 

Well, I guess. So you’re replacing native Californians with rich migrants. Okey dokee. If they can afford to lose big companies then I guess thats great too if that’s what they want. I suppose me can try and spin it to be good but I’m not so sure about any of this. Hey, eventually the entire state can be rich techies and homeless people. That’s cool. Doesn’t effect me at all.

 

It’s much closer to 40% and can easily get close to 50% going up one bracket. As I said, if you buy a new car or dare to be semi-successful then your property tax bill can swell to well over $10K. Easily. So my math isn’t that far off since I said close to 50%. That’s how it is. Oh....and I forgot stupid fuel taxes that crush the poor worst of all. That’s also a nice chunk of money each year that gets thrown into the NYS Govt abyss. Wow. Guess getting closer to 50% isn’t that hard after all? .

No but when the state slaps a tax onto the utility usage and companies that gets passed down. Here is a link: http://www.ppinys.org/reports/GRTreport/hidtax20.htm

 

Hmm, rich foreigners invading huh? You don't have to worry - Ender isn't moving to the US.

 

We do, but I can't imagine it's any significant portion of the population for complicated ones. I'd wager the bulk of the trusts in the US are Revocable Trusts for people to store assets to disburse on death who aren't dead yet.

I'd think more complicated are folks who set-up LLCs or trusts to shield home ownership from public record. But even still, probably not that complicated.

 

Yes, they do, and they hurt the poor especially bad because just like a consumption tax they are effectively a regressive tax. The poor (at least those who can afford vehicles) and middle class spend more of their incomes on necessities like fuel, utilities, food, internet, and little or nothing goes to investments, so fuel taxes and consumption taxes hit the poor and middle class especially hard.

The wealthy spend less of a percentage of their incomes on these things and direct more towards investments, which are currently taxed a lower rate, so fuel and consumption taxes lessen the tax burden of the wealthy.

One tax idea that you did propose earlier is a good idea. You favored a luxury tax. The wealthy spend more on luxury goods, so this tax hits them hardest and the poor the least.

Uh, California's rising housing prices are being affected by an influx of wealthy immigrants and wealthy Americans. It seems like you think wealthy Americans should have the freedom to do whatever they like, so why the bias against wealthy immigrants?

Also, California and the other states don't establish immigration policy. The federal government does, and over the last 4 years those policies were enacted by a completely (1st 2 years) or half Republican congress and a Republican president, the party that you support.

btw, those wealthy Californians and lucrative industries provide a tax base that allows CA's redistributive tax system to afford to pay many benefits only available there and in a handful other states -- paid maternity and paternity leave, better Medicaid coverage than most other states, paid sick leave, etc.

What's also strange about your take here is that posters here have continually pointed out how the US is becoming more and more divided between the wealthy and the poor, they've provided evidence for this, and they've offered countless solutions, and yet you continue to ignore that this is a real problem, and you seem to reflexively reject any proposed solution for reducing inequality no matter how much evidence that those policies actually work -- increasing minimum wage, progressive taxation, increasing taxes on the wealthy, etc. At the same time, you suggest the wealth inequity of CA is a doomsday scenario, as you say here: "Hey, eventually the entire state can be rich techies and homeless people." 1st, this is untrue and won't happen. 2nd, according to you, economic inequality isn't a problem. 3rd, even if it is a problem, you reject all well-founded ways to reduce these inequities.

I think this is why people keep saying you don't argue in good faith. For probably a week, you've been arguing that the growing US wealth gap isn't an issue, and that there's no feasible way to fix those inequities, but when your position on CA is refuted, you propose a false doomsday scenario of homeless and rich techies to "win" the argument. This gives the impression that you're more interested in winning than opening yourself up to new and opposing ideas that would reduce economic inequality and to opposing ideas in general.

Just consider why you liked Ender Sai's post about a wealth tax.

He posted: "The wealth tax makes no sense in practice and you'd do better to have less deductions on CGT crystalisation events, possibly even with a higher CGT rate for single asset value over a defined threshold. Wealth is not zero sum, and it would be good if leftists took the time to understand this. The Scandinavian countries have the lowest income GINI scores in the world but really high levels of wealth inequality - having wealth is fine. Having wealth and not taking care of your citizens with their tax receipts is not."

I'm pretty sure that you don't know what CGT crystalization events are, or what "a higher CGT rate for single asset value over a defined threshold" means, or what GINI scores measure. I'm pretty sure you "liked" the post because you thought Ender was on your side of the issue.

Do you know why I liked the post even though I'm a progressive and Ender is a conservative? Because I want to learn more about wealth tax before I make a decision about whether I should support it or not, and Ender is an economist and dp4m works on Wall Street. They have expertise on this topic that I lack.

You seem to have mostly strong unwavering opinions, even though you've admitted that you don't fully understand certain topics or that you don't know the basic facts. You need to switch this order. You shouldn't have strong opinions without the facts. You should gain a strong understanding of the facts so that you can develop well-informed opinions. If you don't, what you're saying really amounts to "I think this" and "I think that" without any reasoning behind it or no connection to reality.

So, here's my suggestion. Stop searching for topics that others will agree with you on. Instead, ask a lot of smart questions to learn the facts and to understand where others are coming from. In the end, this might change your views or it might strengthen your knowledge about why you're right about some things or you might even realize that there's more than 1 way to solve a problem.

One other suggestion. Every forum has a social component. One thing about these political forum is that posters often forcefully challenge each other's positions. That doesn't only apply to conservatives. Moderates, Democrats, social democrats, socialists are often going at it. Nobody's targeting you. They just expect you to be able to back up your positions or to respectfully back off if you can't. Putting people on ignore who aren't abusive is not respectful way of dealing with other posters with whom you disagree. That's essentially: "Oh, you don't agree with me. Okay, I'm never talking to you again." Can't you see why some posters here think you're not interested in real discussions and open to new ideas when they're getting that message?

Then, I should point out that you've also put on ignore a doctor who's been working overtime in a hospital with covid patients and who in his free time has gone out of his way here in these forums to answer countless questions about covid in the pandemic thread. Can't see how that's not exactly going to endear you to a new community of people?

Just some suggestions to help you get along better in these forums and to help develop your understanding of the issues.

 

The math. You said it'd be 50% or greater in taxes for someone making $50,000. Provide *any* math that backs you up.

And you said my math is guesstimating too, but saying 'too' would imply someone else has done guesstimating, and no one has yet it seems. Certainly not you, because you've refused to provide any math on this. Do you simply not know how to *do* math? Or is it that you can't get the numbers you wish there was?

You made very specific claims. Back them up.

It's simply false to say "my math" because you haven't done any math. You're also a liar if you're going to claim you said close to 50% and not "Your effective rate is like easily 50% or MORE".

 

There's also a bit of a dodge here - utility and cell phone taxes are a standard even for the 'low tax' [sic] states. Florida's average for wireless service is about 15%, with New York at about 19%... and California at 13.5%; the top are Illinois and Arkansas.

Also, for both sales tax and utility taxes, there's a 'local' component, which I thought was supposed to be a good thing, or something, as it went to your local area, whether the resident county or town.

But there's also only a focus on the collecting of taxes, as if they are simply a penalty for living with no tangible benefits in return. A decade ago, I would be listening to people that didn't want to pay taxes yell at having to wait three hours to talk to someone on the phone about their unemployment benefits, and complain about how paltry they were. It's just a huge disconnect. (When the emergency unemployment ended during the Great Recession, I often heard the phrase "Was it Obama?" from people that were astonished to learn that, no, it was the Republican Congress that took away their benefits).

 

Sigh. I think you might be sincere here(hope so) but its hard to believe that. Its still somewhat condescending and full of half truths and fuzzy facts. I ignore people that attack me personally or I find no value in reading posts from. But, I'll take it all under advisement. Thanks.

 

It strikes me here that people are ignoring or at least conflating marginal and effective tax rates.

My marginal tax rate is $54,097 plus 45c for each $1 over $180,000
The effective tax rate for this bracket is 30.05 – 44.8%.

Because most tax brackets don't charge X percent across all income, it's never as clear as the marginal rate being a constant and true. Hence a tax rate at 45c on the dollar is not a 45% tax.

Look at $200k incomes for US federal tax it would be $33,271.50 plus 32% of the amount over $163,300. 32% of the $36,700 gap to $200k is $11,744. So the income tax rate for an individual on $200k with no assumed deductions would be 33271.50 + 11744 = $58,227.50 right?

 

I think this just went to $51,667 plus 45 cents for each $1 over $180,000 - woo hoo!