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September 24, 2012

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Why not have capital gains and dividends be treated as ordinary income, the way interest on savings accounts are treated as ordinary income? Why have different categories of income? Put it all on the 1040.

[HS: That was the idea behind the 1986 tax reform. Which was probably a good idea. There isn't a good reason for treating interest and dividends differently.]

wealth tax > income tax

" The very best tax cuts are those that benefit me more than they benefit other people. This increases my relative status, which is much more important than how much total income I get to keep. If, for example, everyone got a 5% tax cut, prices for everything would just go up by approximately that much and I’d receive no relative benefit"

I am pretty sure a rational status-minded person is aware that they do not care about their relative position of people way below him in status, and you reason to compare yourself to them. Assuming that person already makes a satisfactory amount of money to satisfy physical needs, with reasonable discretionary income, that person should care about the tax rates of people with more wealth/social status than him, and most certainly not care whether the EITC is too generous.

Of course, this is just a cynical perspective that assumes people are primarily motivated by their visceral (and ignoble) desire for status in regards to their public policy positions, not by any abstract concepts of justice and public welfare; it assumes and atomistic and individualistic perspective detached from any social or collective concerns . One practical reason to restrict the economic power of the wealthy, from a far-left perspective, is that the wealthy can parlay their economic power into political power, allowing them to consolidate their wealth and dictate policy to their interests.

OT: Half, the 2012 sat scores have been released. http://research.collegeboard.org/programs/sat/data/cb-seniors-2012

Could you do a post on your thoughts and analysis?

Thanks

If fiscally conservative Dems were smarter, they'd just pitch going back to the '86 tax reform. It would raise a ton of money off of the truly wealthy, by nearly doubling their effective tax rate on investments from 15% to 28%; it would radically simplify the tax code, creating efficiency; and what Republican could argue against a policy Reagan signed?

The catch is that while the '86 rates would nearly double taxes on a Mitt Romney or Warren Buffett, it would lower the top income tax rate to 28% which is awful, because it might lead to some upper middle class people paying less in taxes.

Instead, Dems long for the rates under Clinton, who gave the super rich a big tax cut by cutting the cap gains rate from 28% to 20%, but jacked up the top personal income tax rate to 39.6%

You must make a little more than $150,000 a year. You fetishize the middle class (as most Americans do) and therefore want to define yourself as a member of that group. A person making 150K a year is somwhere around the top 3 percent of US wage earners. Someone making 300K a year is in the top 1 percent of wage earners (equally remote for most people), but since you don't make 300K annualy, it's okay to classify that person as a bigshot.

"One practical reason to restrict the economic power of the wealthy, from a far-left perspective, is that the wealthy can parlay their economic power into political power"

This is true, however the actions of the left do the opposite. The complicated tax system that we have favors those best able to minimize their tax under the system. This includes people with leverage (which usually comes from having connections) or people who have a lot of knowledge on how to work the system (which comes from growing up in the system). Thus the leftist approach to taxes usually ends up further entrenching the elite. Which is not surprising when you realize that the elite tend to be leftist... really the entire purpose of leftism seems to be to distract the middle class to keep the elite in power.

The way to break the power of the elite is to free the middle class from employment. Every adult citizen should receive a stipend of $900/month. This would replace all transfer payments (welfare, social security, etc...). All taxes would be replaced with a 15% tariff and a 15% sales tax. The work week for non-owners would be limited to 20 hours per week. Employee benefits (health insurance, etc...) would be outlawed, along with salaried employment.

These changes would give the middle class agency to negotiate for higher pay, while at the same time proles would still have to work (they need money for cigarettes and handbags) Additionally this policy is mildly eugenic, at least compared to the current situation.

Hey DaveinHackensack,

Upper middle class people vote Democratic too. A tax cut for them is better than a tax cut for the Koch Brothers or Mitt Romney. In addition, it would lead to less rent seeking behavior.

@Black rose

"One practical reason to restrict the economic power of the wealthy, from a far-left perspective, is that the wealthy can parlay their economic power into political power, allowing them to consolidate their wealth and dictate policy to their interests."

Power is power is power. You can "restrict the economic power of the wealthy" only by making them unwealthy, but someone else will still have power no matter what. Whoever that is will use power to dictate policy to their interests, period. Read Moldbug. The trick is to a. identify who the powerful actually are and b. make their interests align with good quality of life for the rest of us.


@Lou
"You must make a little more than $150,000 a year. You fetishize the middle class (as most Americans do) and therefore want to define yourself as a member of that group. A person making 150K a year is somwhere around the top 3 percent of US wage earners. Someone making 300K a year is in the top 1 percent of wage earners (equally remote for most people), but since you don't make 300K annualy, it's okay to classify that person as a bigshot."

The truth is, people making 150k-300k, many of whom are overworked wage slaves in major metro areas, are about the only real "middle class" this country has anymore. That income level allows one to live with some form of dignity as long as they continue to work, but doesn't allow one to fuck off and do whatever they please, or they will be right back in the gutter with NAMs and other trash. "Middle class" doesn't mean "like most other people" it means THE MIDDLE between being poor and undignified and being wealthy and a long-term. multi-generational owner. Most people in America are POOR as evidenced by the fact that they had to go into debt to their eyeballs just to maintain a moderate standard of living comparable to that of their parents.

"The truth is, people making 150k-300k, many of whom are overworked wage slaves in major metro areas, are about the only real "middle class" this country has anymore."

So that means about only 2-3 percent of the American population is middle class? Sounds like we should be labeling them something else if we care at all about using words to describe things accurately.

"Middle class" doesn't mean "like most other people" it means THE MIDDLE between being poor and undignified and being wealthy and a long-term.

In the 1950s and 1960s, middle class meant both of these things. Circumstances have changed, but that doesn't mean we should redefine this term, just like we shouldn't redefine "elite".

"So that means about only 2-3 percent of the American population is middle class?"

Yes. Maybe a little higher than that, my income range is focused on the big metro areas and in other places slightly less income is required (but at the same time, there are fewer good paying opportunities in those places).


"...In the 1950s and 1960s, middle class meant both of these things."

This is your flaw. Remember "all squares are rectangles, but not all rectangles are squares". Because in the 1950s-60s, most of the rectangles happened to be squares, you've made the leap that being a rectangle means being a square.

During the 50s/60s it was much easier and cheaper to be in the middle class, and so most people were able to be in the middle middle class. But from that, it does not follow that being middle class means being like most people. It was an anomaly (a wonderful anomaly that we should be seeking to replicate, but an anomaly nonetheless) that so many people were able to be middle class during that time.

"Circumstances have changed, but that doesn't mean we should redefine this term"

Indeed circumstances have changed. Now it is a lot harder and more expensive to be live a dignified life. I am not redefining the term middle class, I am saying we should use the term the way it really means, not what it came to mean as a result of the anomaly of the 50s/60s. This won't happen on a widespread scale because it requires accepting the uncomfortable truths that a. it is much more expensive to be in the middle class now than it used to be, and accordingly b. a whole lot fewer people are middle class now.

"just like we shouldn't redefine "elite"."
Good eye, I was also the anon who commented that we need to use a different term a couple posts back. However it is the same story. I am not advocating re-defining elite, I am suggesting that we use the word as it is really meant. People who are on top because they repeat the correct dogma are not an elite, they are simply a ruling class. We shouldn't make them sound better than they are.

"A person making 150K a year is somwhere around the top 3 percent of US wage earners."

Earning 150K a year in wages doesn't include your itemized deductions and such, so a 150K salary is not the same as a 150K AGI.

Anyways, Kiplinger has provided this calculator based on your 1040 AGI (from 2009 tax return) which will show you where you stand.

An AGI of 150K is hardly the aristocracy - it's only the top 10%:

http://www.kiplinger.com/tools/income_rank/

"Someone making 300K a year is in the top 1 percent of wage earners (equally remote for most people), but since you don't make 300K annualy, it's okay to classify that person as a bigshot."

An AGI of 300,000 is ONLY in the top 5%.

R,

"Upper middle class people vote Democratic too. A tax cut for them is better than a tax cut for the Koch Brothers or Mitt Romney."

"Better" why?

"In addition, it would lead to less rent seeking behavior."

How?

"This is a GREAT idea because it benefits people like me." -- HS

I appreciate your honesty. haha. It's too bad we can't raise taxes sky-high on just the Democrats since they're the ones who say they want them. As much as I oppose "soaking the rich" I might be willing to take the hit if it punishes them, too. I figure if you effem hard enough that even SWPL's will say Ayn Rand's name.


R,

"Upper middle class people vote Democratic too. A tax cut for them is better than a tax cut for the Koch Brothers or Mitt Romney."

"Better" why?

It is better because they will spend the money and it circulates through the economy. Besides they may be the top sixth or tenth but hardly independent of wage income. That demand will create jobs and businesses or rather people to cater to that demand. That is not so for the Koch Brothers or Mitt Romney. Money to the super rich is either banked, creates financial bubbles, or lets them buy elections. It does not create jobs or businesses.

"In addition, it would lead to less rent seeking behavior."

How?

By having income taxed the same way, there is no tax difference between dividends, interest, capital gains, and wages. Not as much incentive to try to claim wage income as dividend income. Rent seekers are looking for dividends, and capital gains, not to create jobs. Taxing all income as the same reduces incentives to game the system for rents, ipso facto.

This is one of Romney's best ideas IMO and one he should have been putting more attention on.

Instead of focusing on measures like this which will have an immediate affect on the economy and have immediate benefits for many people in the middle-class, the campaign has been sidetracked to talk about entitlement reform (which is controversial and won't benefit us for years to come.) This is one of the reasons why his campaign hasn't taken the lead yet.

"This is a GREAT idea because it benefits people like me.

Based on this somewhat old chart, I am pretty sure I have more capital gains than the average person making between 100K and 200K. The very best tax cuts are those that benefit me more than they benefit other people."

So if you move into the top .05% income bracket, you will suddenly oppose taxes on the rich?

"You must make a little more than $150,000 a year. You fetishize the middle class (as most Americans do) and therefore want to define yourself as a member of that group."

$150,000 is a bit too much money to be considered middle class.

I think Sigma needs higher taxes. How is the government going to keep our starving racial minorities fed without confiscating a little something extra from Siggie's bank account.

"Upper middle class people vote Democratic too."

The upper middle class (as distinct from the upper class) votes Republican.

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