Is income tax necessary?

[Dr. Keith]

Do you know the difference in tax treatment for ordinary income and capital gains?

Yes, I actually have significant savings due to that difference and yet I think it is not in the best interest of our country to maintain such a large difference.

How about the difference in earned income and corporate income?

Yes.

Have you found a definition of "rich" that allows you to say that "rich" people are underrepresented in our government?

 

[wrs]

As a percentage Warren Buffet and Mit Romney paid less than me.

Now you are making my argument for me. They obviously have worked out how they can still be rich and yet pay a lower proportion of their income than you do. On the other hand, a person who earns $1m from a profession will be subject to the highest rate of taxation because they are "rich".

And you still haven't backed up your claim that the rich get less from the government than the poor. Please let me know how that research is going.

Let me know when you have a precise definition for "rich".

Not at all. As a first problem, a vast majority of people can't pay as much as me.

I didn't say everyone should pay what you do, only that the "rich" should.

As a second problem, the more you have the more important a civil society is to you having it.

No, just as with any good, it has a marginal value past a certain point, cf marginal utility curves.

 

[wrs]

Yes, I actually have significant savings due to that difference and yet I think it is not in the best interest of our country to maintain such a large difference.

So who is richer, the guy who gets $1m of capital gain income taxed at 15% or the guy who gets $1m of rental income taxed at about 39% plus 3.8% investment tax?

The first guy nets $850,000, the second guy only gets about $650,000. They are both rich but treated differently. Seems really hard to figure out how this works. But of course if you just call them both rich because they made more than $500,000 it's all good.

Now add a third guy who is a salesman who made $1m because he sold more than he ever had in his career and probably more than he ever will again. He doesn't get taxed the 3.8% investment tax but he still pays the top rate for a good bit of his income and his tax bill works out to $300,000 so he gets to keep $700,000. Problem for him is that next year he only makes $200,000 and the year after, $50,000. Is he rich?

All three guys made $1m one year, the first two have income sources that will continue but the third guy, not so much.

Who is really rich and also who is best represented in our govt?

 

[Dr. Keith]

Now you are making my argument for me.

I may be, but I'm not sure you have actually presented a coherent argument. Lay it out and we may find some common ground. Here are a couple of items I bet we could agree on:

I think all income should be treated the same. Even though I benefit from that difference I think I would benefit more from a fairer tax system.

I don't think there should be deductions for having kids or borrowing money to own a home. Even though I take advantage of both of these deductions I think I would benefit more from a fairer tax system.

Let me know when you have a precise definition for "rich".

Obviously you have a problem defining high income earners as "rich". I can work with that. Are you still going to say that high income earners are not well represented in our current government?

And again, no response on your position that the poor get more from the government than the high income earner does? It's not fun to remind you of all these loose ends.

How about a thought experiment to move it forward: a poor farmer in the rural south finds out that the government no longer exists while at the bank talking about refinancing his equipment loan and land mortgage. Who do you think is more likely to commit suicide on the way home that day, the banker or the farmer?

 

[Dr. Keith]

So who is richer, the guy who gets $1m of capital gain income taxed at 15% or the guy who gets $1m of rental income taxed at about 39% plus 3.8% investment tax?

The first guy nets $850,000, the second guy only gets about $650,000. They are both rich but treated differently. Seems really hard to figure out how this works. But of course if you just call them both rich because they made more than $500,000 it's all good.

Now add a third guy who is a salesman who made $1m because he sold more than he ever had in his career and probably more than he ever will again. He doesn't get taxed the 3.8% investment tax but he still pays the top rate for a good bit of his income and his tax bill works out to $300,000 so he gets to keep $700,000. Problem for him is that next year he only makes $200,000 and the year after, $50,000. Is he rich?

All three guys made $1m one year, the first two have income sources that will continue but the third guy, not so much.

Who is really rich and also who is best represented in our govt?

On this we agree. Income is income and it should be treated as such.

 

[Dr. Keith]

No, just as with any good, it has a marginal value past a certain point, cf marginal utility curves.

No, just like a security system, the more you have to protect the more important the security system is. Fort Knox being a pretty good example.

Also, most high income or high wealth creating enterprises actually require a civil society to exist in. Selling manual labor at an hourly rate doesn't, really.

 

[wrs]

I may be, but I'm not sure you have actually presented a coherent argument. Lay it out and we may find some common ground. Here are a couple of items I bet we could agree on:

I think all income should be treated the same. Even though I benefit from that difference I think I would benefit more from a fairer tax system.

I don't think there should be deductions for having kids or borrowing money to own a home. Even though I take advantage of both of these deductions I think I would benefit more from a fairer tax system.

I agree with the elimination of the home mortgage deduction but not the kids. Let me say why I think kids should be a deduction and actually much larger than they are presently. Bringing kids into the world is a very costly and difficult business (I raised 5 of them). There are far more expenses involved in raising kids than the tax code presently accounts for. Much of the income of someone who raises kids is consumed by the cost of raising said kids. Without children, society would not be perpetuated. People raising children are providing a service to society.

Obviously you have a problem defining high income earners as "rich". I can work with that. Are you still going to say that high income earners are not well represented in our current government?

Based on the fact that these people pay a very much larger proportion of the taxes than their representation in the population, yes. I once was one and I could never get a decent deduction for that part of my income and for which I worked very hard to obtain.

And again, no response on your position that the poor get more from the government than the high income earner does? It's not fun to remind you of all these loose ends.

If you define high income earners as rich, then the answer is that they don't collect govt benefits and they pay a huge tax burden. The other few rich people that you might lump them in with probably gain the lions share of the benefits that the govt doles out to the rich.

How about a thought experiment to move it forward: a poor farmer in the rural south finds out that the government no longer exists while at the bank talking about refinancing his equipment loan and land mortgage. Who do you think is more likely to commit suicide on the way home that day, the banker or the farmer?

Huh?

 

[wrs]

On this we agree. Income is income and it should be treated as such.

What about my last question in that example?

 

[wrs]

No, just like a security system, the more you have to protect the more important the security system is. Fort Knox being a pretty good example.

No, the security system that protects the contents of a bank vault protects it just as well if there is $50,000 or $5,000,000 in the vault.

Also, most high income or high wealth creating enterprises actually require a civil society to exist in. Selling manual labor at an hourly rate doesn't, really.

So what is better for society then, Walmart or 1 million small stores selling what Walmart does?

 

[Dr. Keith]

I agree with the elimination of the home mortgage deduction but not the kids. Let me say why I think kids should be a deduction and actually much larger than they are presently. Bringing kids into the world is a very costly and difficult business (I raised 5 of them). There are far more expenses involved in raising kids than the tax code presently accounts for. Much of the income of someone who raises kids is consumed by the cost of raising said kids. Without children, society would not be perpetuated. People raising children are providing a service to society.

Is the perpetuation of society important to the current member of society? Some say that less children may provide for a better future. And do we really need to encourage something that is built in biological imperative?

Based on the fact that these people pay a very much larger proportion of the taxes than their representation in the population, yes.

Your claim was that the low earning majority was over running the high earning minority. I'm simply trying to point out that there are almost no low earning individuals in our government so your point is a bit odd. Our representatives are almost all high earners.

If you define high income earners as rich, then the answer is that they don't collect govt benefits and they pay a huge tax burden.

You don't have to get a check from the treasury to benefit from living in a civil society.

Huh?

The farmer is still poor, but he has land and equipment. The banker is newly poor and has a bunch of paper that says he owns land and equipment, but no actual land or equipment. One has had a weird day, the other has had the worst day of his life.

 

[Dr. Keith]

What about my last question in that example?

They are all relatively rich and they are all better represented in our government than the very poor.

 

[Dr. Keith]

No, the security system that protects the contents of a bank vault protects it just as well if there is $50,000 or $5,000,000 in the vault.

But it is more valuable to the guy who has $5,000,000 in it.

So what is better for society then, Walmart or 1 million small stores selling what Walmart does?

Irrelevant. This isn't about what is good, it is about who needs a civil society. The poor likes a civil society, as it makes life easier, the rich need a civil society or they would no longer be rich. In other words, Walmart and all those who have gained wealth through its existence, depend on a civil society. They pay taxes to provide an environment in which they can earn money.

 

[sir drinks-a-lot]

They pay taxes to provide an environment in which they can earn money.

That is not where the majority of tax money goes!

 

[wrs]

Is the perpetuation of society important to the current member of society? Some say that less children may provide for a better future. And do we really need to encourage something that is built in biological imperative?

So then no one should have children?

Your claim was that the low earning majority was over running the high earning minority. I'm simply trying to point out that there are almost no low earning individuals in our government so your point is a bit odd. Our representatives are almost all high earners.

I said in a majority rule society such as we have, that is the case. It's pretty obvious that if the govt needs to make the lions share of money off the rich, then the rich that are in power will modify the tax code to benefit themselves. If you look at the tax code, who pays the greatest percentage of their income? You already admitted that Buffet and Romney pay less percentage than you and certainly than the salesman in my example. So do you think it's much different for the rest of those in the elected part of the govt?

You don't have to get a check from the treasury to benefit from living in a civil society.

This is a good with marginal utility and I will keep pointing that out until you admit it.

The farmer is still poor, but he has land and equipment. The banker is newly poor and has a bunch of paper that says he owns land and equipment, but no actual land or equipment. One has had a weird day, the other has had the worst day of his life.

Private party contracts can still be upheld in the absence of govt and are. We are discussing the Fed govt here and not locals. The deeds and liens are in the county courthouse. Please try to stick to the point.

 

[wrs]

But it is more valuable to the guy who has $5,000,000 in it.

Says who? You? It is just as valuable to the guy with only $50,000.

Irrelevant. This isn't about what is good, it is about who needs a civil society. The poor likes a civil society, as it makes life easier, the rich need a civil society or they would no longer be rich. In other words, Walmart and all those who have gained wealth through its existence, depend on a civil society. They pay taxes to provide an environment in which they can earn money.

This one went over your head apparently. The rich ruined the small business owners by the introduction of massive corporations such as Walmart through favored tax and legal privilege. A whole new group of poor were created when Walmart ran all the small business owners out of business in every small town in this country.

 

[wrs]

But it is more valuable to the guy who has $5,000,000 in it.

The point here is that the cost of the vault is the same. No one pays more for the vault based on the amount they protect. Your premise is baseless.

 

[Dr. Keith]

That is not where the majority of tax money goes!

That is certainly a discussion worth having. Which major expenditures (say greater than 10% of federal budget) do you contend don't help to provide for an environment that allows the rich to make money, aka civil society?

 

[Dr. Keith]

So then no one should have children?

No, the government should not give you a tax break for having children. Having kids or not having kids should not be any business of the federal government.

I said in a majority rule society such as we have, that is the case.

And yet you provide no evidence that the poor have taken over the government even though the majority is poor.

It's pretty obvious that if the govt needs to make the lions share of money off the rich, then the rich that are in power will modify the tax code to benefit themselves. If you look at the tax code, who pays the greatest percentage of their income? You already admitted that Buffet and Romney pay less percentage than you and certainly than the salesman in my example. So do you think it's much different for the rest of those in the elected part of the govt?

So your quibble is between the rich and the clearly rich, or the high earners and the high wealth. Fine, whatever. I even agree, hence my numerous prior points that all income should be taxed the same.

This is a good with marginal utility and I will keep pointing that out until you admit it.

No, it has infinite utility. There is no practical limit on how much wealth one may accumulate in this country. Steve Jobs got far more from living in civil society than I did. Thus he paid more for it.

Private party contracts can still be upheld in the absence of govt and are. We are discussing the Fed govt here and not locals. The deeds and liens are in the county courthouse. Please try to stick to the point.

God luck with that. The state governments exist within the federal system. Without the federal system the states would be in absolute turmoil. I would expect the state of Mississippi to last 4 months at the most as a governmental entity. Hawaii would likely be better off, just revert to kingdom status. Everything else would fall somewhere in-between. I'd love to see the local sherriff trying to evict someone in Texas if the federal government no longer existed. The words bath and blood come to mind.

 

[Dr. Keith]

This one went over your head apparently. The rich ruined the small business owners by the introduction of massive corporations such as Walmart through favored tax and legal privilege. A whole new group of poor were created when Walmart ran all the small business owners out of business in every small town in this country.

That's not over my head, that is off topic.

 

[Dr. Keith]

The point here is that the cost of the vault is the same. No one pays more for the vault based on the amount they protect. Your premise is baseless.

That is utterly false. If I have $50,000.00 and you have $5,000,000 and we both want them to be stored in the vault at the local bank, no on deposit mind you, but stored. You will pay many times more than I will based on storage space first and on insurance second.

We will both have our money in the same vault, but the one with more in it will pay more for it to be there. There is nothing wrong with that.