Romney pays 15% tax rate

[Francesca R]

I agree, but I don't think that's what Francesca is arguing. I don't think she's arguing that the wealthy don't benefit at all from public spending. I think she's arguing against the idea the rich get more benefit.

Yes--the argument that the rich get more benefit has not been made other than via something that amounts to:

(i) They're rich so they must have
(ii) The benefit they get from public services is linearly proportional to their wealth.

It gets on exceedingly shaky ground when folks try to argue (not that anyone has) that the welfare system benefits the rich more. Usually this argument is along the lines of unless the poor and destitute are provided for they will go on the rampage and steal rich people's stuff and kill them or something like that. But again--I have not seen anyone who claims the rich benefit more from the welfare system then agree with the internally consistent consequence that shrinking the welfare system would somehow redress welfare/benefit inequality. So it doesn't stand up.

But rather more importantly--it is not necessary (never mind flawed) to assert that the rich benefit more from the state in order to justify that they should pay more to fund it.

 

[Neally]

A variation of the argument is that someone with more to lose arguably benefits more from police and fire protection. Someone who makes more money from commerce benefits more from public highways and infrastructure. Someone who benefits financially from the relative stability of our economy benefits more from military protection.

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate.

Of course those who are more wealthy are already rewarded in our society -- they get to keep the majority of their wealth. It stands to reason that they have benefited more from the society, so they should put more back into it.

And they do as a result of earning more. That doesn't justify or quantify a progressive tax rate.

The fact that they're more wealthy is evidence that they have benefited more than those who are poorer, so the fact that the wealthy have benefited more is an observable fact.

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate.

Maybe so, but I don't think that's the rationale for progressive taxation.

Agreed.

Remember;

If you are rich and own a business, your business likely benefits directly or indirectly from;

Not all rich people own businesses and businesses pay their own taxes, at least corporations do, apart and in addition to paying salaries which are then again taxed.

Rich people & their properties require more police protection. (Robin Hood stole from the rich, duh! The poor have little to steal.)

Yet poor neighborhoods use more police resources.

Rich people have more property that requires more fire protection.

That fire protection benefits the renters in those units as well.

Rich people have more property that requires more supporting infrastructure. (For example, most po' folks don't own private aircraft and so do not require air traffic control services unless sharing those services with a few hundred other sardines.)

Most rich people don't own private aircraft and airport operations are supported by aviation fuel taxes which everyone pays according to how much they fly so the wealthy already pay their fair share.

Rich people have some pretty expensive problems for the courts to resolve.

Police, court, and jail expenses are overwhelmingly dominated by the poor going through the system.

And I bet I could also come up with a whole lot more.

And I've given you a whole lot more instances in which lower income people use more government services, which incidentally is in addition to the direct government benefits that the poor use.

I don't even think it requires math. We all live in the same society and operate under the same system of government. Some of us profit more than others under the same system of government. Therefore, it seems fair that those people who profitted significantly more should pay significantly more in taxes to the system of government that allowed them to profit.

-Bri

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate.

 

[Francesca R]

A variation of the argument is that someone with more to lose arguably benefits more from police and fire protection. Someone who makes more money from commerce benefits more from public highways and infrastructure. Someone who benefits financially from the relative stability of our economy benefits more from military protection.

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate.

It can do, depending on how much of the additional wealth of the rich is deemed to be "due to the providence of the state" (on which the advocates of this idea are vague).

Some might believe that every penny of riches that the wealthy have represents extra benefit conferred on them by society, and that therefore the state has a claim on people's entire income and stock of assets, from which it can then distribute largesse depending on what it thinks people need. So in that scenario, all taxes are 100% but people's effective tax rate (net of what the state redistributes to them) starts out negative and vaults close to 100% the more pre-tax income rises. (ETA: And if that belief was correct, then taxing at 100% would not blunt anyone's incentive to generate income, because it would all be generated "by accident" in an individual sense anyway, that is, by the state's provision)

In a less extreme treatment than this effective tax rates don't ever go so high but are still progressive.

Comments like "the wealthy have already benefitted by still being wealthy in a relative sense after the state's take" smack a little of this rather extreme view that society is responsible for the creation of the majority of everyone's assets.

I don't agree with the reasoning above, as I have said. A progressive tax regime can be justified without this reasoning also.

 

[Bri]

If you're not saying they consume more, and you're not saying that their benefit (their wealth) is wholly due to the providence of the state, I don't know what you are saying.

I'm saying that they may not consume more in the way of welfare, but that their wealth is largely due to the providence of the state.

I think if you say "the wealthy have a greater ability to fund the state, and part of that is luck/happenstance, and so they should compensate the poor via redistributive transfers", then you'd have the Rawlsian doctrine that I agree with.

I agree with this as well, but it's a different argument than the one I'm making which is also a fairly popular justification for a progressive tax system. The problem with your argument is that it's inherently unfair. It amounts to "the rich should pay more just because they can." I suspect the argument I'm making is closer to what people mean when they say that the rich should pay their fair share of taxes.

But what would happen if you cut every government expenditure uniformly by, say 25%? I think most people would think that this will reduce the welfare (income + other stuff) of the poor more than it would for the rich. If you agree, that indicates that the rich do not benefit more.

If you disagree, then in order to better equalise welfare (income + other stuff), you should advocate such a paring back of the state. I don't think many people interested in egalitarianism advocate that.

I agree, but it has little to do with my argument. The benefits provided by the government are not limited to welfare. In fact, they're not limited to money (although the rich receive far more tax expenditures than the poor).

Property rights, defense, infrastructure, public education, natural resources, intellectual property laws, financial infrastructure, research, and trade laws are just a few examples. Many you can't exactly put a price on, but I think if you tried there would be an argument to be made that per individual, the rich have received more benefit than the poor. There are a lot more poor than wealthy, so the total received by the poor may be more, but per individual the rich receive disproportionally more. The rich also have a lot more to lose should the government disappear or be replaced by a different form of government.

I think you can drop the "from society" out of that. You already said you don't believe that their entire profit is due to the providence of society.

(bolding mine) It's not necessary for the entire profit to be due to the providence of society. A large portion of it is. Otherwise everyone who is hard working would be rich, which obviously isn't the case. Not even most hard-working people are rich. And let's not forget that people are already rewarded for their hard work when they succeed. Becoming rich is the reward. And they owe a large part of it to society.

But I don't see you trying to ex-out some portion of their wealth that isn't due to the providence of society (and which should, by your logic remain completely untouched), so I think that, really, you are indifferent as to where the rich's profit comes from.

I don't understand this part. Of course we allow them to keep a portion of their wealth. I suppose in trying to determine what portion they should keep, you could try to estimate how much of their wealth comes solely from hard work. It's not possible to do so, but if you tried (maybe by counting the number of people who work hard but don't succeed) my guess is the rich would get to keep less of their income than they would with most progressive tax systems that have been proposed.

Suppose that the state did nothing at all except collect taxes and distribute benefits. There would still be people who were rich and people who were poor, but you would have lost the rationale for taxing the rich because you couldn't say that they profited from society at all.

I'm not sure that's true. What sort of benefits is the government distributing in your scenario? Are you saying that the government is basically a forced charity that takes from the rich and gives to the poor (like Robin Hood)? Can you give me a real-world example?

-Bri

 

[Bri]

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate.

That depends on how much of their wealth can be attributed solely to their "hard work." One way of thinking about it is whether the wealthy would be so if there was no system of government or if there was a different system of government.

And I've given you a whole lot more instances in which lower income people use more government services, which incidentally is in addition to the direct government benefits that the poor use.

I'm not sure that's true per person that the poor use more government resources than the rich, particularly if you include non-monetary resources. Even if it is true, my argument doesn't really rely on it -- the argument is that the rich have profited more from the system of government, and without the system of government (or with a different system of government) the rich likely wouldn't be rich.

There is also the argument that wealth brings government influence towards policies that will make you even wealthier so a progressive system is needed to even out this effect, but I'm not sure if it's really related to the argument I'm making or not.

-Bri

 

[Francesca R]

The problem with your argument is that it's inherently unfair. It amounts to "the rich should pay more just because they can."

To whom is that unfair? It's unfair to the rich under the libertarian doctrine that people have the right to keep what they acquire legitimately (and that it is all legitimately acquired after the installation of some basic minimal state). It's unfair to the poor under the Marxian doctrine that the theory of value comes all from labour so that fair compensation should be wholly driven by hours worked or some similar measure (with exceptions for those who are disabled in some way). For other philosophies I think it depends on who (the individual versus the state) has a legitimate claim on what proportion of everyone's pre-tax income.

their wealth is largely due to the providence of the state [ . . . ] It's not necessary for the entire profit to be due to the providence of society. A large portion of it is.

If it was a large proportion, then I would contend that taxing away that large proportion would not reduce pre-tax income overall (would not distort anyone's incentive to generate income).

although the rich receive far more tax expenditures than the poor

This has not been shown, in fact you specifically stated you thought otherwise previously:

The rich don't receive more direct public spending

I didn't say the rich consume more public spending.

(in other words I'm not saying that the wealthy receive more from government spending)

. . .

I'm not sure that's true. What sort of benefits is the government distributing in your scenario?

If the state provided nothing bar redistribution of wealth, it would have no justification for taxing the rich any more than the poor under your rationale, because all of their wealth would be due to individual effort (Hence--as you can deduce, there would be no redistribution of wealth). There would still be rich folk who commanded a larger share of assets and resources and presumably co-opted people to protect it for them. As far as I can tell, that would be fair and just under your philosophy.

Are you saying that the government is basically a forced charity that takes from the rich and gives to the poor (like Robin Hood)?

The welfare transfer system is pretty close to that, yes. That doesn't make it immoral of course.

 

[Bri]

To whom is that unfair?

It's unfair to the rich if the only reason for them to pay a higher rate is because they can afford it. If, as you say, the vast majority of wealth is due to their own hard work, then why should they have to pay a higher tax rate?

If it was a large proportion, then I would contend that taxing away that large proportion would not reduce pre-tax income overall (would not distort anyone's incentive to generate income).

I'm not sure it's possible to determine what proportion it is, but I think it's a fairly large portion. I don't think the poor and middle class are just lazy, which is the implication if you think that hard work is the only factor that makes the rich rich.

This has not been shown, in fact you specifically stated you thought otherwise previously:

Actually, it's a fact. I'll post some references if you want, but the rich indeed get more tax expenditures than the poor. When I agreed that the rich don't receive more "direct public spending" I was referring to welfare, in reference to your argument which seemed to ignore all the other benefits provided by government.

If the state provided nothing bar redistribution of wealth, it would have no justification for taxing the rich any more than the poor under your rationale, because all of their wealth would be due to individual effort (Hence--as you can deduce, there would be no redistribution of wealth).

Whether there would be rich people and poor people would depend on how much wealth is being taken from the rich and given to the poor, and the method by which it is taken.

How did the rich become rich? There must be some systems being set up for allowing them to trade in a fair way, so my guess is that there is some other government going on here that you're not mentioning. I think there's a reason why this scenario only works as a hypothetical and has probably never occurred in real life. In real life, most people have to band together and form governments to become rich.

-Bri

 

[Neally]

That depends on how much of their wealth can be attributed solely to their "hard work."

And since that is impossible to quantify, that argument for progressive taxes is pretty much moot.

One way of thinking about it is whether the wealthy would be so if there was no system of government or if there was a different system of government.

Another way of thinking about it is that under another system the poor might be dead. Which is more important, or of greater benefit, being alive or having more wealth? The argument could be made that the poor have disproportionate more benefits under a system of government that provides the safety and support that keeps them alive.

Actually, it's a fact. I'll post some references if you want, but the rich indeed get more tax expenditures than the poor.

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate. Anyway you also said, "I didn't say the rich consume more public spending. " so please explain the difference in "tax expenditures" and "public spending".

 

[Bri]

And since that is impossible to quantify, that argument for progressive taxes is pretty much moot.

One could argue the opposite just as easily. Since we can't precisely quantify it, the argument for a flat tax is pretty much moot.

But actually, there is very clear evidence that the rich benefit more -- they're rich. And the evidence doesn't seem to indicate that everyone who works hard becomes rich (or even that most people who work hard become rich), so you can't say that they're rich mainly because they work hard.

Another way of thinking about it is that under another system the poor might be dead. Which is more important, or of greater benefit, being alive or having more wealth? The argument could be made that the poor have disproportionate more benefits under a system of government that provides the safety and support that keeps them alive.

I can't buy that argument. The rich could be poor and dead under a different system of government too. My point was that those who are currently rich have the most to lose by not adequately funding the government.

And they all pay more as a result of earning more. That doesn't justify or quantify a progressive tax rate. Anyway you also said, "I didn't say the rich consume more public spending. " so please explain the difference in "tax expenditures" and "public spending".

I already answered this above in my response to Francesca:

When I agreed that the rich don't receive more "direct public spending" [than the poor] I was referring to welfare, in reference to your argument which seemed to ignore all the other benefits provided by government.​

-Bri

 

[JoeTheJuggler]

in this case the employer would pay payroll taxes on the money they pay each employee, so this benefit is paid for. unless you think payroll taxes should be higher (not being an employer my knowledge of them ends at "they exist")

personally, i agree on the grounds that the wealthy should more taxes, but i dont think necessarily means a hire tax rate. for example romneys 15% amounts to over 3 million dollars, which is certainly a lot more than i pay

And this is why I reject the idea of talking about how much people benefit from the existence of government or society. I think taxation should be progressive for the reasons I have said. And that means basically that we all need a certain amount to live on, and the rest is discretionary income. About half the country has virtually no discretionary income, so their tax rate should be 0%. Someone making something like $50K has some but not much discretionary income, so should be taxed but at a relatively low rate.

The idea isn't that we compare the amount of tax paid in, but rather compare the amount of discretionary income you have left after paying taxes. Romney still has plenty more than $3 million in discretionary income left even after he pays his $3 million in taxes.

The supply siders say that if you leave a guy like Romney an extra $3 million, he'll create jobs (or otherwise stimulate the economy). My response is that he might, but he might not. If we let him keep that money, it's his to do with as he pleases. If we tax him at a rate similar to other multi-million dollar incomes (say 30%), then the government gets that extra $3 million and we the people can ensure that it will be spent on job creation or economic stimulus (rather than, say, overseas investment or a million dollar donation to a church).

 

[JoeTheJuggler]

But actually, there is very clear evidence that the rich benefit more -- they're rich.

But why frame the argument as "benefit more" at all? That's not necessary. The argument is based on how much they have. Not some idea that we should pay in in proportion to how much we benefit from the existence of government.

And again, the idea of "benefit more" is a slippery one. I could argue that a poor person unable to work benefits more because 100% of their livelihood is dependent on society, whereas a rich person makes a net contribution to society. Someone born with a grave medical condition will never be productive and will require a great deal more benefit from society than most people.

If you look at connecting taxation to proportioned benefits received, this reasoning could be used to justify regressive taxation!

If all you mean by "benefit more" is "has more income", then why not just approach it that way (as I have done) and leave off discussion of comparing benefits?

If the point is just to defeat the idea that wealthy people didn't simply pull themselves up by their bootstraps (or become wealthy "in a vacuum"), I'm not sure anyone is arguing against that idea. (And that idea, BTW, doesn't seem connected to progressive or any other particular tax policy. If anything, it makes a stronger case for government regulations and eschewing pure laissez faire capitalism.) I think they're being distracted by what looks like the idea of connecting tax policy to some measure of degree of benefit one gets from society.

 

[Bri]

And this is why I reject the idea of talking about how much people benefit from the existence of government or society. I think taxation should be progressive for the reasons I have said. And that means basically that we all need a certain amount to live on, and the rest is discretionary income.

The two justifications aren't mutually exclusive. the justification you prefer doesn't really explain why it's fair for anyone to be compelled to spend their discretionary income just because they have it, particularly if your argument is that they have it only because they worked harder for it.

By the way, you've used the phrase "fair share" in reference to the wealthy paying higher taxes before. What do you mean by that?

-Bri

 

[Neally]

But actually, there is very clear evidence that the rich benefit more -- they're rich. And the evidence doesn't seem to indicate that everyone who works hard becomes rich (or even that most people who work hard become rich), so you can't say that they're rich mainly because they work hard.

You still haven't made the connection that the rich should be progressively taxed more because they are wealthy as a result of a favorable society. They should pay more but not progressively based on the argument that they are better off in society as a direct or indirect result of that society.

I can't buy that argument. The rich could be poor and dead under a different system of government too.

Unless 100% of their wealth is a result of the benefits of society, the wealthy would still be significantly better off than the poor. That being the case, they would more likely be able to survive than the poor, so the poor indeed gain more with a favorable system that provides for their life-giving support.

My point was that those who are currently rich have the most to lose by not adequately funding the government.

So the loss of wealth is worse than the loss of life?

When I agreed that the rich don't receive more "direct public spending" [than the poor] I was referring to welfare, in reference to your argument which seemed to ignore all the other benefits provided by government.

Well we are in agreement that the poor receive disproportionately more direct public spending and I've provided counter arguments showing that the poor receive at least as much if not more indirect benefits as the wealthy, at least to the point of disputing the idea that progressive taxes are necessary to equalize the benefits, so do provide the other data that you spoke of so that we can discuss.

 

[RandFan]

Unless 100% of their wealth is a result of the benefits of society, the wealthy would still be significantly better off than the poor. That being the case, they would more likely be able to survive than the poor, so the poor indeed gain more with a favorable system that provides for their life-giving support.

So the loss of wealth is worse than the loss of life?

FTR: I'm not buying that argument. If I had to choose between living and suffering or not living I may very well chose not living.

So the loss of wealth is worse than the loss of life?

Could be yes.

 

[Bri]

But why frame the argument as "benefit more" at all? That's not necessary. The argument is based on how much they have. Not some idea that we should pay in in proportion to how much we benefit from the existence of government.

I'm not sure they aren't part of the same argument. How much they have is in proportion to how much they benefited from the existence of government. In fact, how much you have is how much you have benefited from government minus how much you would have benefited without government (or with a different government), which might be as much as 100%.

And again, the idea of "benefit more" is a slippery one. I could argue that a poor person unable to work benefits more because 100% of their livelihood is dependent on society, whereas a rich person makes a net contribution to society.

In your scenario, the poor person benefited more as a percentage of what they have, but they certainly haven't benefited more than the rich person. The poor person has less than the rich person, which means that even if 100% of what they have came from government, it's still many times less than what the rich person has (much of which also came from government, up to 100% depending on how you look at it). So the rich person benefited a lot more from the government and therefore it's fair that they should pay a lot more in taxes.

If you look at connecting taxation to proportioned benefits received, this reasoning could be used to justify regressive taxation!

If by "proportioned benefits received" you mean how much of their income comes from government, that's not my argument.

If all you mean by "benefit more" is "has more income", then why not just approach it that way (as I have done) and leave off discussion of comparing benefits?

Because your approach begs the question of why simply having more income should require you to pay a higher percentage of taxes. The answer is that they received more benefit from the government which allowed them to have more income.

If the point is just to defeat the idea that wealthy people didn't simply pull themselves up by their bootstraps (or become wealthy "in a vacuum"), I'm not sure anyone is arguing against that idea.

(bolding mine) Look back through the thread. Inevitably, the refutation of the argument seems to come to that. The refutation seems to be "but government didn't give those people their wealth -- they did that themselves and you're completely ignoring their hard work." Except that they didn't do it themselves (nor do I completely ignore their hard work) -- they did so largely because of the government under which they live and work. I say "largely" because of course hard work is part of it. And they are rewarded for their hard work. But it's also fair that they pay back into the system that allowed them to leverage their hard work into significant income.

-Bri

 

[RandFan]

Except that they didn't do it themselves (nor do I completely ignore their hard work) -- they did so largely because of the government under which they live and work. I say "largely" because of course hard work is part of it. And they are rewarded for their hard work. But it's also fair that they pay back into the system that allowed them to leverage their hard work into significant income.

In accounting it's called "goodwill" and it can be measured. The less goodwill the less wealth the rich would have. That's a demonstrable fact.

IMO: this is one of those issues that depends on perspective and perhaps Joe is right that it's not the best argument politically. But I honestly don't think that one can say that there is no merit to the argument. Goodwill is leverage that will magnify one's wealth. If we could re-run the clock multiple times with Bill Gates, Steve Jobs and Romney relocating to various other nations like Somalia and the Sudan we would likely find that their wealth would be far less if non existent.

 

[Bri]

You still haven't made the connection that the rich should be progressively taxed more because they are wealthy as a result of a favorable society. They should pay more but not progressively based on the argument that they are better off in society as a direct or indirect result of that society.

The argument is simply that they disproportionally benefit from society, so they should disproportionally pay taxes.

Unless 100% of their wealth is a result of the benefits of society, the wealthy would still be significantly better off than the poor. That being the case, they would more likely be able to survive than the poor, so the poor indeed gain more with a favorable system that provides for their life-giving support.

Not really. If it were a different system of government, a person who is currently wealthy might not be wealthy. In fact, might be poor. And therefore might die (according to your argument).

Well we are in agreement that the poor receive disproportionately more direct public spending and I've provided counter arguments showing that the poor receive at least as much if not more indirect benefits as the wealthy, at least to the point of disputing the idea that progressive taxes are necessary to equalize the benefits, so do provide the other data that you spoke of so that we can discuss.

No you haven't. I listed all sorts of benefits that disproportionally help the rich. Someone else mentioned the fact that someone like Bill Gates has benefited himself from all the benefits his employees have benefited from.

The fact that a wealthy person is wealthy is a simple indicator that they have benefited more than a poor person.

-Bri

 

[Bri]

In accounting it's called "goodwill" and it can be measured. The less goodwill the less wealth the rich would have. That's a demonstrable fact.

Exactly. The very fact that a wealthy person has wealth is evidence that s/he benefited from government, even if hard work was also part of the equation.

If it wasn't true, there would be a direct correlation between hard work and wealth (i.e. that nearly everyone who works hard is wealthy).

IMO: this is one of those issues that depends on perspective and perhaps Joe is right that it's not the best argument politically.

Arguments that the rich should pay their "fair share" are likely articulations of very similar arguments.

-Bri

 

[RandFan]

Exactly. The very fact that a wealthy person has wealth is evidence that s/he benefited from government, even if hard work was also part of the equation.

If it wasn't true, there would be a direct correlation between hard work and wealth (i.e. that nearly everyone who works hard is wealthy).



Arguments that the rich should pay "their fair share" are likely very similar arguments.

Over the years I've determined I'd make a lousy campaign consultant. Fair point. It should be noted that human societies are dynamic and arguments that will work for one period don't work for another. I think it would take focus groups and analysis to determine the best arguments.

 

[Bri]

Over the years I've determined I'd make a lousy campaign consultant. Fair point. It should be noted that human societies are dynamic and arguments that will work for one period don't work for another. I think it would take focus groups and analysis to determine the best arguments.

Agreed. There are ways to frame complex arguments so that people can understand them in a sound bite. Some may lend themselves to that better than others.

I should also point out that I don't think my argument is really separate from the argument Joe and Francesca are making, but rather an extension of it that explains why it's "fair" for people who can afford it to pay disproportionally higher taxes.

-Bri