NationStates Jolt Archive

So, I have a debate about taxation on Thursday at 12:15. The debate is about the general idea of it, which kind is better, etc, etc. It's poorly defined. Anyways, my stance is in favor of a highly progressive income tax, with the proceeds funding government programs such as universal health care, public transit, welfare, etc. Though I don't know whether the destination of tax revenue is part of the debate. Again, poorly defined. Anyways, anyone willing to supply me with arguments in my favor? I'm in the US, so remember I'll be addressing people who aren't used to that kind of a system. Try not to turn this into too vicious of a debate, as I'm not particularily interested in arguments from the other side (though criticisms are, of course, welcome, so that I can provide defense against them). I figured the NS community would be a good place to go for help, with so many of you active in political-type things, and living in countries that use a highly progressive income tax system. So, again, your assistance would be appreciated. Thanks.

-Mentho

bump. Please help me.

As for progressive tax rates.... any time where a person's tax rate could exceed their income something is seriously wrong.

Someone else pointed out that in Sweden (I believe) there was a writer who became hugely wealthy in one year, and because of the progressive tax rate, she ended up having to pay 102% in taxes. Somethings rotten in Denmark.

Again, poorly defined. Anyways, anyone willing to supply me with arguments in my favor? I'm in the US, so remember I'll be addressing people who aren't used to that kind of a system.
-Mentho

Well, the biggest argument going against progressive taxes coming from republicans is what Reagan and Bush Sr. called "Trickle Down" economics and what Bill Maher called "they're pissing on you."

The idea is that if rich people have more money they'll be able to invest it in job creation. The problem is that the rich already spend all the money they want to and if they have more, they won't spend any more. As Robert Reich puts it "that's pretty much the definition of rich."

A regressive tax system ultimatly stifles the economy because supply side economics doesn't work (that's where the government tries to stimulate the economy by making sure that producers and retailers have enough money to produce and buy stuff to sell).
If the rich businessmen are taxed more heavily than poor consumers, even to the point that they can't fund their businesses out of pocket, the economy will still benifit because succesful businessmen will simply borrow the money that they need for investment. The fact that they're working to pay off debts means that they'll work all the harder to make their business thrive rather than if they're working to make a fat bank account even fatter, in which case they'll close up shop as soon as it's too much work. Take a look at the businesses that Bush ran before he entered politics. Every one of them lost money, and because he had all the money he'd ever need already, he just sold off his failure to people who knew the meaning of "hard work." (no mister President, it has nothing to do with loving widows, that's called being human, or in your case, creepy as hell) :D .

If the rich are taxed lightly, so that they can invest in business without taking out loans, you end up with two obstacles to the economy.
(1)Businessmen won't want to take on risky business ventures when they already have plenty of money.
(2)The poor and middle classes won't have much money to spend, so businesses that survive by selling them stuff will collapse.

Thanks for the feedback. I'd love to see more of it, especially if anyone knows of studies done by credible sources on the subject. But thanks.

Well, the biggest argument going against progressive taxes coming from republicans is what Reagan and Bush Sr. called "Trickle Down" economics and what Bill Maher called "they're pissing on you."

The idea is that if rich people have more money they'll be able to invest it in job creation. The problem is that the rich already spend all the money they want to and if they have more, they won't spend any more. As Robert Reich puts it "that's pretty much the definition of rich."

A regressive tax system ultimatly stifles the economy because supply side economics doesn't work (that's where the government tries to stimulate the economy by making sure that producers and retailers have enough money to produce and buy stuff to sell).
If the rich businessmen are taxed more heavily than poor consumers, even to the point that they can't fund their businesses out of pocket, the economy will still benifit because succesful businessmen will simply borrow the money that they need for investment. The fact that they're working to pay off debts means that they'll work all the harder to make their business thrive rather than if they're working to make a fat bank account even fatter, in which case they'll close up shop as soon as it's too much work. Take a look at the businesses that Bush ran before he entered politics. Every one of them lost money, and because he had all the money he'd ever need already, he just sold off his failure to people who knew the meaning of "hard work." (no mister President, it has nothing to do with loving widows, that's called being human, or in your case, creepy as hell) :D .

If the rich are taxed lightly, so that they can invest in business without taking out loans, you end up with two obstacles to the economy.
(1)Businessmen won't want to take on risky business ventures when they already have plenty of money.
(2)The poor and middle classes won't have much money to spend, so businesses that survive by selling them stuff will collapse.
Wow, some serious misconceptions there.
"Rich" people, as you call them, don't stop spending if they have more money... on the contrary. Their greed will cause them to invest their excess money to get even more money. That helps the economy.
If you tax someone's business into debt then they would be inclined to cut their losses and move on to some other market where the tax burden isn't quite so high.
You assert that supply side economics doesn't work, yet we've seen that since the tax cuts in the last 3 years has actually cause the economy to climb, and to create jobs.

You also seem to imply that there are only 2 forms of taxes... progressive and regressive. I don't see anyone advocating for the exclusivity of those 2 options.

I personally believe in a flat tax rate.

I can say a good number of things about problems with progressive tax systems and how they are usually regressive despite nominal progressivity. You have to get rid of the problems where someone like Hienz-Kerry pays taxes at a lower rate than an airline pilot (about 12% tax paid on her 9-10 digit income). I think if you really want to make a solid argument you should be sure to structure your "progressive" tax system in a way which negates the silliness of it becoming effectively a regressive system. Perhaps simply arrange to phase out all deducctions and treat all income equally regardlesss of source/type after a certain income level will be enough. Preempt the argument about the well off being able to game the system to lower thier taxes and you should beat out most opponents.

Plenty of people here will talk about progresseive vs regressive vs flat taxes upon the economy and living standards so lets look at another side of it, government spending.

Politicians gain by spending our money lavishly. They are able to appease certain groups of voters and thus make their re election easier. We as taxpayers want to make sure politicians spend our money wisely(things that make our country/citizens better off) and not on things that simply a means for a politician to "buy" votes or aid friends.

A progressive or regressive tax allows politicians to keep spending and shift the burden to only a fraction of the voters. This makes it easy for them to spend how they wish because they can raise taxes and only piss off a few voters.

A flat tax on the other would force politicians to spend more wisely. It will give them a greater incentive to spend wisely because they will less willing to raise taxes and therefore piss off everybody.

Think also of all the waste in the system(separate from pork). If there was a true incentive for politicians to control the costs of govt programs, think of all the money that would be freed up to do the really important work of govt.

You assert that supply side economics doesn't work, yet we've seen that since the tax cuts in the last 3 years has actually cause the economy to climb, and to create jobs.

You also seem to imply that there are only 2 forms of taxes... progressive and regressive. I don't see anyone advocating for the exclusivity of those 2 options.

I personally believe in a flat tax rate.

Um, no. Under Bushes Sr. and Jr. we have had rescession. Bush keeps calling it the Clinton rescession, but under Clinton we had 8 years of prosperity. The rescession didn't start until a few months after Bush took office. You can argue that that wasn't long enough for Bush to enact policies that have an effect on the economy, but any economist will tell you that the market hates uncertainty, especially a change of office. Republicans like to cry 9/11 but Bush Sr. created a rescession with the same policies.

Now while it is true that the rich will always want to be richer, they can only make people buy so much until they don't have any money with which to buy. Especially in a luxury driven consumer economy like the US. It is in the interests of the country to see that the poor are as financially secure as possible, not because of any sort of charity or altruism, but because it gives business a reason to exist. Businesses doesn't exist to create demand they exist to fill it.

The music industry has to re-learn this lesson every 10 years or so. First they find a few talented bands and people like to listen too them. Then they get rich enough to mass produce bland inoffensive bubble-gum crap which sells like hot-cakes for a couple of years, then record sales drop. The record companies blame file sharers, or tape recorders, or unauthorized cover bands, but the real reason is always the same. No one wants to spend money on their crap.

I don't have much to offer you, as it's my position that highly progressive taxes are bad. Progressive taxes, punish achievement, and motivate the rich to take their capital elsewhere. If you can come up with a good rebuttal for that you're doing pretty good. Though, I've not read his work, it's my understanding that Marx spoke favorably of progressive taxes, though apparently because of, rather than in spite of, their economically destructive nature.

I've been listening to a series of lectures on the history of taxes. You can find it here (http://www.mises.org/Media/?action=category&ID=67). There's about 15 hours total, but it's probably part 9 that would interest you most. I haven't gotten that far yet. The speaker seems to share my bias, but the substance of his lectures is historical fact. It might not be a big help for your debate, but I'm sure you'd learn something.

I think if you really want to make a solid argument you should be sure to structure your "progressive" tax system in a way which negates the silliness of it becoming effectively a regressive system. Perhaps simply arrange to phase out all deducctions and treat all income equally regardlesss of source/type after a certain income level will be enough. Preempt the argument about the well off being able to game the system to lower thier taxes and you should beat out most opponents.

I don't think it's possible to come up with a blanket policy that will ensure that taxes will always work out to be fair. There will always be some sort of unpredictable... what's the opposite of a loophole, a knot-hole?... something wierd in the tax code that sooner or later has someone owing more taxes than they made money. It's happening more and more with this Alt. Min. Tax. that was invented to ensure that corportations don't ditch out on their fair share, but now is just making it so that successful middle class people have an unbearable tax burden. I think it makes the most sense to simply set forth a sensible tax philosophy and set up some sort of tax court so that if the tax law makes someone pay a tax that is just stupid they can appeal to a court and say "Your honor... C'mon!" And there would tax penalties for trying to abuse the system. Nothing debilitating, just enough to cover the cost of you taking courts time to save 30 bucks on your taxes.

I also wanted to add that what the tax is spent on should be part of your debate. Where the money goes after it's taken partly determines how destructive (or constructive, if that's possible) the tax is. For instance, it's more destructive to spend $X on building bombs than to spend $X on building highways.

I don't think it's possible to come up with a blanket policy that will ensure that taxes will always work out to be fair. There will always be some sort of unpredictable... what's the opposite of a loophole, a knot-hole?... something wierd in the tax code that sooner or later has someone owing more taxes than they made money. It's happening more and more with this Alt. Min. Tax. that was invented to ensure that corportations don't ditch out on their fair share, but now is just making it so that successful middle class people have an unbearable tax burden. I think it makes the most sense to simply set forth a sensible tax philosophy and set up some sort of tax court so that if the tax law makes someone pay a tax that is just stupid they can appeal to a court and say "Your honor... C'mon!" And there would tax penalties for trying to abuse the system. Nothing debilitating, just enough to cover the cost of you taking courts time to save 30 bucks on your taxes.I agree, I often argue that one should never underestimate the ingenuity of the human species in finding ways to pervert any system to individual benefit. For the purpose of an argument in a debate however, the nature is such that a well cafted plan will see usually one through before the innate human deviousness at subverting the system can uncover the cracks to force a way through. I was thinking in terms of an argument for the purpose of a debate, not for real world adoption of a tax policy.::shudder::

I don't have much to offer you, as it's my position that highly progressive taxes are bad. Progressive taxes, punish achievement, and motivate the rich to take their capital elsewhere. If you can come up with a good rebuttal for that you're doing pretty good.
Where are they going to get it? There are only two ways to get money. Earn it or steal it. I used to work at the IRS so I know that there are some criminals who pay taxes on their criminal proceeds, but that isn't really a viable option for businessmen.

The business of business is just like showbusiness.
Rule #1 Give the people what they want.
Rule #2 Always leave them wanting more.
Rule #3 Never let 'em see you sweat.

Rule one and two come into play by finding out what there is a demand for and filling it but in such a way that people will have to fill it again soon (furniture that breaks, clothes that go out of fashion, computers that go obsolete). No matter how bad the economy is there is always going to be someone who will find a way to fill demand.

Taxing a percentage of business income is NOT a deterent to earning more because however much they earn they still keep more money, just a smaller percentage. How much money would you rather have 10% of a million dollars or 85% of 30 thousand dollars? The idea that a progressive income tax will make millionares throw up there hands in commercial despair and say "I only get to keep ten times the average workers salary when I initially bring in 5 times that? I may as well get a job stacking Cherrios at that Wallmart I own!" is just absurd.

And if you're wondering about ordinary businessmen applying rule #3, they use it to argue against progressive taxes with a straigh face :D
BTW those rules also apply to dating (but not sex, that uses the rules for real estate).

I favour a flat tax rate. It eventually works out to the rich pay more because they earn more and the poor pay less because they earn less. Maybe there could be exemptions for the extremely poor (e.g. students), but with everyone paying 50% there's no one not giving their fair share.

I don't have much to offer you, as it's my position that highly progressive taxes are bad. Progressive taxes, punish achievement, and motivate the rich to take their capital elsewhere. If you can come up with a good rebuttal for that you're doing pretty good. Though, I've not read his work, it's my understanding that Marx spoke favorably of progressive taxes, though apparently because of, rather than in spite of, their economically destructive nature. For the last, well Smith also favored progressive taxation for it's destructive nature. The point of the system of progressive taxation of wealth is to insure that capital is used efficently. If wealth is allowed to remain in the same hands for extended periods it tends to stagnate and wind up not being pushed back into the productive economy and a progressive taxation system would help alleviate this problem. However for the most part the world has gone from taxing wealth to taxing income - but a good argument could be made for reverting to taxing wealth, in fact I wonder if the resolution wording is sufficently vague to allow for such an interperation. If wealth were taxed (instead of income) it would reguire the uber rich to ensure that their wealth used in a productive manner, be harder to shield and generate the greatest income to pay for thier taxes, else they lose the wealth and it is put to productive use.

Where are they going to get it? There are only two ways to get money. Earn it or steal it. I used to work at the IRS...

So you know all about stealing it? :p


Actually, I'm not entirely sure what you were trying to say, and it seems you might've misunderstood me.

I was saying that when people decide taxes are too high, they find ways to avoid them, namely by moving their money/buisness/self outside the country. This is not an unobserved theory, it's a matter of historical fact.

I can say a good number of things about problems with progressive tax systems and how they are usually regressive despite nominal progressivity. You have to get rid of the problems where someone like Hienz-Kerry pays taxes at a lower rate than an airline pilot (about 12% tax paid on her 9-10 digit income). I think if you really want to make a solid argument you should be sure to structure your "progressive" tax system in a way which negates the silliness of it becoming effectively a regressive system. Perhaps simply arrange to phase out all deducctions and treat all income equally regardlesss of source/type after a certain income level will be enough. Preempt the argument about the well off being able to game the system to lower thier taxes and you should beat out most opponents.

A good point in that the system is often operated in an inconsistent fashion.

Also note that all non-income/non-wealth taxes fall more heavily on the poor than the rich in terms of taxation; if the income tax is not the only tax, and the income tax is "flat," then the tax scheme falls overall more heavily on the poor in terms of percentage of income.