Taxing the Rich
Aug 25th, 2010 by Carlos
How much money do you need to call yourself rich? Thanks to Obama’s tax proposal, we don’t have to wonder much longer. His plan is to make the Bush tax cuts permanent for everyone except the “rich.”
So if you make $200,000 or you’re a couple that makes more than $250,000, congratulations! You’re in the top 2% of earners in this country and that means you’re rich!
Unfortunately, that means the tax cuts won’t expire for you and you’re tax rate will go up to either 36% or 39.6% (from 33% and 35%).
This has been in the news a lot and apparently there is TONS of debate going on about Obama’s plan. As usual, it has to do with party lines. Democrats say that the national debt is so out of control that this needs to be done. Republican think that the tax cuts should be extended for everyone, even the top 2%. They say that small-business owners will be affected and the economy as a whole might lurch (even more) due to the tax increase.
And I just don’t get it: why is this such a big story when so few of us are impacted?
From the NY Times:
Analyses from the Joint Committee on Taxation and the Tax Policy Center, a nonpartisan research organization, show that less than 3 percent of filers with small-business income pay at the top two income tax rates, and many of those are doctors and lawyers in partnerships.
I’m not naive, I know that these types of studies and committees can be very biased, but even if that number is 10% or 20%, that still means that a small minority of Americans will have to pay more taxes. And not just higher taxes—just what they used to pay before the tax cuts were put into place. So it’s not like taxes are going up for them, they’re going back to where they were.
As you can tell, I don’t make anywhere near $200,000 (though I’m working on it), so it’s easy for me to dismiss this whole issue and act surprised that it’s such a big deal.
What I don’t understand is how this isn’t a much simpler issue. If you had Americans vote on it, I would expect this to be resolved rather quickly. Everyone that makes under $200,000/$250,000 would be like “yeah raise taxes, I don’t care” and that would be the end of it.
Right?
The government needs money to run itself and the national debt is getting out of control. We need more money so why not take it back from the people who have oodles of it in the first place?
Which way would you vote? I’m curious if people out there not making “rich” money would still vote to keep the tax cuts for the rich. If so, I want to hear from you. Why? Is it because you think you might get to that level at some point and don’t want to pay those taxes? Wouldn’t you be so thrilled to get to that tax bracket that you wouldn’t care about paying a little more in taxes? I remember when I moved up from the lowest tax bracket to the next lowest and I was all excited: more money meant more taxes, sure, but it still meant more money.
I really want to hear from people on this because my goal is to understand. If you’re going to spout Democrat/Republican party lines, please don’t bother me. If you want to try to explain it to me like I’m a five-year old, then please do because I’m stumped.
I think they should keep the current rates in place. The top wage earners are the economic driver of a recovering economy. Today I heard a story that the wealthy were cutting back on spending, which has a trickle down effect to all of us because that money isn’t being circulated.
Another reason I support is that people can escape taxation when it becomes burdensome, they leave the country and renounce their citizenship. While the number of people who can do this, just move to another country and live of investments, is small, they pay a large majority of the tax revenues collected. This has become more common as the economy struggles and more taxes are being imposed.
Bottom line is that higher taxes on anyone isn’t going to help the economy.
I was a beneficiary of the Bush tax cuts for the so-called “rich”, but I thought then that this was a dumb move. It pushed our budget from a surplus into a deficit and my spending habits did not change that much when I had to pay a few thousand Dollars less in taxes. I already had plenty of income to live a comfortable lifestyle.
As for people making more than $200,000 being the drivers of the economy, creating jobs, etc., let me ask you how the Bush tax cuts have worked out for the economy?
Raise the taxes, with the caveat that the revenue cannot be spent. It must be applied to the deficit/debt. I think most Americans would agree we need to dig ourselves out of that hole and not leave our children that legacy.
I don’t buy Mike’s argument that the rich drive the economy. As business owners, they reap the benefits, but the middle class drives it. The reason the economy sucks now is in large part due to the fact that so many middle class have no jobs and can’t afford to consume at the same rate. The tax cuts obviously haven’t helped spur the economy since 2001/2003 when they were enacted, so what do we have to lose?
I come from a family operating a small business. As a partnership, business income flows through to the partner’s personal income tax return. The majority of the revenue is reinvested into the business. A higher tax rate generally equals less investment back into the business.
I feel that I can distribute that investment in the form of jobs and purchases from suppliers better than the government can.
Melissa – why would you invest in “jobs and purchases from suppliers” over and above what your current level of revenue requires?
The industry we are in requires constant expansion. It’s a cycle involving borrowing money to acquire an asset, then creating jobs and paying suppliers to make use of that asset. The end product is sold, revenues increase, the loan gets paid off, the cycle repeats. The more money contributed to the government in the form of taxes inhibits the growth that naturally occurs due to the industry we compete in.
There is nearly always demand for the product we sell and when the price isn’t right, the product can be stored until the price rebounds. Proper care of the product prior to and during storage can generally buy as much as three years to wait on the market.
I don’t understand why they want to tax the rich. Maybe politicians want them out of US. In this cyber world one can open business anywhere and some will do if the politicians continue putting responsibility for the stupid financial decisions they made on the shoulders of innocent tax payers (rich or poor). I think this won’t have a positive impact on reducing US debt, but will only make a mess and increase division in the society.
It is better to leave taxes at present levels.
Thanks for your insights.
I’m with NumberA1Patriot. I was also a beneficiary of the Bush tax cuts back when I still worked. I lived a perfectly wonderful lifestyle under the Clinton presidency, and when I got all those tax cuts under Bush, I did not in any way fuel the economy. I spent the same amount as I always did, saved the rest, and retired as soon as I had enough. So much for that whole helping the economy argument.
I really don’t understand what all the whining is about. The “rich” did perfectly well under the Clinton tax rates, we had the longest peace-time expansion in this country’s history. Stop making arguments that don’t have any historical proof. It’s easy to champion that whole trickle down thing, but it really didn’t hurt the economy when the top rate was 39.6%–why does everyone think it will be so catastrophic now? Based on what?
I think there is a general distaste for taxing the rich in America is because of the fluditity of classes in America. Most (You and I) hope to reach that income level one day…so why punish it now?
I would LOVE to make over $200k, but I also wouldn’t care about paying a bit more in taxes if/when I do. Besides, most of us won’t ever “make it” to that level, so why all the fuss?
2% of Americans fall into that category. The other 98% THINK they will fall into that category, shortly. Same reasoning behind the estate tax. Everybody THINKS they’ll have millions to give away they don’t want the government to touch, when in fact a miniscule number actually do.