Taxing Extreme Wealth to Fight Extreme Poverty

[Phi for All]

President Eisenhower had a 91% top tax rate on extreme earnings, which basically took care of two big problems: the worst of the poverty related to circumstances of birth, and the fact that the crazy extreme wealth tends not to circulate through the economy). Do you think we should work towards reinstating such a tax in the US?

[StringJunky]

President Eisenhower had a 91% top tax rate on extreme earnings, which basically took care of two big problems: the worst of the poverty related to circumstances of birth, and the fact that the crazy extreme wealth tends not to circulate through the economy). Do you think we should work towards reinstating such a tax in the US?

The problem is that they'll re-domicile to a more tax-friendly country.

[Raider5678]

Random slightly off topic question, if the taxes stayed like that and had never been changed, would Space-X ever managed to get off the ground? Or Elon Musk at all?

[Sensei]

President Eisenhower had a 91% top tax rate on extreme earnings, which basically took care of two big problems: the worst of the poverty related to circumstances of birth, and the fact that the crazy extreme wealth tends not to circulate through the economy).

 

The more interesting would be actual statistical data, how much money from how many taxpayers these extreme taxes were bringing to the budget in the past..

 

If somebody is smart enough to have such legal earnings, is also smart enough to bypass them (either legal way or illegal way)..

How much is 91% from 0.. ? It's less than 10% from $1 million..

 

Do you think we should work towards reinstating such a tax in the US?

 

Absolutely not. It's encouragement for people to cheat, and do everything to bypass it..

 

Poverty should/could be fight by free of charge high quality education.

Model in which people have to pay for education, is promoting rich people to gain education, and rejecting poor people.

Edited March 15, 2017 by Sensei

[Phi for All]

The problem is that they'll re-domicile to a more tax-friendly country.

 

I can't find where that happened to any great extent during the Eisenhower years, which leads me to believe it would be insignificant with regards to the tax.

 

Random slightly off topic question, if the taxes stayed like that and had never been changed, would Space-X ever managed to get off the ground? Or Elon Musk at all?

 

They actually might have been encouraged to begin earlier. Eisenhower authorised the establishment of NASA, after all.

 

Please remember that there were still wealthy people under this type of structure. Plenty of major businesses started during the Eisenhower years that are still around. There may not have been as many shadow yachts, but there weren't as many starving Americans, and business still went on and more people prospered than ever before. It could be argued that more overall prosperity would be a huge boost for businesses everywhere.

 

Absolutely not. It's encouragement for people to cheat, and do everything to bypass it..

 

Poverty should/could be fight by free of charge high quality education.

Model in which people have to pay for education, is promoting rich people to gain education, and rejecting poor people.

 

But for a while, things are better. It's taken the wealthy more than 50 years to warp our society back to where they get not only the advantage of wealth but also of denying advantage to the poor. It took the avaricious that long to mess it up again, but in the mean time we had the GI Bill that sent so many fantastic military folks to college, and we got the interstate highway system.

 

So at least for a while, before the greed sets back in, we have something closer to a society that actually cares about its citizens.

[MigL]

I haven't looked up Political/Campaign Financing acts and legislation but I would guess that rules were significantly watered down in the 60s and 70s.

It would be extremely hard for any politician, who gets financial contributions from wealthy people/corporations to then bring in such a level of taxation on those supporters. It would most likely be political suicide.

 

The only way higher taxation on the wealthy could be realized is to stop the wealthy from 'buying' the government THEY want.

[iNow]

^ good points, MigL!

 

Some of the posters above look at this too one-dimensionally, IMO. Assume for a moment that taxes on the wealthy do increase. Even if evasion takes place or some businesses never start, on net government revenues will still go up in rather significant ways.

 

This would lower the deficit, potentially help us translate our debt into a surplus, and provide funding for massive infrastructure programs, healthcare, education, and all of those progressive focus areas that have proven to have a huge ROI in both the short and long term.

 

Mathematically and economically, the approach is sound. Even if more people hide their cash on foreign islands and fewer people become entrepreneurs, poverty and massive inequality would plummet.

 

The true question here is whether we actually want those things, how this money should be properly spent and intelligently overseen, not whether or not steps should be taken to improve the balance sheet and to enhance the lives of the 99%.

 

The problem is that ideological wedges and derp derp idiocracy-style arguments (practically written in fat crayon on red/blue construction paper while eating paste) have ruled the airwaves for so long that we can't even begin the conversation in a mature way that could find traction and achieve consensus.

Edited March 15, 2017 by iNow

[Ten oz]

 

I can't find where that happened to any great extent during the Eisenhower years, which leads me to believe it would be insignificant with regards to the tax.

 

I was born and raised in California. Spent most of my life there. Have been heard my whole life about how California is on it way down. How businesses are fleeing the state Because of taxes and regulation. Meanwhile California has continued to have the countries largest economy. More than its largest economy California leads the country is key industries like agriculture, technology, and media.

 

Google, Facebook, Apple, Tesla and etc sure could save money if they moved their campus centers to Montana. They could buy land for nothing, get huge tax breaks, pay all their employees less because the cost of living in so low, and etc. They don't leave however because critical infrastructure and networking is more important.

 

Who built and continues to build the roads that allow Uber, U-Haul, UPS, Domino's Pizza delivery, McDonald's drive thru, Hertz rental, and etc in business? Who builds Airports which support Fed-Ex, Hilton hotels, taxi services, luggage manufacturers (gotten fit the overhead), and etc? Who pays for the water treatment facility that makes development viable for construction companies in the first place?

 

A thriving economy is a team effort and there is no I in team (corny but true). Wealthy people do not get there without help. Would Donald Trump be a wealthy man today without bankruptcies protection? What if the 6 times his companies went bankrupt banks just took his mansions and other businesses as payment? The team protected Trump from those losses. And what is the thanks, Trump feels smart people don't pay taxes (support the team).

 

So how do we get the tax money in a equitable manner; topics questions. I think capital gains tax needs to be changed. The richest 10% amongst us own 90% of all stock. Capital gains tax is significantly lower than income tax. The thought being that it is best to motive people to investigate. However many wealthy people take advantage of this buy accepting stock options rather than salary. We should change to tax. First million in collective capital gains reduced to 10%. That would help people's 401k's, IRA's, Mutual funds, and etc. Everything above a million, regardless of type of account, should be treated as income and taxes at that appropriate rate.

[DrmDoc]

President Eisenhower had a 91% top tax rate on extreme earnings, which basically took care of two big problems: the worst of the poverty related to circumstances of birth, and the fact that the crazy extreme wealth tends not to circulate through the economy). Do you think we should work towards reinstating such a tax in the US?

 

Although I am not a wealthy man, I think there's something inherently unfair about having such a high tax rate on wealthy earners. At 91%, the government is suggesting that it's contribution to your financial success is worth 91%. The government is essentially saying that it is entitled to a majority share of your profits because the stable and secure environment it provides for your business to thrive makes it your controlling partner and, as such, should receive a 91% year-end bonus for the decisions, risks, and costs you shouldered alone. In consideration of the environment our government provides, I would consider no more than 50% to be a fair tax rate. I agree that the super wealthy should be made to pay more--but not to extremes exceeding an equal partnership.

Edited March 15, 2017 by DrmDoc

[Airbrush]

Health care is among the biggest expenses that people have. To make any positive change to the general healthiness of the nation can reduce this huge expense in the economy. It could also lead to a smaller health care industry overall. If people are LESS in need of expensive medical procedures, they save money.

 

TAX JUNK FOODS. Subsidize healthy foods. Place better quality control on produce, so when you buy some fruit or veges, they have a good flavor. Then most people will choose healthier foods.

 

EXCOURAGE EXERCISE. Have more localized fitness centers for people to go and have fun exercising and socializing. Give tax breaks to people who can prove their level of healthiness and fitness by blood tests and other tests.

Edited March 15, 2017 by Airbrush

[Sensei]

EXCOURAGE EXERCISE. Have more localized fitness centers for people to go and have fun exercising and socializing. Give tax breaks to people who can prove their level of healthiness and fitness by blood tests and other tests.

 

Wrong solutions, and too late. Kids don't pay taxes to have tax breaks..

 

Current obesity problem in US/UK starts in early stage of kid life.

Karate, tae-kwon do, kung fu etc. obligatory lessons since primary school, instead of normal PE Phys. Ed.

Initial year of karate exercise 3h (1.5h x 2 days) per week.

 

On karate lesson everybody are training simultaneously.

On normal PE lesson only the best players are playing (team games), while nerds, geeks, obese are just stareing from bench..

They are excluded by good players to not lose.

Edited March 15, 2017 by Sensei

[dimreepr]

I think we should look to create a cultural imperative (along with regulation); imagine if the wealthy measured their worth, not by the amount they accumulate but by the amount they contribute to society.

 

Then the natural urge to keep up with the Jones' would create a society that not only loudly but proudly paid their taxes; the same urge would also mean they'd contribute further, especially when their ego's demand they have some control over their philanthropy.

[Delta1212]

 

Although I am not a wealthy man, I think there's something inherently unfair about having such a high tax rate on wealthy earners. At 91%, the government is suggesting that it's contribution to your financial success is worth 91%. The government is essentially saying that it is entitled to a majority share of your profits because the stable and secure environment it provides for your business to thrive makes it your controlling partner and, as such, should receive a 91% year-end bonus for the decisions, risks, and costs you shouldered alone. In consideration of the environment our government provides, I would consider no more than 50% to be a fair tax rate. I agree that the super wealthy should be made to pay more--but not to extremes exceeding an equal partnership.

Is that a maximum 50% total or marginal tax rate?

[Airbrush]

Is that a maximum 50% total or marginal tax rate?

 

What's the difference? I'd really like to know if you would be kind enough to explain.

 

Ok I did a Wiki of marginal tax rate and got this:

 

"In economics, one theory is that marginal tax rates will impact the incentive of increased income, meaning that higher marginal tax rates cause individuals to have less incentive to earn more. This is the basis of the Laffer curve theory, which theorizes that population-wide taxable income decreases as a function of the marginal tax rate, making net governmental tax revenues decrease beyond a certain taxation point."

 

https://en.wikipedia.org/wiki/Tax_rate#Marginal

 

But I don't understand how to compare this with a "total tax rate". Could you please explain what it means?

Edited March 15, 2017 by Airbrush

[swansont]

 

Although I am not a wealthy man, I think there's something inherently unfair about having such a high tax rate on wealthy earners. At 91%, the government is suggesting that it's contribution to your financial success is worth 91%. The government is essentially saying that it is entitled to a majority share of your profits because the stable and secure environment it provides for your business to thrive makes it your controlling partner and, as such, should receive a 91% year-end bonus for the decisions, risks, and costs you shouldered alone. In consideration of the environment our government provides, I would consider no more than 50% to be a fair tax rate. I agree that the super wealthy should be made to pay more--but not to extremes exceeding an equal partnership.

 

That was the marginal rate on income over $400,000. If that's in 1956 dollars, it would be over $3.5 million today

http://www.usinflationcalculator.com

 

What's the difference? I'd really like to know if you would be kind enough to explain.

 

Marginal rates only apply to amounts over a certain threshold. If the marginal rate is on incomes over $10,000 but zero below that and you make $10,001, the rate is only applied to $1

 

Absolutely not. It's encouragement for people to cheat, and do everything to bypass it..

 

Poverty should/could be fight by free of charge high quality education.

Model in which people have to pay for education, is promoting rich people to gain education, and rejecting poor people.

 

 

That's horrible logic. Like not making something illegal just because we won't catch everyone who does it.

 

Also, how do you make education available to all without taxing people more? This doesn't happen by magic.

[Sensei]

 

Also, how do you make education available to all without taxing people more? This doesn't happen by magic.

 

USA is wasting tremendous amount of money on army and wars..

 

And now you will be wasting money on the wall with Mexico..

[Phi for All]

That was the marginal rate on income over $400,000. If that's in 1956 dollars, it would be over $3.5 million today

 

Sorry, I should have just used that term instead of explaining it in the OP as a top rate on extreme earnings.

USA is wasting tremendous amount of money on army and wars..

 

And now you will be wasting money on the wall with Mexico..

 

... but first I'd like to talk about using a tax on extreme wealth to fight extreme poverty. I'm actually very surprised at the pushback from you, Sensei. This is how we would pay for things like universal healthcare and education for all. You seem unfocused or unclear on this issue, or else I've completely misjudged your worldview.

But I don't understand how to compare this with a "total tax rate". Could you please explain what it means?

 

I'll add to what others have said. This isn't a tax on all earnings, it just covers earnings over a certain amount, which don't typically get infused back into the economy (one can only spend so much money). There will still be fabulously wealthy people, but there will also be people with more advantage than poverty. This solution has been applied before, and many people point to that era (1950s US) as a golden one.

 

I think the advantage of wealth should be offset by advantages of universal healthcare and education. I think this type of tax is one way to achieve that.

[Ten oz]

 

Although I am not a wealthy man, I think there's something inherently unfair about having such a high tax rate on wealthy earners. At 91%, the government is suggesting that it's contribution to your financial success is worth 91%. The government is essentially saying that it is entitled to a majority share of your profits because the stable and secure environment it provides for your business to thrive makes it your controlling partner and, as such, should receive a 91% year-end bonus for the decisions, risks, and costs you shouldered alone. In consideration of the environment our government provides, I would consider no more than 50% to be a fair tax rate. I agree that the super wealthy should be made to pay more--but not to extremes exceeding an equal partnership.

Poor people pay much higher percentages of their income towards taxes than wealthy people do our have. 91% seems extreme but the reality is wealthy people don't get the majority of their wealth from salary. They get from returns on property, inheritence, stocks, and etc. They also have tremdous write offs. People often complain about all the various tax laws but the reality is everything that applies to a basic salary earning family would fit in a small handbook. The rest are for wealthy people. And when they can't write off they typically expense to a business. Trump charged his own campaign for office space and rooms at his own properties for example. Wealthy people do not pay anywhere near the advertised top marginal rate. They take their salary and put in directly into long term investment accounts which have separate tax rates (retirement accounts, health insurance accounts, etc) and use their capital gains as spending cash when they can't just expense something.

 

Even before becoming POTUS Trump didn't pay out of pocket for anything. Everything he did we a business expense. If he flew to Miami for the went he'd bill his resort company andjust say he was in Miami for business scouting new locations or whatever. If he went to a fancy diner samething. Just charge it to one of his businesses and then claim the diner was business related because he was considering buying the place or something. And not just Trump all super wealthy people.

 

Us regular type that can only spend our own money and live primarily off our salaries and not inheritence, interest, stocks, etc pay the full marginal rate of the bracket we are in. Additional we pay tax on almost everything we buy and nearly nothing we buy can be written off as a business expense.

[Phi for All]

Great article from Business Insider. It's a healthy, well-rounded economy where all participate that creates jobs, NOT wealthy people as they like to tell us.

Entrepreneurs and investors like me actually don't create the jobs -- not sustainable ones, anyway.
Yes, we can create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy's job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.
So, if rich people do not create the jobs, what does?
A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend.

Income gains need to benefit all, not just the richest.

[John Cuthber]

The problem is that they'll re-domicile to a more tax-friendly country.

Why is that a problem?

Does your country have a shortage of selfish people?

 

Either their money is currently in your country- in which case you can keep it there, or it is invested elsewhere in the world, and thus not doing your country any real good.

[Sensei]

Either their money is currently in your country- in which case you can keep it there, or it is invested elsewhere in the world, and thus not doing your country any real good.

That's very large simplification.

If US investor is investing his/her money in Mexico, creates jobs in Mexico, these people remain in Mexico, and don't flood USA as emigrants.

So, by his/her action, even unintentionally, he/she is doing something good for USA. Decreasing rate of emigration..

 

How to have flood of Mexicans on the border to US, and have serious emigration problem.. ? Make a law disallowing US citizens investing in Mexico..

 

How to solve emigration from Mexico problem? Invest, and hire them in newly created companies in Mexico..

Edited March 15, 2017 by Sensei

[DrmDoc]

Is that a maximum 50% total or marginal tax rate?

 

I think a 50% tax rate would be fair at a reasonable margin that, admittedly, may be difficult to fairly determine.

[CharonY]

To clarify, you mean a progressively increase in marginal tax with 50% as the highest bracket? I.e. extending to the current ~40% as the highest bracket and increase it to 50% (or create a higher bracket and tax that at that level)?

Edited March 15, 2017 by CharonY

[DrmDoc]

To clarify, you mean a progressively increase in marginal tax with 50% as the highest bracket? I.e. extending to the current ~40% as the highest bracket and increase it to 50% (or create a higher bracket and tax that at that level)?

 

Yes, a progressive increase that tops out at 50%. I don't think the government can be more than a 50% partner for it's contribution to the success of wealthy earners.

[Phi for All]

Yes, a progressive increase that tops out at 50%. I don't think the government can be more than a 50% partner for it's contribution to the success of wealthy earners.

 

I don't think tying the tax to how much of a "partner" the government has been to you is a sound approach. In fact, it's exactly how the wealthy have managed to convince us to lower such taxes, because they don't feel any obligations to the government, and actively call for its reduction. This is more of a societal obligation, or should be. I say let the wealthy object to helping their own society, rather than hiding behind an objection to the government.

 

Is allowing extreme wealth only after extreme poverty has been eliminated such an abhorrent concept?