dmp said:
Yes we have had higher tax rates in the past, and they were reduced for good reasons.
To be clear I am not opposed to progressive rate structures, but I object to the suggestion that the current tax system is not discouraging economic output, and that raising rates will not have knock on effects. Arthur Laffer (ala the Laffer Curve) wrote a classic economic paper describing how simply raising taxes does not generate the expected tax revenue, because it creates a negative incentive to avoid taxes, and in the extreme to just earn less.
I am on record as favoring tax reform. I would be more willing to accept a small increase along with reform that closes loop holes and levels the playing field. As the world becomes more level taxes need to be competitive to prevent capital (and job) flight to more friendly countries where that capital earns more. There have been a spate of corporate tax inversions where a US company re-incorporates as a foreign company to escape US tax policy. Often these are structured as one company buying the other, but geography, i,e, tax law, is the driving force in these transactions. The remedy for this IMO is to reduce or remove those attractive tax rate spreads.
This is a matter of faith/philosophy, but in my judgement the government can raise enough money and more to accomplish their actual work, with reformed tax law that is competitive with the rest of the world, and by closing loopholes, unwinding decades of crony deals. This will be easier to say than do, so perhaps a massive clean-sheet start over is required.
Another old suggestion, the government should double or triple their anti-fraud activity. The huge increases in entitlements with poorly formed checks and balances attract dishonest claims. Public workers spending other peoples money can be unintentionally or intentionally lax. The government's anti-fraud activity more than pays for itself. The one area of government I would expand. 8) At least until it stops returning more than it costs.
Just like I don't know what the correct temperature for our planet is (it has always been changing up and down), I do not know what the correct number is for concentration of wealth. Beyond a certain level of wealth, it becomes more a way of keeping score, than meeting some actual need. Most(?) very wealthy are generous with charitable foundations, and even pledges to give excessive lifetime wealth accumulation away. The most common theme about these charitable urges is the near universal sense that government is not the best shepherd of charitable funds. Almost to a man, the wealthy prefer to steer their excess wealth to more productive charitable efforts. Bill Gates is a poster boy for this but he is not alone. Warren Buffet famous for publicly supporting the government's tax increase screed (smart PR), has voted with his own dollars to fund private charities, so look at what he does not what he says ;D. The vast majority of public support for increasing taxes is to increase "other people's" taxes.
I have been active in the stock market since the late '60s, investing capital that I earned the old fashioned way and I had already paid income taxes on once. This has not made me wealthy(?), but I am in better shape than my peers who put their excess capital up their nose, or bought bigger houses, ski boats, 4 wheelers, etc. As I have noted before the recent massive injection of liquidity by central banks have inflated hard assets (like stocks and homes), so I benefitted from both (on paper).
A capital gain tax would be less painful if it was adjusted for inflation. While the stock market generally outperforms inflation (ignoring this recent targeted asset inflation by central bankers) capital gains tax is charged on the nominal gain, not the real inflation adjusted gain.
It may be popular to attack dividend and interest income ASSuming this is something only wealthy enjoy, but this ignores the number of pensioners trying to live off the unearned income from their lifetime of savings. This is almost academic as interest income these days is insignificant, but dividend paying stocks have become more attractive as people chase higher yield. Hopefully the fed will finally start raising interest rates soon after years distorting that market and hurting many retirees.
Another philosophical point of disagreement. Again as I've said before, if you want to improve worker wages, we need more jobs to shift the supply/demand balance. Despite the horrible sub-standard economic growth we've been saddled with for over a half dozen years, demand is finally generating some upward wage pressure from cumulative job growth. With a less contentious business environment economic and job growth would be higher and wages would respond to the supply vs. demand as it always does.
Government force to arbitrarily make business pay higher wages will create unintended consequences and not work as expected. If we continue to strangle the golden goose, we will get what we get. It is remarkable how part-time work has increased, while simultaneously teen employment in part time jobs is down. Obviously adults are ending up in these part-time jobs that teens used to get, as business responds to costs imposed on full time workers. This is not good for future economic health.
Of course opinions vary, and maybe I'm wrong. 8)
JR
