A Closer Look At Arbitrary Numbers & Taxes

5 Apr

In the past week I’ve read at least 4 popular authors talk about increasing taxes on “the rich,” a group defined by – for reason(s) completely unbeknownst to me – one of two thresholds, either $250,000/year or belonging to the top 1% of earners (somewhere around $400,000-$500,000/year/household).  I have no problem increasing taxes on the SUPER rich, say, over $1,000,000/year, but to suggest that we should increase taxes on almost every successful doctor, dentist, lawyer, and small-to-medium business owner in the country seems a bit ludicrous to me.  Those who don’t make this magical $250,000/year may consider this outrageous, but many people who make that much, while certainly not poor by any stretch of the imagination, aren’t living anything like the opulent life of the guy in the DirectTV commercials.

These are the people who buy the BMW’s that keep thousands employed at the plant in South Carolina, take vacations that keep hundreds of thousands (millions, really) more employed in Florida (and every other destination), and build homes that keep millions of trades-people employed, to say nothing of the property (and other) taxes they pay that pays for teachers, firemen, and police in our towns and cities.  These are not the ultra rich that drive Ferraris, have lavish mega-mansions in the Hamptons and yachts in the Caribbean that can afford to pay lawyers and accountants to cut their effective tax rates from 30%+ to half that or less.

Even if we talk about the top 1% instead of those who make about half of the floor to be considered part of that group, we’re still missing out on some fundamental truths, for instance, that those in the top 0.1% account for ~half of the taxes paid by the whole top 1%.  Think about that, the top 1/10th of the top 1% accounts for half the income earned by the whole group.  Why then should we increase taxes on the whole group when such a disproportionate amount of the group’s earnings come from the very small minority?

I should warn that, while making John Paulson or Ray Irani pay another few million/year in taxes may help the Government pay for its various programs, there exists a very-real point at which the uber-rich will simply tell Uncle Sam to screw-off.  I don’t think I’ve read any proposals – yet – that would increase taxes on these rich among the rich to the point where they simply moved to another Country, but it’s something to keep in mind, lest Politicians get carried away, as they’re wont to do…

 

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3 Responses to “A Closer Look At Arbitrary Numbers & Taxes”

  1. kduck April 5, 2011 at 5:24 pm #

    the return to clinton era tax rates would hardly be outrageous / ludicrous. we’re talking about a bump of a couple percent.

    Your father was fine then, I’m sure he’d still be fine if those rates returned.

    • The Analyst April 5, 2011 at 5:38 pm #

      I’m not just talking about the Bush-era cuts, and while your ultimate observation is more likely than not true, it misses the larger point(s).

      • kduck April 5, 2011 at 6:34 pm #

        i’d be interested in which four of these unnamed popular authors want higher than clinton era tax rates.

        even if they want the ‘outrageous’ tax rates from the reagan era, that period wasn’t so bad for the ‘rich’ either.

        if anything your post shows why we should raise taxes on those making 250k a year – people like your father cannot simply pick up his business and move to some offshore haven, while its more likely that someone making millions a year can, so it’d be practical to tax your father (along with the multi-millionaire, of course). besides, there are many, many, many, more people like your father than those pulling in millions a year.

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