Here's a good article on how to keep the budget from going to far into debt. As an aside it would probably not fall on 99% of the folks who turned out for the tea parties, though it would fall on the organizers and promoters of the rallies. ******** Featured guestMr Dean Baker The need to tax the wealthy The quest to increase taxes on the wealthy is not a gratuitous attack on upper income households; it is driven by the need to raise more revenue to run the government. While many deficit hawks been irresponsible in raising fears of an impending collapse of the American government, the projected deficits for years following the recovery are in fact larger than is desirable. There are areas of American spending at the federal government level that could be reasonably cut, but even after we have zeroed out the "waste, fraud, and abuse" category of federal spending we will still likely need additional revenue of between 1-2%t of GDP to keep budget deficits in an acceptable range. That leaves a choice between increasing taxes on the wealthy or imposing more taxes on the middle class. The vast majority of the income gains in the United States over the last three decades have gone to the richest 5% of the population, largely as a result of policies that were explicitly designed to redistribute income upwards. Therefore it is far more appropriate to tax the richest 5%t of families who have prospered than the broad middle class who have suffered. Of course taxes can be designed in a better or worse manner. The best way to increase taxes on the wealthy, in addition to allowing the Bush tax cuts to expire, would be to apply a modest financial transactions tax (FTT). There is a long history in both the United States and the rest of the world with FTT. Until 1964, the United States imposed a tax of 0.12% on new stock issues and 0.04% on stock trades. Britain still has a tax of 0.25% on each stock sale or purchase, raising five billion pounds a year. This would be equivalent to roughly $30 billion a year in the American economy. Robert Pollin and I calculated that a scaled set of FTT on stock, futures, options and other financial instruments could raise approximately $150 billion a year. This would go far towards bringing the long-term budget deficit down to a manageable level. A FTT would be hugely progressive. While many middle income families own stock, their holdings are dwarfed by the holdings of the wealthy. Furthermore, few middle income families are active traders. Their intention is to hold their stock to support their retirement or their kids' education, not to shuffle it around on a daily or hourly basis. Some mutual funds do engage in frequent trading. An FTT would encourage investors to move their money to funds that are less active traders, thereby allowing them to escape most of the impact of the FTT. Most of the burden of the FTT will fall on wealthy individuals who are active traders and also on the financial industry itself. Either way, the tax will be overwhelmingly borne by the wealthy. By raising the cost of trading, the tax will discourage the trading that provides the revenue for the financial industry. A well-designed tax should also discourage the creation of exotic assets that may serve little useful purpose, since it could lead to the tax being paid multiple times. For example, the holder of an option on a stock would both pay the tax on the purchase and sale of the option and also on the purchase and sale of the stock itself, if the option was ever exercised. While most taxes impose some economic cost in addition to the revenue raised, a FTT may actually increase economic efficiency. By discouraging financial transactions that are entirely rent-seeking in nature, a FTT will reduce the resources used up by the financial sector, without affecting at all its ability to serve the productive economy. The reduction in trading volume will of course reduce liquidity to some extent, but American financial markets will still be quite liquid. Even with a 0.25% tax on a stock sale or purchase, transaction costs will still only be raised back to their mid-80s levels. And, the United States had a large and very liquid stock market in the 80s. There also is a powerful element of justice in imposing a FTT in the current situation. The main reason that the budget situation has deteriorated so much in the last two years has been the damage caused by the irresponsibility and greed of the financial industry. In this way, a FTT can be seen as sort of a user tax, where the industry is effectively forced to pay for some of the damage caused by its practices, just as we might like to tax the output of industries that pollute our air or water. In short, there is a very good argument for increasing taxes on the wealthy given the current budget situation. The alternative is taxing those who are not wealthy. And, there is no better way to tax the wealthy than to tax their gambling in financial markets. A financial transactions tax will raise revenue at the same time that it makes the economy more productive. This is a genuine win-win situation. http://www.economist.com/debate/days/view/299
That argument fails because it is based on a faulty premise. It only works if you assume that it is imperative to keep government spending at current levels, or at most to get rid of fraud, waste, and abuse. With a smaller government, everyone can pay less taxes.
This made a lot more sense in 1964 than it does today. I do not know anybody I would consider to be wealthy. I do know a lot of people that casually play the markets to see if they can generate a little extra income. The ability to trade easily via the internet changed everything. Also, do you tax those transactions made by investment houses that are managing 401(k)s? There are numerous variables here.
during a recession? you really want a smaller government? wealth disparity has increased significantly since 1964. your anecdotal evidence aside, give me a break. especially when you look at break downs of the top 1% of top .1%, it is incredible how rich the top earners have gotten compared to the rest of us. median household income has remained flat.
I do not necessarily disagree with a reasonable transaction tax, but the writers seem to have ignored the impact a larger tax could have on the liquidity of the market. I would think it could decrease liquidity, which could cause stock values to decrease. Additionally, it could have a large impact on short sellers. While I do not sell stocks short, it is my belief that short sellers are an important component of the market.
Glynch -- First, taxation is not opposed by 99.9% of the electorate. Over-taxation is the problem. But what is overtaxation? That is the problem. Everybody has a different definition of these issues. I want to know: 1) What income level is "wealthy?" $100,000; $250,000; $1M; $5M? $100M? 2) What constraints to spending are there to new revenues? 3) Is class warfare the goal, yes or no? Who belongs in what class? Is "class" determined by wealth, education, race, political party? It's the lack of definitions that are causing a great deal of frustration and rage. I know. I am finding this out in my new "hobby," which is rapidly becoming a full time job.
Thats easy. If you're richer than me, then you are "wealthy" and you should be taxed at 40+%. Naturally, these new revenues should be spent towards social programs.
still waiting on that evidence of people who think constitutional rights should only apply to terrorists, not americans.
Groogrux or Deckard or Batman Jones or mc mark or Franchiseblade (liberal posters I respect), could you please answer my questions posed in Post #7? I'm not being combative. I need serious liberal input -- defined lines in the sand, so to speak -- to help me formulate definitions for position papers I am writing.
1. For the sake of individual taxes 250K will work. 2. That congress must approve the spending. There is also interest from the debt. 3. Class warfare is not the goal, and numerous very wealthy individuals support the estate tax, and the recent 3% bump in their personal taxes. Class has different meanings in different contexts. One can behave and carry oneself with a degree of class regardless of how much money they make. Yet when talking about taxes class almost always will refer to wealth of lack of wealth. The top bracket of income earners is now taxed about 10 points less than they were under Reagan. That is after Obama's newest tax plans.
i'd also like to add another bracket or two. there's no reason why the 100th million should be taxed at the same rate as the 250th thousand. add a 42% at a 500k. add a 45% above a million. maybe even another in the 10 million range around 50%.
That you would still need "liberal" input to answer those questions only reinforces the perception that you have not been paying attention anyway and already know the slant you need for your position paper.
Well, first of all the government is the very very wealthy. So good luck with taxing the most wealthy elitists.
Comparatively it is. The percentage of Americans earning that income is very small. The vast majority of single incomes is less than 250K. It goes further in some places than others.
250k in Houston is pretty damn wealthy. Maybe not in NY, but if we're splitting hairs on cost of living, then basing who's rich on proportional wealth in relation to proximity will do.
To clarify, you're saying, "$250k is not wealthy for the sake of discussing individual taxes," right? Which means you think the top 5% or 10% or whatever of earners is too high of a number, right? What percentage would you say should be considered "wealthy"? The top 1%? The top 0.1%? If you're just objecting to the term, please propose a different term to refer to those people making over $250,000 a year to avoid confusion.
