The US political debacle

jay pettitt on 31/8/2008 at 13:54

A million/year huh - Where did you pluck that figure from? The average UK salary is about £24k. Are you really suggesting that the threshold for 'rich' should be 40 times the average? Earning £117K+ puts you in the top 1% of earners, over £350k would put you in the top 0.1%. You define rich as being the top 0.02% of earners - are you sure?

I think you also have to keep in mind that income tax is not the only fruit; which muddies that water quite a lot. VAT, Fuel Duty, Local Taxes and so on can conspire so that low income earners are paying a higher percentage of their salaries in taxes than a high earner - high earners can still find themselves at a considerable advantage even with a progressive income tax.

If earning ever more is some kind of noble goal it also has to be said that taxation isn't the only thing that's going to stop people. Personally speaking I've got this rough idea of what I need for a cosy life - much above that and I'd rather cut my hours so I can spend more time with family or exploring private projects. If I was someone else I might want to earn and earn and earn and then retire early.

It's also worth considering that there is very little evidence to suggest that moderate tax cuts or hikes effect productivity. The Laffer Curve (which I can't say I'd give the time of day to) would seem to show that taxation anywhere between 35% and 65% will yield good tax revenue without much effect on productivity.

SubJeff on 31/8/2008 at 14:10

I don't care what % of people earn over a million, or over £117K. I just think that once you hit the 1 million mark higher taxes are less likely to significantly affect your lifestyle. A guy who earns £117K may well notice a significant difference in lifestyle if he is suddenly taxed to greater extent. It may seem silly or greedy to you or I but if you've bought a £600K house you may well find that a tax increase means you struggle to pay the mortgage.

Everyone is perfectly happy to pay celebrities massive amounts of money but when a company director gets a massive bonus its all "Greedy Fat Cats pay themselves bonus".

Starrfall on 31/8/2008 at 14:23

Quote Posted by jay pettitt

It does occur to me that only ~40-50%ish of the US population can be expected to return income tax at all. Children, retired senior citizens and stay at home parents supported financially by their partners don't. Are you suggesting that children should pay more taxes to make it more fairer?

You're missing the point. If the question doesn't hide all of the other information necessary to evaluate tax systems behind a number that sounds very large then it won't serve its purpose of being a good sound byte that will be heard by thousands of young adults who once skimmed through Atlas Shrugged and who will in turn be SHOCKED at the patent unfairness threatening the well-being of all Americans.

And then after careful feeding of more empty sound bytes that (don't really) show how fiscally responsible Republicans are, they go out and vote red just like they're supposed to!

jay pettitt on 31/8/2008 at 14:58

Dang! You win.

@ subjeff

Sure (except for the bit about celebs - Wogan gets paid way too much), though I did (http://http://www.ifs.org.uk//bns/bn76.pdf) grab my numbers from the Institute for Fiscal Studies whom describe the top 0.1% of earners as being the really, really rich. A couple of things spring to mind, among which is that in much the same way as you need to quantify 'rich' you also need to quantify how much tax is punitive. I also wonder if income in itself is a particularly good way to gauge someone's 'resiliance' to tax increases at all. I'm no economist though.

Morte on 31/8/2008 at 15:08

Quote Posted by Chimpy Chompy

How much of the wealth do those 10% have?

Shockingly, a brief google on the US distribution of wealth reveals that the top 10% possess 71% of the wealth. Never could have seen that coming, could we?

Swiss Mercenary on 31/8/2008 at 15:25

Higher taxes discourage productive people from doing more work. Just ask my mother, who, two months into her 10-month 10K/month layoff package is looking for a new job. Doing so will push her from ~38% overall taxation to ~45%.

Starrfall on 31/8/2008 at 15:44

Quote Posted by Swiss Mercenary

Do you understand how tax brackets work? I'm being serious, many people don't and it's hard to tell from your post whether you've actually done all the math and are correct or whether you don't understand tax brackets and are incorrect.

Swiss Mercenary on 31/8/2008 at 16:31

Quote Posted by Starrfall

I do - right now, unemployed, much of her income is in lower brackets. After gaining a second source of income, much of it will be in the highest. To minimise the amount of money subtracted by taxes, she'd have to stay unemployed until her benefits dry up. To maximise her earnings, she has to find a new job ASAP.

scumble on 31/8/2008 at 16:33

Quote Posted by Morte

Shockingly, a brief google on the US distribution of wealth reveals that the top 10% possess 71% of the wealth. Never could have seen that coming, could we?

I suppose at the same time you might say that the top 10% have 70% of the influence, or possibly more, in which case the tax could turn out to be a good deal. I wonder if both the candidates are in the top 10%?

Starrfall on 31/8/2008 at 16:50

Quote Posted by Swiss Mercenary

I think I see, you're saying that because she has the severance package, any potential new job income already starts "up" in the scheme.

Is the actual amount really enough to make a difference to her though, especially since she'll still have the severance pay when she's in higher brackets to compensate for any higher taxes? (Since that's what's pushing her up to begin with.)

And if it is enough I still don't see what the problem is with her being temporarily discouraged from working - we all can probably survive without her contributions for a few months, and frankly if I were her I'd damn well spend at least a couple of months doing nothing just because I could.