Are you rich? Am I rich?
One of the features of President Obama's fiscal policy has been that he would not impose new taxes on middle-class Americans. Of course, in America, we're all middle-class, so there has to be a cut-off point for such a determination. President Obama has set that point at $250,000 per year of income. A lot of people who make that much (or even more) contend that they aren't rich: They, too, are middle-class.
Daniel Gross provides a nice analysis here, showing that people making $250,000 annually are indeed rich. It's a nicely written piece, and Gross doesn't bother us with statistical analysis, but he does point out that $250,000 is about five times the national median income.
I, for one, think it would be good to allow the Bush tax cuts to expire in their entirety, and for the estate tax to come back in full force, but I'll settle for having those cuts taken away from the rich.
Glenn A Knight
In my study
Saturday, February 6, 2010
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2 comments:
Glenn:
There are two parts to the argument:
1. $250k/year is "rich".
2. Because you're "rich" you should be taxed at a higer percentage than those who are not "rich".
I would love to make $250k/year and I also consider it rich. I don't see though why it follows that those who make this amount should pay a higher percentage in taxes. Even if they pay the same percentage as those that are not rich, they are still already paying more in taxes.
Regards,
Agim
Good to hear from you, Agim.
There are a couple of arguments for the progressive tax system, Agim, as I'm sure you know. There are also arguments against it, with probably the most famous alternative being the "flat tax" promoted by Steve Forbes. This is sometimes called the "fair tax," and is a favorite in some conservative circles.
There are two problems with a flat tax. The first is that, at any given rate, people below a certain income level cannot afford to pay it. If the average rate today is, say, 20%, after all the deductions, exemptions and so on, and you convert to a flat tax at that rate, then a person making $10,000 per year would have to pay $2,000 in taxes, leaving him or her only $8,000 to live on.
In that situation, you have a couple of choices. You can go with the flat tax, knowing that a lot of people will not pay it, and that withholding at that amount will cause a lot of people to give up on working at all. You can set a cut-off, which means you have two rates: 0% and 20%. No matter where you put the cut-off, you're creating a great opportunity for people to conceal any income they make that would put them over the line.
Anyway, the first problem with the flat tax is "affordability." The second problem is total revenue. If your tax system isn't progressive, you won't bring in enough money to pay for everything you want the government to do. Right now, even with the progressive tax system, we're pulling in $1.5 trillion less than the government costs.
These two points go, in turn, to two larger questions:
1. What is justice?
2. What is an appropriate size for government?
And on those, I'll say more later.
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