Monday, November 03, 2008

If You Tax Something, You Get Less of It

Obama in today's WSJ: To rebuild the middle class, I'll give a tax break to 95% of workers and their families. If you work, pay taxes, and make less than $200,000, you'll get a tax cut. If you make more than $250,000, you'll still pay taxes at a lower rate than in the 1990s -- and capital gains and dividend taxes one-third lower than they were under President Reagan.

Translation: Obama intends to raise income taxes on families making over $250,000 and individuals making over $200,000.

Prediction: Some families currently making over $250,000 and some individuals currently making over $200,000 will make adjustments to the timing and amount of their incomes next year so that they'll report less income, to take advantage of the tax cuts for lower income levels, and avoid the tax increase on higher incomes.

17 Comments:

At 11/03/2008 9:58 PM, Anonymous Anonymous said...

Not that it matters which one of these guys "wins", the US will defalut on it's debt before they are out of office. Bye, Bye, empire.

 
At 11/03/2008 10:57 PM, Anonymous poor boomer said...

A lot of people respond to taxation irrationally.

I would be thrilled to pay "higher taxes" on an income over $200K.

 
At 11/03/2008 11:33 PM, Anonymous dano said...

poor boomer wrote:

"A lot of people respond to taxation irrationally."

It is rational to adjust your income to avoid paying additional taxes.

 
At 11/04/2008 1:37 AM, Anonymous poor boomer said...

dano said:

It is rational to adjust your income to avoid paying additional taxes.


That, sir, is, to some extent, a function of income.

Since my monthly income is less than $1K, I am confident that at my present income level, I would not adjust my income to avoid paying additional taxes - indeed, I would even say that such behavior at my income level would be irrational!

Perhaps such tax avoidance behavior is rational at some income levels, but not at all income levels.

And I did not claim that all or even most people respond to taxation irrationaly - only that a lot do.

 
At 11/04/2008 2:50 AM, Anonymous Anonymous said...

If it's only fair that taxaion is progressive, then voting should be progressive also.

I should receive a number of votes proportional to the taxes I pay.

Alternatively, anyone who doesn't pay income tax should not be able to vote to raise the taxes of those who do pay income tax.

BTW, social security taxes pay for the social security pension. Social security taxes are capped because the pension benefit is capped. If Nobama uncaps the taxes but doesn't increase the pension benefit by a proporational amount, he has merely turned social security into a welfare program.

 
At 11/04/2008 8:32 AM, Anonymous wyatt said...

and social security isn't already a welfare program??? it is the most regressive tax in the tax code. it is another great example of big brother trying to do good, but the way they tried to do it does not accomplish what they intended. however, the ignorant public is still convinced it is a great program.

 
At 11/04/2008 9:00 AM, Anonymous Anonymous said...

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse (generous gifts) from the public treasury. From that moment on the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy (which is) always followed by a dictatorship."
"The average age of the world's greatest civilization has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage."


Alexander Tyler circa 1787 re the
fall of the Athenian Republic.

 
At 11/04/2008 9:09 AM, Anonymous diz said...

I'm pretty sure there is going to be a large drop in the top 1%'s income regardless.

I'm sure a disproportionate number of the top 1% are invloved in financial services, and those big bonuses look like they will be on hiatus for a while.

I'd guess another big chunk of the top 1% are one-shot people, who report a lot of income the year they sell a business they have built for many years. I think there will also be a lot less of that in the current economic climate.

And, of course, capital gains in general are a distant memory for many people.

 
At 11/04/2008 10:36 AM, Anonymous Anonymous said...

Diz has a great point.


Poor Boomer,

To earn $250K costs a lot in terms of stress, hours at the office and risk. A lot of that compensation is likely deferred bonus or the earnings of a business which requires risk not associated with wages. If you are earning an after tax income which just compensates you for all that it costs you to earn it, a higher tax will encourage you to work less and keep more by dropping into a lower tax bracket. That'll decrease tax revenue and taxes will have to be raised on the middle income earners to make up the difference, creating even less incentive to work and invest. It's a terrific race to the bottom.

Although it's politically unpopular, raising taxes on the "middle class" is more effective for increasing tax revenue than raising taxes on the top 5% as they have less flexibility with the timing and classification of their income. The middle class also tends to consume rather than invest any tax cuts while the top earners tend to invest a significant portion of their income.

 
At 11/04/2008 10:44 AM, Anonymous Anonymous said...

Yeah, yeah, Clinton promised a "middle class" tax cut and actually raised taxes on the middle class. You can count on the same from Obama.

 
At 11/04/2008 10:59 AM, Blogger juandos said...

Outstanding comment anon @ 2:50 AM...

Yes sir, there are lots of people who though they may have federal income taxes deducted through the year will still get it all back and then some of the pinko parasite should happen to prove that the majority of American voters are abysmally and wantonly ignorant...

How Obama May Bomb the Stock Market and the Economy in 2009-2010

 
At 11/04/2008 11:28 AM, Blogger notnidiot said...

"Prediction: Some families currently making over $250,000 and some individuals currently making over $200,000 will make adjustments to the timing and amount of their incomes next year so that they'll report less income, to take advantage of the tax cuts for lower income levels, and avoid the tax increase on higher incomes. "

Classic tax avoidance behavior. If you've got enough going for you to make the income, chances are pretty good you can think your way into a tax reduction or at least deferral.

$250,000 is actually not that hard to come by when you look at a) the professions such as doctors, lawyers, many private practice finance/accounting folks, sales people and b) two income families.

It also doesn't go that far if you pay out of state tuition to a school such as Umich! Go Blue

:-)

 
At 11/04/2008 11:36 AM, Blogger Marko said...

Others will adjust their spending downward to make up for the increase in taxes. More than half of consumer spending is from these rich people, so that will hurt the economy. Why couldn't anyone in this election cycle explain that sticking it to the rich actually sticks it to the poor? Duh?

 
At 11/04/2008 1:20 PM, Blogger movingeast said...

Can anyone explain to me why a married couple is taxed as a single unit in the US? Why no treat each taxpayer separately?

It seems weird to have different tax schedules for single & married people...

 
At 11/04/2008 2:19 PM, Anonymous Anonymous said...

Movingeast,

married couples are considered a single economic entity in the U.S. There are legal advantages and disadvantages to this.

 
At 11/06/2008 11:38 AM, Blogger Georgfelis said...

Well, we raise the tax on cigarettes to make people smoke less.
We raise the tax on alcohol to make people drink less.

So what’s going to happen when we raise the tax on income and cap gains?

 
At 11/10/2008 5:02 PM, Anonymous poor boomer said...

marko said:

Others will adjust their spending downward to make up for the increase in taxes. More than half of consumer spending is from these rich people, so that will hurt the economy. Why couldn't anyone in this election cycle explain that sticking it to the rich actually sticks it to the poor? Duh?



Doesn't this sound an awful lot like the kid who will take his ball and go home if he doesn't get his way?

 

Post a Comment

<< Home