April 21, 2011

We're already all wet

Now that I'm thinking about taxes, an additional rant. As I pointed out last time, I didn't have to pay any income taxes this year, and in times past have even qualified for the Earned Income Tax credit. So I definitely qualify as "non-rich." But I'm against "soaking" them.

The problem with soaking the rich is two-fold: 1) If a bunch of rich people hit a rough patch and start making half as much, or decide to take their income in capital gains, they'll still be rich, but the government will be broke; 2) "No taxation without representation" isn't just a snappy slogan, it's a law of human nature. It starts in childhood. Weasel a couple of bucks out of your parents and they're going to want to what you're going to do with it. We all expect a quid pro quo.

The more the government takes from corporations and the wealthy, the more they are going to want to know what's happening to their money, the more they're going to care about where it goes and how much, and the bigger the payoff for corrupting the process. The fiduciary responsibility of a corporation is to its shareholders, and it'd be irresponsible of them to not spend a few million on lobbyists and tax lawyers to make sure tens of millions more flow to their investors.

The answer is simplicity and transparency. Eliminate all forms of corporate welfare, farm subsidies, green energy subsidies, the whole lot. In turn, eliminate the corporate income tax and treat capital gains as ordinary income. Reduce all deductions to a single, individual deduction that is the same for everybody. I see no reason why home buyers should be privileged over renters, especially after they ruined the world economy. Oh, and get rid of Fannie and Freddie too.

Labels: , , ,


# posted by Blogger chosha
Eliminate all corporate welfare? /sarcasm/ But then how will people get elected?
4/21/2011 5:11 PM

# posted by Blogger Aaron
I agree we should eliminate corporate welfare (and the different ways the fed cleans up after corporate messes), but it's weak to say, oh dont tax the rich because they'll start asking what we're doing with the money. Huh? The rest of America is incapable of asking what the fed is doing with our taxes? We need the privileged special 'rich' to start asking questions? And expecting the extremely wealthy to pay the same kinds of taxes as the poor is like weaseling money out of mom and dad? I think you lost me there.
4/21/2011 11:11 PM

# posted by Blogger Joe
The real problem with heavily taxing the rich is that they have the ability to avoid paying those taxes. As they move money offshore and/or into an underground economy, that has real implications on raising capital. (This was seen several years ago when a hefty luxury tax was added on yachts. It all but killed the domestic yacht industry and those were very good paying jobs.)

PS. Gene's point was that people don't fork over money without wanting something in return. You can make a list right now of the rich who are demanding favors--not reform, but favors--furthering the corruption of our tax system.
4/22/2011 8:09 AM

# posted by Blogger Eugene
I didn't pay taxes this year. Not income taxes. FICA (Social Security and Medicare) taxes, yes. The poor pay proportionally higher FICA taxes than the rich. And yet nobody screams louder than well-meaning liberals when anybody proposes reform of the FICA system.

The biggest mistake in politics is mistaking how we wish people would behave with how they actually behave when the rubber hits the road. The one thing our complex tax code does best is obscure who's paying the piper. Look at the results instead.

Take, as one example, the deduction on mortgage debt. The maximum limit is interest on up to $1,100,000. The working poor who pay income taxes and rent are generously helping out those with million dollar mortgages. That is what the present system hath wrought.

The reason Warren Buffet pays a lower tax rate than his secretary is because he takes most of his income in capital gains. As long as corporate income is taxed, there's no other way to get around the double-taxation, which ends up benefiting the rich most of all.
4/22/2011 9:51 AM