03-31-2009, 09:28 PM
Quote:But, they didn't earn it in wages. My point is that the money grab by the US federal government is against people who earn money through wages. If you earn a salary of $100,000, you would be lucky to be able to save/invest $1M over 20 years. With some incredible investments and luck, you might multiply that by 10. The fact remains that the government feeds itself on the backs of wage earners (78% of revenue).
They certainly do, and I think any tax that has traction on the growth of wealth, rather than income, is on the right track. Death taxes are a start.
Quote:Investing $4000 per year is not the road to Billions. Look up the average US rate for savings and investment, and you will see that it has been in the negative numbers for years. Lately, this has been caused by the ridiculously high prices of homes (which are now upside down for many, many people).
First, there is no "road" to billions, in the sense that it is well understood and can be followed. There's a reason why only a tiny handful of people have that much money; it's very, very, very difficult to get it. Nearly every American billionaire on that list is there for one reason: they own tons of stock in a gigantic, successful corporation. In most cases, this is because they founded it. Warren Buffett is there because he some magical combination of the world's smartest and luckiest investor.
What is clear, however, is that, if there is a road to billions, however winding, it passes through America much more often than it does other countries, your protestations to the contrary notwithstanding. Bill Gates is the richest man in the world, and he earned the vast majority of it in the good 'ol USA, taxes and all.
Second, the average savings rate is negative because of simple preferences. If house prices are high, people have choices (I love the free market, don't you?): They can buy overpriced homes, or buy smaller homes, or rent. Americans chose to buy the homes, and go into debt, because the economy was supposedly going to prosper forever. Had they different preferences, as prevail in many Asian countries, they'd have saved their money rather than spent it. But, short of coercion, I don't know how to increase the marginal propensity to save except by increasing interest rates, but that would be economic suicide right now.
However that's just behaviour on average; it has nothing to do with any individual person, who is as capable of making their fortune with hard work, lots of savings, good luck and smart investment. A 35% tax rate will hardly prevent that from happening. Many of the current billionaires earned the bulk of their wealth when top rates were much higher than today. The trick, then as now, is to invest, either in your good idea, or someone else's. Nobody has ever earned their gigantic fortune on wages alone; either you make your money work for you, or you cap your earnings capacity at a few hundred thousand a year. That's always been true, and it would be every bit as true if they abolished the income tax entirely.
Quote:In 2003, any income over $57,500 was enough to qualify for the top tax rate.
Just the US federal tax for single people in 2008,
# 10% on income between $0 and $8,025
# 15% on the income between $8,025 and $32,550; plus $802.50
# 25% on the income between $32,550 and $78,850; plus $4,481.25
# 28% on the income between $78,850 and $164,550; plus $16,056.25
# 33% on the income between $164,550 and $357,700; plus $40,052.25
# 35% on the income over $357,700; plus $103,791.75
Am I missing something? How can you qualify for the top bracket at both $57,500 and at $357,700? Or did they change the brackets dramatically between 2003 and 2008? These rates sound quite reasonable to me, given what prevails in other OECD countries, not to mention the staggering quantity of the debt. Certainly, losing 35 cents to the dollar wouldn't be enough to stop me from earning more if I could.
Quote:In my opinion, 94 percent is pretty close to 99.5 percent.
From a marginal perspective, the difference between keeping one dollar in twenty and keeping one dollar in two hundred is quite substantial.
However, on the basic fact, you are correct, I was not. The 79% rate was a peacetime rate. Given the outlays required for the war, and the debts the government had to take on, I don't see even 94% as unreasonable. However, we are talking about the top marginal rate here, and not the rate paid by over 99% of the population. FDR's top tax rates were those paid by the tiny handful of the extremely rich, and were mostly cosmetic, to show that the richest were paying for their share of the war. The actual revenues raised from these supertaxes, as with most modifications to the top marginal rates, were fairly small.
-Jester