Rich people and taxes

[Epee_Pox]

Originally Posted by jeff

Jumping in from my own debate subthread for a moment: there's a valid point that the tax code is frequently manipulated to provide tax evasion methods that are only usable for the very wealthy. Some is unintended consequences of laws meant to do other things and then found to be useful in other ways, other is specific tax legislation done for and at the bidding of its beneficiaries.

No, that is tax AVOIDANCE. Tax EVASION is never allowed.

[chefencer]

Originally Posted by Epee_Pox

No, that is tax AVOIDANCE. Tax EVASION is never allowed.

Yes, but tax avoidance can be described as legal tax evasion... at least that's what Obviousman would say were he here.

[Epee_Pox]

Originally Posted by chefencer

Yes, but tax avoidance can be described as legal tax evasion... at least that's what Obviousman would say were he here.

No, they're very different things. "Legal tax evasion" translates as "legal crime," which is absurd.

Tax avoidance is when you do something the law allows, which reduces your tax burden. As a motive, it is sometimes taken into consideration when deciding whether to allow or disallow certain deductions and exclusions. Opportunities for tax avoidance increase with the amount of things you're being taxed on, so of course people with more economic activity have more of those opportunities. Nothing wrong with that. Spme people think that's unfair, but that's usually people who think being more economically active than others is unfair, and there's no point arguing with them.

Tax evasion is when you fail to pay taxes required by law. You're breaking the law, not paying what you were supposed to. This is something that wealthy people do, middle-income people do, and low-income people do. Fortunately, only a small percentage of people engage in tax evasion. To jump from those small numbers, however, to accuse an entire class of people of bad behavior or unfair advantage, is itself unfair.

[keith]

Originally Posted by Epee_Pox

Tax avoidance snips

Tax evasion snips

Well at any given moment they may be two different things, but at any moment a ruling by a tax agency or an investigation of the details of a new 'legal' strategy by said agency can miraculously convert avoidance to evasion

Obviousman guffaws in the face of your semantic nit picking.

[Epee_Pox]

Originally Posted by keith

Well at any given moment they may be two different things, but at any moment a ruling by a tax agency or an investigation of the details of a new 'legal' strategy by said agency can miraculously convert avoidance to evasion

Obviousman guffaws in the face of your semantic nit picking.

On the contrary, the law changes slowly, via precedent-based decisions and ponderous legislation. "Miraculous" sudden conversions are not something that ordinarily occur.

And it's not semantic nitpicking -- these are two very different terms, that are used to refer to two very different things.

[jessicasimpson]

Originally Posted by Epee_Pox

False. An individual's payroll taxes are income tax, social security payments, and medicare payments. It is a falsehood that the income tax went up, because it went down. It is a falsehood that social security and medicare went up, because they stayed the same. So it is a falsehood to say that individuals' payroll taxes went up.

and it is a falsehood to say some people's tax liability became zero

Originally Posted by Epee_Pox

1. So? Are you suggesting that people who pay LESS in taxes should receive GREATER tax cuts than others? Don't forget about people whose tax liability went to zero, or even became eligible for tax credits -- one might say their subjective benefit is the greatest, even from across-the-board reductions.

[keith]

Originally Posted by Epee_Pox

On the contrary, the law changes slowly, via precedent-based decisions and ponderous legislation. "Miraculous" sudden conversions are not something that ordinarily occur.

In the field of tax law, and the legality of strategies - oh yes it does. Or rather it ain't illegal until someone has been convicted of doing it, comparisons with criminal law are worthless. As in; there are not thousands of well payed lawyers working out how to kill someone without it being a murder .

Originally Posted by Epee_Pox

And it's not semantic nitpicking -- these are two very different terms, that are used to refer to two very different things.

......whatever your accountant tells you deary. Just remember who's signature is at the bottom of the return.

[Inquartata]

Originally Posted by jeff

If memory serves, you've alternated between the position that the rich do not dodge taxes, and that they inevitably do.

That they inevitably can; a small but important difference. Some, indoctrinated by the popular view that having money makes you a wicked person who has obviously emploited the poor somehow, may choose not to do so. Witness all of the charitable efforts of the wealthy: it's either penance or an attempt to buy the good opinion of the public.

One cliche is that the popular mob uses its vast voting power to enrich themselves at the expense of the wealthy, and the other is that the wealthy minority uses its economic power to dodge taxation - and each of these opposing forces is supposedly too powerful to be defeated by the other.

Defeated? No. Hampered? Yes.

Actually, our system of government has thus far managed to keep the mob in check. Voting for representatives who make laws instead of lawmaking by plebiscite. That sort of thing.

Not but that the vast majority of the mob doesn't bother to vote in the first place. If it did ever bestir itself to exercise its latent power...well, let's just say that I expect a certain much-protested French labor law to be withdrawn.

attempts to redress inequities in the system

Ah, ah, ah, tendentious phrasing! Not everyone agrees that there are any "inequities". Inequalities, certainly, but no moral opprobrium need attach to that state of affairs. Inequality is the natural state of mankind, due to differing endowments and abilities. If there are no inequities, there is no need for "redress", as no one has been deliberately injured or unjustly exploited.

To take from those who produce and give to those who do not is not redress. It is only redistribution.

(You didn't answer my question: if the rich are so powerful, how were high tax rates - or tax rates at all - imposed on them in the first place?

Perhaps I'll adopt your theory: that they didn't care because they always had the resources to avoid them. If your accountants and lawyers can ensure that you pay no taxes, what does it matter what the tax rate you are not paying happens to be?

If the poor are so powerful, how were they removed?)

Simple. The representatives they must elect identify not with them but with the rich, the class to which they themselves belong. And the poor, for many reasons, are a sleeping giant in America, not an active one.

[Inquartata]

Originally Posted by jeff

You're claiming that the reduction in crime that occured (say) during the Giuliani administration was purely due to a change in demographics, not do to the dramatically altered procedures for law enforcement?

Purely? No. Primarily? Yes.

There are certainly some enforcement methods that can have an effect in the short run and at the margins, under special circumstances. For example, I was watching Frontline's program on the methamphetamine phenomenon last night. It was pointed out that the DEA in conjunction with the world's chemical manufacturers had virtually wiped out a once-thriving illegal trade in quaaludes, simply by tightening control of the chemical ingredients, which require sophisticated and capital-intensive processes to make. Probably meth can be controlled by a similar methodology, because the primary ingredients, ephedrine and pseudoephedrine, are apparently similarly difficult and expensive to manufacture. But in the long run, eliminating the quaalude trade did not have any real effect on overall drug crime. Addicts simply substituted other drugs for the ones the supply of which dried up. It will be the same way with meth, I suspect.

We can no more ever be rid of crime than we can be of wealth disparities. The latter was not even achieved under Communism; how can you expect that it could be under a system which does not even label wealth disparities an evil?

The incidence of mooks born 18 years previously didn't change from one block to the next, but the crime rate did.

Right; they just moved to other neighborhoods. Temporarily. This is scarcely the same thing as "reducing crime".

[jeff]

In haste, as Mr. Obviousman has a plane to catch to visit bloated plutocrats

Originally Posted by Inquartata

That they inevitably can; a small but important difference. Some, indoctrinated by the popular view that having money makes you a wicked person who has obviously emploited the poor somehow, may choose not to do so. Witness all of the charitable efforts of the wealthy: it's either penance or an attempt to buy the good opinion of the public.

You mean to say that the wealthy have the ability to save themselves zillions of dollars and then don't use it That beggars the imagination, and is contrary to your "forces of nature" (and basic economic theory) argument about people working to their economic advantage.

In fact, they spend millions of dollars on tax strategy - hiring companies like KPMG, building elaborate tax-avoiding edifices, hire lobbyists, influence laws, etc in the dedicated pursuit of avoiding taxes.

As far as the charity stuff: that's more of a potlatch method for one bigshot to show off with the other big shots. "See, look how much money I contributed", "See, I have my name on a new building at the Metropolitan Opera". That's ego, not playing to the mob.

Originally Posted by Inquartata

Defeated? No. Hampered? Yes.

Actually, our system of government has thus far managed to keep the mob in check. Voting for representatives who make laws instead of lawmaking by plebiscite. That sort of thing.

Well, that's the thing about such cliches - reality turns out to limit them.

Originally Posted by Inquartata

Not but that the vast majority of the mob doesn't bother to vote in the first place. If it did ever bestir itself to exercise its latent power...well, let's just say that I expect a certain much-protested French labor law to be withdrawn.

d'accord. But they barely have a representational democracy in the first place. To the streets, mon ami!

Originally Posted by Inquartata

Ah, ah, ah, tendentious phrasing! Not everyone agrees that there are any "inequities". Inequalities, certainly, but no moral opprobrium need attach to that state of affairs. Inequality is the natural state of mankind, due to differing endowments and abilities. If there are no inequities, there is no need for "redress", as no one has been deliberately injured or unjustly exploited.

To take from those who produce and give to those who do not is not redress. It is only redistribution.

Caught you in assumption - did I not explicitly say "both directions". Yet here you are yammering about "taking from those who produce". Tsk. In fact, people on all sides of the tax issue, left and right, decry it as unjust - with many different definitions!

Originally Posted by Inquartata

Perhaps I'll adopt your theory: that they didn't care because they always had the resources to avoid them. If your accountants and lawyers can ensure that you pay no taxes, what does it matter what the tax rate you are not paying happens to be?

You might adopt that for fun in debate - but we know you don't really believe it! Besides, tax advice and building shelters is expensive...

Originally Posted by Inquartata

Simple. The representatives they must elect identify not with them but with the rich, the class to which they themselves belong. And the poor, for many reasons, are a sleeping giant in America, not an active one.

Not a question of identity, but "who paid to get me in to office" - in other words, the lobbyist class....

On this I must depart. Mr Obviousman thanks with appreciation with comments above about "tax avoidance"

[chefencer]

Re: fairness issue - I believe to be true the adage that if nobody likes a compromise, it's probably a good one and the same is likely true for taxes. There will never be a completely fair tax system to all minds and while there is just about universal distaste for them, not enough people have hated them sufficiently to drastically alter the way they are adjudicated or swing the burden appreciably. Yes, lobbyists and lawyers have their way in the hidden muck of our political system, but the politicians are still beholden to the telephones, faxes and e-mails of the Masses and if something (say ownership of select U.S. ports...) becomes a public issue, all considerations as to the correctness of public opinion aside, they must at least appear to be doing something.

BUT - I still say the indignation expressed in the original post is understandable and represents the opinion of significant portions of society, apart from considerations of it's validity, and in our political system perception Does make it Real (e.g.: Dubai ports...) whether we like it or not.

[Inquartata]

Originally Posted by jeff

You mean to say that the wealthy have the ability to save themselves zillions of dollars and then don't use it That beggars the imagination, and is contrary to your "forces of nature" (and basic economic theory) argument about people working to their economic advantage.

To maximize their utility, to be precise; this involves more than economic advantage. ( Mother Teresa did not work for economic advantage, but she was maximizing her utility. )

And yes, having the ability and not using it. We call it charity.

In fact, they spend millions of dollars on tax strategy - hiring companies like KPMG, building elaborate tax-avoiding edifices, hire lobbyists, influence laws, etc in the dedicated pursuit of avoiding taxes.

Yes. This doesn't prove that no one does anything else, or less. Doesn't prove that it's universal, in other words.

As far as the charity stuff: that's more of a potlatch method for one bigshot to show off with the other big shots.

You think you know what's in the minds and hearts of all those different individuals, and it's just one thing? Even economists don't go that far!

Each individual has a unique set of preferences and priorities. Economics tries to draw broad rules of behavior by aggregating them, but it recognizes that it cannot predict the choices of a given individual. At the extreme, there's always insanity to scramble things at that level.

Some give for the reasons you mention. Some give to deflect criticism and because they think it's "good for business" to be seen as having a conscience ( cough, Bill Gates ). Some give because of guilt, some because of honest wishes to help the less fortunate...all Democrats, those last, I am sure!

[jeff]

Originally Posted by Inquartata

To maximize their utility, to be precise; this involves more than economic advantage. ( Mother Teresa did not work for economic advantage, but she was maximizing her utility. )

And yes, having the ability and not using it. We call it charity

So, your claim is that the wealthiest spend millions of dollars on lobbyists and tax lawyers to create and exploit tax loopholes as a form of charity, rather than as a way to increase their net worth?

Originally Posted by Inquartata

Yes. This doesn't prove that no one does anything else, or less. Doesn't prove that it's universal, in other words.

Thus valiantly refuting I claim I never made.

Recall that we're going down this particular irrelevancy because you like to portray your arguments as "deeply founded in the basic laws of economics and of political science". Nice rhetorical trick if you can pull it off - my hat's off to you - but the principal you were pursuing was that you didn't tilt at windmills. Unless you're claiming the the windmill in question was the rich person's power to think about avoiding taxation, rather the actuality of doing it, your prior statement made no sense whatsover. You're not creating a thoughtcrime here, are you?

And then there's the tedious fact that the reality is that the tax system is widely manipulated to this effect. There's really nothing hypothetical or charitable (!) about it. Consider one cheeky example: the CPA and tax accountant Cynthia Soldano hired Patton Briggs lobbyist firm, connected with the Gallo and Mars (eg: wine and candy bars) families and set up the the "Center for the Study of Taxation". Despite the name, it was a marketing organization to create an ad campaign opposing the estate tax. She also hired Republican pollster and advisor Frank Luntz, who came up with the idea of rebranding estate tax as "death tax" and marketing it as an unfair tax that affects everybody. We don't all have "estates" but we all die. The rest is history, with the rollback of estate taxes. You want to claim that this is accidental, act of charity, or that the consequences of these individuals (eg: a specific change in tax code) is an inevitable consequence of economic theory?

Originally Posted by Inquartata

You think you know what's in the minds and hearts of all those different individuals, and it's just one thing? Even economists don't go that far!

Add this to the the vast list of things that economists, poor dullards, don't know! This is sociology and maybe psychology, rather than economics.

Originally Posted by Inquartata

Each individual has a unique set of preferences and priorities. Economics tries to draw broad rules of behavior by aggregating them, but it recognizes that it cannot predict the choices of a given individual. At the extreme, there's always insanity to scramble things at that level.

Some give for the reasons you mention. Some give to deflect criticism and because they think it's "good for business" to be seen as having a conscience ( cough, Bill Gates ). Some give because of guilt, some because of honest wishes to help the less fortunate...all Democrats, those last, I am sure!

Actually, I agree - there are a number of factors. My sour observation was prompted by memories of forced enrollment in United Way at my previous employer. It was made apparent that this was done so executives could have bragging rights, based on mandatory contributions from their employee's pockets.

[gojujay]

Originally Posted by jBirch

Heard an interesting economic argument on tax cuts the other day...

Their economic justification lies in the concept that prices stay the same, yet more things are consumed because there is more money in the system. The rebuttal? Inevitably, prices rise to the same real-value equilibrium after tax cuts. So if it cost me $1 for a basket of goods, and there is a tax cut that effects everyone equally, the cost of $1 of good rises to $1.05, effectively nullifying any stimulant effect of the tax cut. Further, more dollars in the system = less demand for dollars so there is a downward pull on the currency value overseas.

Net effect? Tax cuts don't really do anything except deplete the government's coffers. *grin*

James.

Which to my thinking is a good thing no matter how you look at it.

[gojujay]

Originally Posted by jeff

...snip... It calls to mind the endemic street crime that used to occur in New York, and the response that said it could be curtailed - and it was. Does that mean crime is eliminated? Of course not, but it's down to levels not seen since early 1960s.

Off topic, how was it curtailed? By a paradigm shift in L.E. focus.

[gojujay]

Originally Posted by jeff

Jumping in from my own debate subthread for a moment: there's a valid point that the tax code is frequently manipulated to provide tax evasion methods that are only usable for the very wealthy. Some is unintended consequences of laws meant to do other things and then found to be useful in other ways, other is specific tax legislation done for and at the bidding of its beneficiaries.

Which is one of the reasons I support a simple flat tax. The unintended consequences, like side effects from medication, can be worse than the original problem. (eg: I take this for my migraines, this for my upset stomach from my migraine medication, this for my hypertension from my stomach medicine, this for the depression that comes from my hypertension medicine. And my depression medicine gives me headaches! The sad thing is I know people like this!)

[jeff]