sighs wistfully I still remember the first day I was able to exit vim without looking it up. It's right up there with that one time I wrote a function that compiled and worked on the first try.
While you ARE technically correct, the alternative in the wild is progressive taxation. That makes flat taxation a de facto regressive tax, as it will be more regressive than the current taxation regime.
I think this whole tax debate misses an important point. Taxes are viewed as revenue in terms of budget and there is a business tendency to make more revenue to cover expenses. If you stop seeing Tax as a major source of revenue and start having Govt invest money in different ways to make money other than just taxes, we can start actually having a real debate around what is a fair tax rate for govt to cover their expenses and figure out a way to make it progressive.
> Say 4 of the high earners stop working as much (since their marginal rates are so high).
I know you're just using this as an example, but it begs a question I've struggled with: is there any actual proof that marginal tax rates reduce productivity in high earners?
On its face it makes perfect micro-economic sense, but that's like saying a cache will never miss or a cow is perfectly spherical. It just doesn't match up with real life experience. I've never once heard someone say "well, I'd ask for that raise, but they're going to take so much in taxes it's just not worth the effort".
Anecdotally it hasn't changed my motivations one lick as I've moved up tax brackets, to the point that I recently joked with my dad "I guess I'm done trying now!" when I stopped qualifying for a certain tax credit after I'd negotiated hard for a nice raise.
Not-so-anecdotally there's plenty of research that has shown that money (in and of itself) is a terrible motivating factor[0].
Woah there! You've basically just claimed that the laws of supply and demand don't have an impact in the labour market. That requires more evidence than finding a link between pay and intrinsic motivation/job security.
Nobody is going to turn down a flat wage hike - but the damage of government tax policy is it shrinks the window of "what the company will pay for" and "what the worker will work for". Now we can't measure this for sure, but theory tells us it is a very likely, if not practically certain, outcome. The issue is you won't see it, because companies will just not be offering some jobs because they experimented and couldn't offer them at a wage that interested workers.
As a bonus, raises are a bit of an illusion. There is a huge amount of new money entering the system from somewhere (see https://www.federalreserve.gov/releases/h6/20170406/, about 5% p.a. increase). Most wage rises in theory are to balance that out so that you have enough dollars to call on the same real resources for hours of your labour.
If your basic economic principle argument held much water, every investment banker would have moved to a lower tax locale decades ago.
The reality is that people weigh these costs against many factors and locales, clusters of business, family and institutions have powerful effects that add friction.
From a practical standpoint, the investment banker pulling in a $500k bonus in NYC with its 11.5% marginal tax rate doesn't move to New Hampshire because he'd take a 50% or more compensation haircut.
> I've never once heard someone say "well, I'd ask for that raise, but they're going to take so much in taxes it's just not worth the effort".
In a similar vein, nearly 10 years ago in Australia, a Mineral Rent Resource Tax (MRRT)[1] was proposed, wherein mining companies making a net profit of over 5% were taxed a bit extra on the amount over 5%. Of course the miners and their fans screamed bloody murder, and threatened to move offshore. Yeah, sure you guys are. You're going to move your profitable-by-definition business in a stable first-world country and away from working mines and supply chains.
Besides, miners mine where the minerals are; they don't move to Ireland and mine there because the taxes are low.
[1] One of the earlier names for the MRRT was the stonkingly-bad-PR move of calling it "Super Tax". It was meant to be a tax on 'super profits', but a) it sounds like an extra-powerful tax, and b) sounds like a tax on your superannuation.
> I recently joked with my dad "I guess I'm done trying now!" when I stopped qualifying for a certain tax credit after I'd negotiated hard for a nice raise.
If you are still talking about tax credits, you are no where near the top tax brackets. Note that income brackets extend to more than just your reported W-2s...
Agreed, at a certain point money becomes less important. The amount of extra money the rich could make by continuing to work hard or by working harder is less of a motivational factor than it is for people in the lower and middle classes.
> Despite all the different changes in the income tax rate/other progressive taxes. This supports an overhaul to the tax code to a more simple, flat tax system. From another data source outside this report, I'd have to find it, but historically, no matter the top bracket tax rate, the Federal government collects about 15-17 % income tax. Including when the top rate was 90%+.
Even assuming that is true, it wouldn't change the regressive nature of a flat tax.
In practice a 20% flat tax on all people and corporations without exceptions and deductions would be more progressive than the current system. The wealthy pay very little taxes.
The parent is talking about "progressive" as in "the tax gets progressively higher as you make more money", not in the "social justice" sense. The flat tax being regressive means that the poor would have to actually pay more in taxes than they do now, which is very little. That's seen as a bad thing. Obviously there are solutions to that in flat tax proposals.
Second, "the wealthy pay very little taxes" is a meme. I mean, look at what we've got here:
Those making $250K and up are responsible for 51.6% of all income tax revenue. How much more should they be expected to contribute? Remember: the truly wealthy can live anywhere in the world. There's a balancing act that needs to be established between "you're not paying your fair share" and "soak the rich."
> Those making $250K and up are responsible for 51.6% of all income tax revenue. How much more should they be expected to contribute?
And this is what is so annoying about groups complaints about the wealthy paying taxes. The heavy reliance on misleading statistics.
The quote says a specific group pays 51% of all tax revenue and says it's way too much. Well did they collect 51% of all income?
An entire article that not once answers the most obvious question even though they clearly have the data to answer it.
And to be clear, I'm not talking about Adjusted Gross Income (which is the total after taking every possible deduction in the book), but actually gross personal income. The latter usually isn't reported. The former is which often is used to make percentages of taxes paid seem higher.
And I don't know the answer, it may even help their case - but the fact the most obvious stat question isn't brought up in arguments for why taxes on the wealthy are too high makes it easy to conclude these aren't discussions in good faith.
More, quite possibly. They're likely using infrastructure more heavily (primarily due to the way they make money), they more likely to rely on subsidized work by others (employing people on medicaid etc, because they're not provided health care via employer)...
It's hard to say, but anyone who is a part of a demographic minority that has collected 51% of all the income in a country's economy has clearly gotten some additional benefits.
The IRS is so nice as to provide exactly the metric we're looking for, which is:
For the group of people making $XXX per year or more, what percent of all income in the US does this group earn, and what percent of all income tax does this group pay?
Here's the groups you mentioned:
+------------------+------------------------+---------------------+--------------------------+
| Income group | Percent of tax returns | Percent of total US | Percent of total US |
| | in this group | taxable income | Income Tax owed |
| | | earned by group | by group (after credits) |
+------------------+------------------------+---------------------+--------------------------+
| $200,000 or more | 4.20% | 41.90% | 57.50% |
+------------------+------------------------+---------------------+--------------------------+
| $100,000 or more | 16.00% | 67.90% | 79.50% |
+------------------+------------------------+---------------------+--------------------------+
So yes you can see that those who earn high amounts pay taxes at greater rates than those who earn smaller amounts. However, it's not as though those earning $250k+ a year are only earning 25% of money earned by people in the US but are paying 50% of the taxes. Instead, they're payed around 40% of all the income and pay around 57% of all the taxes.
> The flat tax being regressive means that the poor would have to actually pay more in taxes than they do now, which is very little. That's seen as a bad thing.
It is a bad thing. In low-income households, there is less disposable income. In that case, taxes eat into the cost of necessities (or near-necessities such as broadband for those with slightly higher income). On the other end of the spectrum, for those with large incomes that income is largely disposable.
Dollars are dollars, sure, but there is a distinction to be made between taxing someone's food money and someone's Rolls Royce #2 money.
In other words: The marginal utility of your first dollar is significantly higher than that of your last. Also known as the law of diminishing marginal utility.
> Remember: the truly wealthy can live anywhere in the world.
As an American who often lives anywhere in the world, I'd like to point out you pay US taxes no matter where you live. (though you do get a 90k income exemption, if you are talking about the "truly rich" then that doesn't matter a whole lot)
That is still regressive. A truly progressive tax system would be similar to what we have now but with much fewer deductions that the affluent can use to lower their effective tax rate. (Oft cited that warren buffet has a lower effective tax rate than his secretary because of all the deductions and loopholes.)
Not to mention that there is a huge misunderstanding of how progressive tax rates work. A very affluent businessman was on tv saying they would essentially have no motivation to work if the marginal tax rate increased for him when Obama was campaigning. His idea was that the tax bracket above 250k per year would somehow affect his entire income if he earned more than that figure so he would only want to work until he had 249,999 dollars and then stop making money to avoid "making less money". Of course the marginal tax rate is the rate that your money is taxed above that threshold. In this case the tax rate would go from say 15% to 20% on the money earned after 250k. Let's say you made 260k that year. Your extra tax burden because of the marginal rate increasing would be 20-15= 5% on the 10k dollars. You don't get taxed an extra 5% on all your money made like that fellow thought.
Flat tax is regressive and sales tax is regressive.
I find the whole claim that people, who are otherwise hard-working people, doing whatever it is they're doing to make a lot of money (running a business, lawyering, doctoring, whatever), are going to look at an increased tax rate and just stop doing whatever they're doing. That doesn't make sense to me, from every business owner, lawyer, and doctor I've ever known.
No one would say anything even remotely like, "well, my practice is going well, I saw 20 patients today, oh what rewarding work, but what with these taxes I'll just stay home".
Every single wealthy person I've ever known, their motivation has been the thing they do first, the money a distant second. Maybe I just know pretty decent wealthy people, I dunno.
It's clearly a progressive tax, as the rate goes up as income goes up. Feel free to call the above rates or the idea of a flat tax unfair, but please don't try to glance the meaning of well defined terms like 'regressive tax' to mean what you want them to.
There are two definitions of a regressive tax. the first deals strictly with the percentage rate and the second deals with the proportionality of effect toward lower class incomes. Your flat tax would be strictly progressive on the first front but regressive on the second even more regressive if tax deductions are still a thing. The only fair tax is one that is progressive and accounts for diminishing marginal utility of a dollar. Just like sales tax is a flat tax it's regressive because of the elasticity of demand for essentials.
The point that the businessman was trying to make is not that he misunderstands how marginal tax rates work, but for the next dollar I'm going to earn, I now get to keep less. My incentive to earn the NEXT dollar is therefore less.
This is exactly why we don't have a tax rate on the top bracket of 90% like in the Eisenhower era. It's not about being taxed on all your money when you make over that amount, it is, where is the incentive to grow my self or my company if I only get to keep $0.10 of the next dollar I make.
Most people who pay multiple tax rates across brackets understand how it works.
Listen, I saw it and I know what he said. he said if he goes one dollar over 250k he would make less than if he had not gone over that threshold. this is complete bullshit and it was either an ignorant understanding of marginal tax rates or a deliberate way to obfuscate the issue with a national tv appearance where you can feign ignorance and most of the population doesn't understand tax rates.
He didn't say after 250k my motivation to work is gone because a smaller amount is returned to me.(iirc the tax rate wasn't that much more than it was before anyway) he said he would lose money if he went over that threshold of 250k.
> he said if he goes one dollar over 250k he would make less than if he had not gone over that threshold.
That actually is theoretically possible - there are numerous tax credits and deductions that come with income caps, and while they are generally phased out, it's not always a smooth slope, and can have some cliffs.
Obviously he'd be in a very odd and like one-time situation if that were the case, but it is possible with how screwy our tax system is.
> Obviously he'd be in a very odd and like one-time situation if that were the case, but it is possible with how screwy our tax system is.
That scenario is possible, sure. either way it's disingenuous to make the claim that they would lose money by making one more dollar when the tax breaks were not part of the discussion and that cliff would exist regardless of the marginal tax rate on the high earners(which they were discussing). I am ALL for simplifying the tax code to remove subsidies and loopholes and other complexities to the tax code. I am not for removing the progressive nature of the tax code.
This is such a ridiculous argument because you will never replace all taxes with a simple 20% tax since states, counties, localities, and ports all have the ability and incentive to tax and impose fees.
Due to this, I will focus on what it means to replace the income tax system with a flat 20%. A family of 4 (2 kids under 18) making $50,000 per year pays about $200 in federal income taxes if they do nothing but file their taxes and take the standard deduction, personal deduction, EITC, and Child Tax Credit. A family of 4 making 70k pays something like $2000. A family of 4 making $150k last year contributing to 401k, HSA, IRA's, 2 kids under 18, have an effective tax rate of like 8%.
In every single one of these cases, the families would be worst off (some significantly) if they were required to pay a 20% flat tax.
They also own 88% of the country's wealth. And collect 65% of the country's income. (More if you include investment gains.) Pardon me if I don't shed too many tears. [1]
Increasing taxes on them would hardly qualify as hardship. The utility of a dollar is much lower when you have ~$300,000 in savings (80th percentile), then when you have ~$300 in savings (20th percentile).
Related anecdote: With an annual income of ~$250-300,000, my net tax rate, including untaxable benefits and investment income is the same as that of my partner - who makes ~$30-40,000. If I had an income of $2,500,000, it would be substantially lower.
Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before.
The proportion of tax paid is the same at any income level. Anything that would counteract any "regressive" tax system would have to happen on the personal income side. Which means better education, opportunities, etc., to increase income levels.
I'd support a rule though that said if you make less than the poverty line (around 32k I believe?), you pay no income tax at the federal level.
> Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before.
It's regressive in that it causes the poor to pay more than they do now. With regard to taxes, progressive and regressive have specific meaning.
> The proportion of tax paid is the same at any income level.
I don't believe this is true. You'll have to back up a statement like that with references, rather than just repeating it continuously.
What you are talking about is the effective tax rate. That said, you might find this table of effective tax rates by quintile[1] interesting, as it directly disproves that point.
> It's regressive in that it causes the poor to pay more than they do now. With regard to taxes, progressive and regressive have specific meaning.
Under that meaning, a flat tax is the border between progressive and regressive taxation. It is not an example of a regressive tax.
Increasing the amount that poor people pay makes a tax scheme relatively more regressive, but if it's no more regressive than a flat tax, it's still not "regressive".
> Under that meaning, a flat tax is the border between progressive and regressive taxation.
That depends entirely how you measure. If you measure by total income, then yes. If you measure by income after necessities for living are accounted for, then a very simple progressive tax that takes that into consideration might be considered the baseline, and a flat tax that doesn't take that into consideration could be considered regressive. On the other end of the spectrum, if you make people account for all subsidized government services used and count that as income, then a flat tax is progressive. Without an agreement on the baseline for measurement (which I believe is where a lot of people start disagreeing), you can't even necessarily agree on what is progressive and regressive.
I thought progressive and regressive referred to convex and concave taxation curves, respectively (both monotonically increasing, of course). Then flat tax is exactly the border (i.e. a linear function).
While depending on background, that may be what some people think of as defining progressive and regressive taxes, and may indeed describe at a low level the concept that most people think of and even be the origination of the term, it's not the definition generally put forth currently[1][2] (which is, admittedly, very simplistic). That just goes to my point, which is that people aren't even necessarily in agreement on the terms, and might not even be aware of that.
I think these definitions are equivalent. If your marginal tax rate (at least sometimes) increases as you get more income, the curve of tax liability against income will be concave upwards. If it (at least sometimes) decreases, that curve will be concave downwards. Right?
Almost. I think the concept inside many people's heads is simplified to the degree that it doesn't even need to describe a curve. A simple step function, for example (the simplest in this case being if you make less than $X, you pay nothing, otherwise Y%). In that manner, the concept is not approximating the curve, the curve is approximating the concept.
What I meant by the proportion of tax paid is the same at any income level is under a flat tax scenario, leaving out all tax rules today of exemptions/credits.
If the rate is 10%, the proportion of tax is the same, whether you make $10 or $1 million, you are still paying 10% of your income.
Yes, the effective tax rate collected. The reference you provided only supports my claim. It looks like the effective tax rate, which is the actual rate collected by the IRS is around 20% since 1979. I'd have to find it, but if you take the data all the way back to the New Deal, the effective tax rate is around 17%. Most likely due to it being easier to "hide" income back then.
Regardless, the effective tax rate has stayed around 17-22% over almost the last century, despite the large differences in the tax rates at different brackets. Remember, the top rate during the Eisenhower administration was 90%. Yet the effective tax rate average was unchanged.
I think the problem here is that your inference that a flat tax rate would be good because the total amount of income taxes collected each year as a percent of total income hasn't change has had no supporting evidence presented, and it's such a leap to most people that they don't even understand that's the argument you're making.
Exactly why do you believe that since the total percentage of income collected hasn't really changed that means a flat tax is a good idea? The reason for a progressive tax is not to raise the total amount of taxes collected, but to change which people it is collected from proportionally. I'm not sure what the total percentage collected has to do with that.
Someone making $10 is going to miss 10% of that a lot more than someone making $100, and they're going to miss 10% of that a lot more than someone making $10,000. And someone making $1MM isn't likely to miss it at all.
The basic point in simplest form is that the less money a person earns, the greater the impact of paying 20% of their income in taxes is in terms of real dollars left to live on.
A family earning $50K will have $40K left after federal taxes to live on. A family earning $250K will have $200K left to live on. One of these families is hurt more than the other by a flat tax. This is what is meant when a flat tax is criticized as being regressive.
Thanks for the explanation of what he meant. I was thinking more macro, but by regressive, people seem to mean the micro aspect of it. I don't believe it would take a very complicated tax code, if we started over, to make sure the lower brackets are not regressive. Even just using standard deductions, child tax credits (cost of living higher), etc.
A single "family" of one making 50k though should most likely be paying their portion of tax, whatever the tax rate is. At some point an individual has to be accountable and live within their means.
So in the end, the tax rate would be flat, but effective tax rate would not.
If you are just going to carve out a bunch of exemptions, which is what actually makes that tax code difficult in the first place, to end up with the same outcomes that we have now, why change anything? It would actually be even more difficult to get the exemptions right since there would have to be more, they would have to be higher, and their phase outs would be more complicated.
Also, a single "family" of one, pays more in taxes today then say a family of four with 2 kids earning the same household income. Apologies ahead of time if I misconstrued your argument.
I've wrestled with it, and settled into prioritizing humanely-raised meat. I have far more qualms about the inhumane treatment of most farm animals than I do about the concept of raising and slaughtering animals for food.
The heuristic I apply is I only eat antibiotic free meat. It has nothing to do with animals taking antibiotics per se, but rather that large farms abuse them as it's cheaper to pump a pig full of antibiotics than it is to provide remotely sanitary living conditions, nevermind the environmental issues around creating antibiotic resistant superbugs.
Yeah I was having this thought the other day: Why own a home when you could own a self-driving RV? Obviously there will still be advantages to owning land, but there's some real appeal to having your home drive itself around for you. Imagine waking up, prepping for work, opening the door and being in the parking lot, then hopping inside after work, eating dinner, and stepping out in front of a park to meet some friends.d Maybe you own some land with a larger home that you can "dock" with, maybe you don't and you can roam the country while working remotely.
Then you start to imagine what businesses could do with this. Self-driving food trucks is an obvious example: why pay a delivery driver when your restaurant drives itself?
To my knowledge there has never been a timing attack documented in the wild on a remote server. They are only practical in offline scenarios with host access
Timing attacks are usually used to attack weak computing devices such as smartcards. We show that timing attacks apply to general software systems. Specifically, we devise a timing attack against OpenSSL. Our experiments show that we can extract private keys from an OpenSSL-based web server running on a machine in the local network. Our results demonstrate that timing attacks against network servers are practical and therefore all security systems should defend against them.
The only vulnerability of Tor, which heavily depends on cryptography, is timing analysis.
One of the most important lessons of cryptography is that it doesn't exist in a vacuum. Timing between messages and message sizes can be enough to end you.
I guess "timing analysis" means something else, more akin to correlation of meta-data. https://en.wikipedia.org/wiki/Timing_attack is pretty clear, so maybe I was referring to something else than the OP.
Right. People forget that there is no such thing as a truly "free" market. Literally everything we consider a "market" has regulations, from contract enforcement to currency standardization to abolishing violence and theft as market forces.
Allow me to followup in support: I work for a private VPN company (that coincidentally used to be a dial-up ISP), and the owner/leadership is very active in lobbying state and federal legislatures to pass privacy-oriented legislation. In other words: someone who's worked for decades on both sides of the issue acknowledges that legislation is the best solution.
Good times.