Organizing for America | The Large N Limit: Any Tax System is Redistribution of Wealth....(as it should be).

Any Tax System is Redistribution of Wealth....(as it should be).

By PDSimic - Nov 2nd, 2008 at 3:32 am EST

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Tags: economy, PDSimic, Socialism, Taxes, War

Poltical Punch: Jake Tapper, ABC News' Senior National Correspondent, October 31, 2008.
http://blogs.abcnews.com/politicalpunch/2008/10/obamas-new-atta.html?cid=137258875#comment-137258875

Any tax system is a redistribution of wealth. It is just that in democracies, such as ours, the shape of the redistribution curve reflects (or better, *should* reflect) the dominant civil values of the population...

During Clinton years the max tax bracket was 39.6%, while capital stock and dividend gains tax at 20%. During GW Bush years, tax bracket was 35%, with dividend income tax at 15%. In terms of the values one could say that our tax code imposes a relatively steep penalty on people who work for living and aspire to "make it" the old fashion way - by working hard and saving. This is not the whole story, of curse, but is something that should be noted if one is talking about incentives to work etc...

The ideological and theoretical argument is that Bush rates are better for economy because while they disproportionately benefit the top 1% of the income earners, the benefit trickles down. That's a theory and ideology, and it is not an established fact, mainly because economy as an academic discipline, unlike natural science, is far from an exact science and is subject of easy ideological manipulation that cover its huge complexity and the relative incompetence of some of its practitioners and their dubious interpretations of "historic facts".

For example, it is probably safe to say that today, at the end of the 8 years of Bush in office and the 35%/15% tax rate, we all are much worst off then we where in Clinton years. As a result of the philosophy and policies that Bush and McCain share - after all, they share the exactly the same group of Neo-Cons as primary advisors -, our country is at its lowest in almost all areas of national interest, the economy being the most visible to a common person.

So what this all means to a common person who is to vote in this election, works hard, hate taxes, and thinks that government is a burden that should be reduced to an *optimal* minimum?

First, avoid getting emotionally attached to theoretical and ideological economic arguments - such as "free market is cure for all", "wealth will trickle down", "socialism is evil", etc. - that you are not sure you really understand. Economy is a complex discipline, and "historic facts" are easily missinterpreted and even easier misrepresented. Stick to the basics and a common sense.

Second, don't be a sheep that becomes hysteric when an old rich man and his rich trophy wife press the key: "socialist", or, "sharing".

Third, just look at the state of the economy today:

If it looks and feels good? => vote for more of the same - John McCain!

Else => vote for change, give a chance to this young, intellectually brilliant, emotionally stable, pragmatic, inclusive, and by many accounts once-in-a-life-time leader.

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Side Punch - Tax system is not distribution... | Report to Admin

By PDSimic Nov 2nd 2008 at 5:48 am EST (Updated Nov 2nd 2008 at 5:48 am EST)

Original Punch: Jake Tapper, ABC News' Senior National Correspondent, October 31, 2008 ( Link )

Side Punch: CommonCents

Ah, PDSimic…Don’t know if you’re still around to see this. I’m sure your arguments sound studied and logical to you, but they aren’t. Your premises are mistaken, and your conclusions are pulled from emotions and generalizations - not facts. First a couple mistakes:
A. Any tax system is a method for generating revenue for the one doing the taxing (in our discussion, the Federal government). It is *not* redistribution. Government policy may or may not include redistribution. Words matter if you want to have a “rational discussion.”

Counterpunch: PDSimic

I beg to disagree. Here is why. The main use of the government tax revenue is in providing public goods and services to the citizens. These services have obviously a market value, let say, 12K per year for security provided by police. So, a person who pays 12K income tax, and a person who pays 120K income tax, all get the same benefit. The first person got exactly what he payed for. The second person got 1/10th of what he payed for. Clearly, money is collected according to some tax rate, progressive or flat does not matter, and is being *redistributed* in the form of public goods that have market value, and present widely different percentages of the recipients incomes. This is why any known tax system is fundamentally redistribution of wealth. And this is why it is pure propaganda to claim that Obama is doing something different just because he wants to cut tax burden to middle class and pay for it (as any good conservatives would do) by cutting somewhere else, in this case, restoring Clinton era tax bracket.

Side Punch: About fat cats who sit around and live off dividends | Report to Admin

By PDSimic Nov 2nd 2008 at 5:54 am EST (Updated Nov 2nd 2008 at 5:54 am EST)

Original Punch: Jake Tapper, ABC News' Senior National Correspondent, October 31, 2008 ( Link )

Side Punch: CommonCents

" Your observations about tax rates really go nowhere, because it makes some assumptions that aren’t real. That is, fat cats who sit around and live off “dividends” are favored over workers in our society. Well, that ignores the fact that most “dividends” accrue to ordinary individuals through retirement plans and the like; people who also work for a living."

Conterpunch: PDSimic

It is true that at almost any income level you will find people that will have some stock investments and some dividends, so all these people did benefit from 15% low dividend and capital gain tax. However, if you look at how much each income group actually benefits, here are the facts (SOURCE: Institute on Taxation and Economic Policy, 2006)

Average Capital and Dividend Gains in dollars for the 99% of the tax payers was between $579 for the $46K-$77K bracket, and $12K for the $154K-$396K income group.

Contrast this with the fact that the average income from Dividends and Capital gains for the top 1% income group ($396K and up) was $233K.

These data speaks for itself as far as who benefited disproportionately from the Bush "tax cut", and who is to loose more then peanuts if the tax is back to 20%.

If so, and talking about our tax code reflecting our values and giving a proper incentives to people to work, I would claim that taxing a real work (income and payroll tax) should not be a priority over taxing the gains that does not come from real work - stock market investments and dividends.

As the actual data from the Institute on Taxation and Economic Policy, referenced above, the dividends are small percentage of income for all but people in the above 396K bracket.

In fact, suppose you have a portfolio worth about 2 million. If carefully selected such a portfolio may be able to generate about 50K of dividends annually. If you are senior and the dividends are your only source of income, under Obama plan you will pay 0% income tax. I don't think this is a "socialism".

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