What It Takes to Be in the 1% Around the World

[Lake-Effect]

Originally Posted by Muaddib1116

How so?

Elimination of loopholes and exceptions. if you make more you pay more. Period.

An example...

[Muaddib1116]

I'm not sure how that would be more enforceable than the current tax system. As someone already mentioned, it all comes down to various ways of defining income etc. Even so, that's not a "fair" flat tax.

[danstanford]

Originally Posted by Lake-Effect

Elimination of loopholes and exceptions. if you make more you pay more. Period.

An example...

IT is fairly apparent that any existing 'loopholes' are intended by the architects of our various tax codes. They give us shelters for retirement or education savings because they want to encourage us to save in these ways. The rates are different for capital gains than for income for many reasons, some discussed here, but ultimately because they think it is best if they are.

Flat tax systems will almost certainly be damaging to those in the very low income categories who are currently paying little or nothing, and I cannot fathom how it would not benefit those paying higher rates.

If your intent is to be fair to all then you first have to decide how to define fair.

In some of our models we use user pay models where you would take the costs divided by the number of users to come up with a truly flat fee. This was in the spirit espoused by those claiming the unvaccinated should not be covered for Covid related illnesses.

Some other models use ability to pay as the governing principle and that most closely represents what we have now, I am in the higher brackets and so I pay a much higher rate than my kids who are just starting out.

FWIW, I believe the discussion of the top 1% and how much people believe they do or don't pay is a trap which prevents us discussing how much you and I pay and how that might change. Further, as discussed above in this thread, we also need to examine how changing tax rates will impact total revenues.

[Lake-Effect]

My position here (on tax and wealth) is pretty simple:

• I'm (mostly) a capitalist; people should be free to better themselves and to pursue wealth, and other goals. Pure socialism doesn't yet hand out free boats
• Countries have other reasons for being besides providing a safe platform and market for entrepreneurs. Countries exist for the benefit of all their citizens.
• Economic performance is required to fund a successful country, but there's more to a good life than just GDP.
• Any country's economic system that does not provide a reasonable standard of living for every citizen willing and able to work (and support for those unable to work) is flawed
• Any economic system which deprives the lower economic rungs of a decent standard of life to enrich the top layers is flawed

That's what a country's economic system should achieve, regardless of ideology. Poorer countries of course can't always manage it (though some do), but there's no excuse for prosperous countries.

As I mentioned earlier, a common factor in the prosperous countries deemed to have the best quality of life, is that the majority collect 30+% of GDP in taxes. It seems the percentage is what's significant, not the system of taxation, which differs between those countries.

I'm open to ANY economic system or taxation scheme that achieves the above goals.

[danstanford]

Originally Posted by Lake-Effect

My position here (on tax and wealth) is pretty simple:

• I'm (mostly) a capitalist; people should be free to better themselves and to pursue wealth, and other goals. Pure socialism doesn't yet hand out free boats
• Countries have other reasons for being besides providing a safe platform and market for entrepreneurs. Countries exist for the benefit of all their citizens.
• Economic performance is required to fund a successful country, but there's more to a good life than just GDP.
• Any country's economic system that does not provide a reasonable standard of living for every citizen willing and able to work (and support for those unable to work) is flawed
• Any economic system which deprives the lower economic rungs of a decent standard of life to enrich the top layers is flawed

That's what a country's economic system should achieve, regardless of ideology. Poorer countries of course can't always manage it (though some do), but there's no excuse for prosperous countries.

As I mentioned earlier, a common factor in the prosperous countries deemed to have the best quality of life, is that the majority collect 30+% of GDP in taxes. It seems the percentage is what's significant, not the system of taxation, which differs between those countries.

I'm open to ANY economic system or taxation scheme that achieves the above goals.

Well said, and I think most of us support most of those aspirations though dissenting opinions abound.

It would be great if our discussions could get a bit deeper than the rhetoric most seem to default to. What are the reasons we do what we do should be deeper than accusations of corruption and malfeasance so prevalent today.

I have an example you may wish choose to skip reading but which illustrates how we get to these places. Our city has been struggling with a much higher industrial tax rate than most similar cities we compete with. A group of us who were advocating for addressing this problem were met by a resolute City Council who complained that the industrial sector was getting a free ride. It wasn't until we realized that the pie chart representing the various sectors they were using indeed showed shrinking industrial taxes but which failed to show a corresponding reduction in taxpayers and value brought on by industrial site being converted to retail use.

[Mike OReilly]

The term "fair" has come up a number of times. It's a term I prefer not to use because it seems too open to personal interpretation. But human behavioural researchers have been probing the concept for some time. When put under the microscope, so to speak, humans (in general) do exhibit an innate awareness of what is fair.

Just DuckDuck "human behavioural research" and "ultimatum game," or "puppet studies".

Example hits:

At age six, children develop a sense of justice

Are Humans Hardwired for Fairness?

Children's reactions to inequality: Associations with empathy and parental teaching

[cyan]

Originally Posted by danstanford

This is one of the principals behind the capital gains rules. Unlike employment income, presumably you bought your capital items with already tax paid income so gains on that capital should not be re-taxed at income rates.

To use a real world example, take the real estate I have spent the last 30 years paying off. I paid personal tax on every penny of the original purchase price as I paid down the principal amount of the mortgage. It has become my retirement fund. If I were to sell it today it would put me in the top tax bracket so 50% of that value would disappear in tax. Did I mention that I paid personal tax on all the money that it took to buy the property?
As others have pointed out, there is also the element of inflation which needs to be taken into account which is the other large element of a different rate for capital gains vs personal income.

I think you hit the nail on the head here! I've seen some (Mike O?) suggest that capital gains taxes should be the same as ordinary income taxes, in order to solve the absurd "income", yet low tax cases. I think there is a strong argument to avoid this blanket solution.

Another example: Here in the US, I put in long hours for decades, paid hefty taxes, and slowly accumulated extra funds post-tax. I could have put that extra money in a bank account and paid regular income tax on the interest received. The bank would have profited and I would have SLOWLY grown my savings, MAYBE keeping up with inflation?

Instead, I invested that money in US equities, taking a bit more risk. My funds went toward companies that hired people and churned out products and services. I was rewarded for that risk, and now I have to pay the price when realizing any gains on that capital. Thankfully this tax rate is lower than regular income.

Here's the thing. I had INCENTIVE to put my ALREADY TAXED funds into companies that contributed directly to the GDP, with level a certain of risk. That was a win-win for the economy. Why should my capital gains on my already 37% taxed income also be taxed at 37%, if I accepted the risk? If that was the case, I'd re-evaluate the risk in the first place, probably removing a large part of my funds from equities. The lower capital gains rate is key. The economy wins.

Such incentive has made the wealthiest country in the world the place to come for innovation. This system is not as broken as some would believe, IMO. Perhaps there could be a progressive tax on capital gains or unrealized threshold tax, to help spread the wealth among us working stiffs... forcing more of the Buffett-types to pay up? However, I would protest the extra few thousand pages of tax code! Catch-22 there.

[valhalla360]

Originally Posted by Lake-Effect

I've been convinced by others that a simpler, flatter tax system could be fairer and more efficient. Guess what? In a fair flat-tax system, the well off would end up paying more than they do now. So this is why such a system won't see the light of day any time soon in the US.

Sure but it would take away the loopholes...I agree the politicians have no incentive to get rid of loopholes because that's how they buy the next election.

Income tax will always have complications and loopholes because you need to define what income is. It seems simple as an hourly wage earner but once you get into any kind of business, it quickly gets messy.

Much simpler to use a sales tax. While not perfect, it's much easier to define what is taxable.

[valhalla360]

Originally Posted by Lake-Effect

My position here (on tax and wealth) is pretty simple:

• I'm (mostly) a capitalist; people should be free to better themselves and to pursue wealth, and other goals. Pure socialism doesn't yet hand out free boats
• Countries have other reasons for being besides providing a safe platform and market for entrepreneurs. Countries exist for the benefit of all their citizens.
• Economic performance is required to fund a successful country, but there's more to a good life than just GDP.
• Any country's economic system that does not provide a reasonable standard of living for every citizen willing and able to work (and support for those unable to work) is flawed
• Any economic system which deprives the lower economic rungs of a decent standard of life to enrich the top layers is flawed

That's what a country's economic system should achieve, regardless of ideology. Poorer countries of course can't always manage it (though some do), but there's no excuse for prosperous countries.

As I mentioned earlier, a common factor in the prosperous countries deemed to have the best quality of life, is that the majority collect 30+% of GDP in taxes. It seems the percentage is what's significant, not the system of taxation, which differs between those countries.

I'm open to ANY economic system or taxation scheme that achieves the above goals.

I can generally agree with this but a few notes:
- It should be equality of opportunity, not equality of outcome. There should be a safety net for those who can't help themselves but for those who are capable, they should carry a good portion of the burden if they don't help themselves.
- +30% GDP in taxes: you are looking at correlation not causation. For the most part, the wealthy countries were wealthy before they raised their taxes. It's a common concern among emerging economies, can they get wealthy before they lose the advantage of being a low cost production area.

[Lake-Effect]

Originally Posted by valhalla360

It should be equality of opportunity, not equality of outcome.

If there is genuine opportunity for everyone who is willing to work, and that work provides a livable wage, then I'm with you. If the "opportunity" is some mythology about "The ___________ Dream", and some harrumphing and pointing to somebody successful who started out living 10 to a shoebox in the middle of the road, working 16 hours a day for tuppence a week... and there's a pathetic minimum wage and an entry-level economy of mostly insecure gig or service jobs... then something's missing.

There should be a safety net for those who can't help themselves but for those who are capable, they should carry a good portion of the burden if they don't help themselves.

As I said, if there is genuine opportunity and livable wages, then I'm with you. It's my experience that most people want to work, and to be respected for that work. And let's face it, if there wasn't a sea of wage/salary-earners who are content to put in their 40 hours and then enjoy their families and spend a little discretionary income, then where would consumers come from? Not everyone wants to be a type-A go-go entrepreneur. Again in my experience, there's not that many healthy out-and-out freeloaders looking for the free ride.

- +30% GDP in taxes: you are looking at correlation not causation. For the most part, the wealthy countries were wealthy before they raised their taxes. It's a common concern among emerging economies, can they get wealthy before they lose the advantage of being a low cost production area.

The 30+% of GDP is what most prosperous countries are spending in infrastructure, education, healthcare, parks and other supports and amenities for their society. Show me a wealthy society that isn't spending that much, and I'll show you a society with some significant gaps compared to the others. It seems inescapable.

[GordMay]

Originally Posted by Lake-Effect

... It's also been demonstrated to me that in the majority of prosperous nations, the social health, "happiness", quality of life, and citizen satisfaction depends less on the political system, and correlates more closely with the percentage of tax collected relative to GDP. So regardless of a country's ideology, it seems it costs ~30+% of GDP to build and maintain an advanced modern society. There is no free lunch, I've heard it said...

From L-E’s linked article: "Tax-to-GDP Ratio: Comparing Tax Systems Around the World"
➥ https://www.visualcapitalist.com/com...und-the-world/

According to research conducted by the International Monetary Fund [1], countries should have a tax-to-GDP ratio of at least 12% in order to experience accelerated economic growth.
The OECD countries all meet that threshold, with an average tax-to-GDP ratio of 33.8%.

America gains most of its revenue from the personal income tax. In fact, 41% of the country’s total tax revenue comes from taxes on personal income, as well as individual profits and gains - for context, the OECD average is 24%.

[1] “Tax Capacity and Growth: Is there a Tipping Point?” ~ IMF
➥ https://www.imf.org/external/pubs/ft...16/wp16234.pdf

[Tetepare]

So....after 28 pages, has this team compiled a fair and effective tax strategy to hand over to government?

[goboatingnow]

Originally Posted by Tetepare

So....after 28 pages, has this team compiled a fair and effective tax strategy to hand over to government?

They have to formulate a world peace plan first , then there’s a AGW solution. I think global tax fairness is after that , busy people this team.

[GordMay]

Originally Posted by Tetepare

So....after 28 pages, has this team compiled a fair and effective tax strategy to hand over to government?

It may be difficult to formulate solutions to a problem, we can't even agree exists.

[valhalla360]

Originally Posted by Tetepare

So....after 28 pages, has this team compiled a fair and effective tax strategy to hand over to government?

Sure but those with vested interests (on all sides) have little to gain from a simple and fair system.

It's like asking an arms dealer if they want "world peace". They can't say "no" but they sure aren't going to do anything to make it happen.