Wealth distribution

[Husar]

You guys are missing an important point.

Our money system is based on debt creation. Banks make their money from lending. The fractional reserve system allows the creation of money based on that debt.

It makes no difference if it is the government borrowing the money or the family buying a house or just taking a cash advance from their credit card.

Money is not based on any real assets. There is no gold or silver involved as in the past.

Banking interests loan you what they don’t have to pay for real things. Then when you default they are covered by insurance of the loan but also get to take the real assets and resell them, usually creating more debt.

Convincing some poor sod to go into debt just makes them wealthier. You put the focus on individuals. What about what our brilliant governments owe.

But that was my point all along. The education required to make good decisions in our system is not evenly distributed. And then rich people incite poor people to make bad decisions and afterwards they blame them for having made those bad decisions which accidentally caused the rich guys to make a profit.

[Fragony]

But that was my point all along. The education required to make good decisions in our system is not evenly distributed. And then rich people incite poor people to make bad decisions and afterwards they blame them for having made those bad decisions which accidentally caused the rich guys to make a profit.

If we keep it to America, look up the community reinforcement act of the Carter administration. You will immediatly understand why people bought houses they can't afford.

[Seamus Fermanagh]

Well, my reply to GC seems to have sparked some VERY nice discussion.

I do not object to taxation. The Athenian approach, as noted above, is even more inane.

I do not particularly want higher taxes -- though fewer loopholes written for one company and such would be a nice improvement.

My objection is with the form of taxation. If the goal of a tax system is and should be wealth redistribution....then tax wealth. Taxing income only gets in the way of those trying to achieve; it does not touch the "this isn't income" plutocrats whom GC decries so much in the first place.

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

[Rhyfelwyr]

Unless tax levels were ever made truly crippling, they will not do much to affect income inequality - it would be a token measure at best.

Taxation is not the answer. Welfare is only a short-term answer. Education is no longer the answer, as my own life testifies.

As things stand, a big chunk of the population has neither the incentive nor the means to improve their lot in life. IMO the solution is to help the ordinary worker to produce their own wealth, which would require a whole host of very broad and varied measures. That would stop the inequality at the source, rather than merely curbing its excesses as taxation aims to do.

[HoreTore]

Well, my reply to GC seems to have sparked some VERY nice discussion.

I do not object to taxation. The Athenian approach, as noted above, is even more inane.

I do not particularly want higher taxes -- though fewer loopholes written for one company and such would be a nice improvement.

My objection is with the form of taxation. If the goal of a tax system is and should be wealth redistribution....then tax wealth. Taxing income only gets in the way of those trying to achieve; it does not touch the "this isn't income" plutocrats whom GC decries so much in the first place.

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

I favour taxing what is owned rather than what is earned, even though the end result probably isn't that big since the state has to rake in the same amount of money, and that for the most part means the same people paying.

I could go on and on about how wealth taxation is better than income taxation, as the last election in Norway had removal of wealth taxation as one of the hot issues, and I argued endlessly with friends on how we should instead increase the wealth tax and reduce the income tax. The biggest problem with the wealth tax is the human brain: we react strongly to something being "taken away"(why do I have to pay tax on this house I already paid for?!?!?), but we don't really react at all if we don't get the chance to buy that thing. But since we seem to be all in agreement here, I won't do the wall of text-thing now...

[Seamus Fermanagh]

I favour taxing what is owned rather than what is earned, even though the end result probably isn't that big since the state has to rake in the same amount of money, and that for the most part means the same people paying.

I could go on and on about how wealth taxation is better than income taxation, as the last election in Norway had removal of wealth taxation as one of the hot issues, and I argued endlessly with friends on how we should instead increase the wealth tax and reduce the income tax. The biggest problem with the wealth tax is the human brain: we react strongly to something being "taken away"(why do I have to pay tax on this house I already paid for?!?!?), but we don't really react at all if we don't get the chance to buy that thing. But since we seem to be all in agreement here, I won't do the wall of text-thing now...

Clear thinking on your part. If your goal is wealth redistribution from rich to poor (I don't agree with that goal as you know, but that does seem to be the goal behind using taxation to re-balance society) then taxing anything aside from wealth is counterproductive. Taxing income means taxing the actively employed middle class...the backbone of all Western economies...but only taxes the "current accounts" of the rich.

It is one of the things I find idiotic in the USA right now. We have a progressive income tax that, in practice, hammers the upper middle class and drains the wealth accumulation potential of the working class, while shielding from taxation the very people the US political left blames for the imbalance. The solution? Higher taxes on corporations (which are passed to the working class in higher prices) and higher income taxes on wage earners over 150k (which includes lots of owner operator small businesses and other small business employers, thus discouraging job creation; and yes, it does take thousands of dollars more from the salaries of big corp CEOs....who make less than 20% of their compensation in salary and are taxed at 15% (lower then their staff's income tax rates) on the rest.

The system, as currently constituted, is inane.

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

[HoreTore]

If your goal is wealth redistribution from rich to poor

Taxation is only "a means to a means to an end", it is not the way to achieve the goal.

As I said previously, taxation is only important due to what you can do with that tax money. The actual answer to poverty is meaningful employment in private sector jobs with proper wages, for all. Taxation alone isn't going to do anything towards that goal.

Even though I agree with you on wealth v income tax, I wouldn't go so far as to abolish the income tax altogether. Tax diversification is also important, both to ensure a stable tax revenue(you can't plan long term without stability) as well as lessen the impact of loopholes.

But even more important, the process needs to be simple. If I need to do anything more than I currently do to pay my taxes(which is reading a letter from the government every january for half a minute before throwing it in the trash), I'll storm the bastille.

[Pannonian]

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

[Lemur]

[A FairTax] has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

There are actually terms for this.

A tax that gets smaller as more wealth is involved is called a regressive tax.

A tax whose marginal rate increases as more wealth is involved is called a progressive tax.

[Seamus Fermanagh]

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.

[HoreTore]

Ideally and theoretically, I like the idea of a consumption tax as the main form of taxation.

However, I fear it will be eaten alive by the iron law of unintended consequences the minute it hits reality, and so I don't really consider more than a supplement to other taxation...

[Ironside]

I have a bright chap in my comm class, b-student who owns his own tattoo parlor, who has been "paid" little or nothing since he bought a piece of the business, instead granting himself "stock" compensation in a closely held corp so that he can be taxed at 15% and not 35%.

Our current emphasis on income tax, at least as framed, fails to generate the revenues needed for sweeping improvements such as those suggested by Horetore and GC, AND manages to create stumbling blocks to wealth achievement. Trending towards the worst of both.

Increasing the capital gain taxes to normal income taxes or even the highest levels are a great reform for the US. Honestly, anybody going for a grassroot campaign should start here. It's easy to explain, easy to implement, simple and the top politicians will never touch it by themselves. Because they use it. And pay less taxes than those employed in the White House because of it.

Who has a lot of capital gain? Wealthy people. CEO:s who's changed their salary into divends. It slows down wealth accumulation and works as an indirect wealth tax.