Letters to the Editor - August 4, 2012

Tom Vail
Your dead on. As a young American that has worked hard and worked since I was16 it is very frustrating. I am 27 years old and i make less than 40k a year, but do you know what i do? I work harder. I see people who make 200k a year as inspiration. Most people who make this amount of money did it on their own. Most people that have done well did it ON THEIR OWN. Though their blood sweat and tears THEY made it happen. The issue of taxes, of course they are going to pay more than me for taxes, but they should be charged the same pennys on the dollar as i am. For example if i make 1000 dollars i pay 10 bucks. If they make 100,000 they should pay 1000. Plain and simple. We need to not penelize someone for being sucsessful, insted we should encorage people to make their own way. I dont get why people (expecially my generation) think their entitled to everything. They think they should get everything for free because they dont have money? That is when you get off your lazy butt and do what it takes to make money. I work 40+ hours a week. Its not always enough, so what do i do? I go do extra work for people. Americans need to get it together and get some self respect back and get some pride. People argue with me there are no jobs. There are jobs get up at 6 am and beat your feet, you will find a job. Last year i lost my job, within a week of looking i had to make a decision on which job to take. Most employers cant find good workers anymore. I dont know maybe i am crazy and completely wrong. But i am going to keep doing what i am doing, and work as hard as i can. Just my $.02

Young people are too dependant on "looking online," for a job. Get out of bed comb your hair, dress nice and make yourself known. I see interviews with young people at the occupy camps. They say their unemployed, why are they protesting and disrupting the true 99%. The slent majority is americans that go to work in the morning.

Oldschool....You make some excellent points about work ethic and effort. but you missed the mark regarding taxing the people in the top tax brackets...they are currently paying less of their income (percentage wise) then you are.

Capital gains tax on investments is 15%....top wage earners generally have many deductions and credits that reduce their taxable income further. Should investors pay less (again percentage wise) than people who actually work?

I understand that investment is important and it needs to be encouraged, but the tax discrimination against the 1% that Mr Vail points is silly.....taxing the 1% will not solve the country's budget issues, but it will at least force the elite wage earners to contribute an amount more in line with middle class wage earners. That's not discrimination, that is correcting a problem.

Hacksaw,

You said, "people in the top tax brackets, they are currently paying less of their income (percentage wise) then you are."

I don't think you are correct. Do you have any data to support your opinion? Warren Buffet's situation really isn't typical.

As you know,wage earners have a progressive tax that increases as wages increase. For example a single filer that made 40k (as Above) would pay 10% on income to $8500 ($850)15% on income of $8500-$34,500($3900), then 25% on income of $34,500 to 40k($1375). That would be an approx effective rate of 15.3%. At the $60k income level the effective percentage rises to 18.5%.

Compare that to the current (long term) capital gain and dividend rate of 15%.

I also think it is a fair assumption that wealthy filers have the ability to lower their taxable income further by using itemize deductions (and others) as opposed to taking only the standard deduction.

Without being political... candidate Rommney reportedly paid 14% income tax in 2010....less on a percentage basis than a wage earner at the $40k level. I believe President Obama was similar. I don't believe this situation is uncommon.

I don't have statistics for how many in our country file in each tax bracket, but Google is your friend....

You said, "I also think it is a fair assumption that wealthy filers have the ability to lower their taxable income further by using itemize deductions (and others) as opposed to taking only the standard deduction."

Almost everyone who owns a house would itemize deductions rather than take the standard deduction. I agree that there are deductions that fit some individuals differently than others. But remember, only about 50 percent of our working age population pays any federal income tax. That leaves about 50 percent who don't pay any federal income tax.

Yes I have heard that 50% don't pay anything line, but that really isn't my point. I am illustrating that the ultra wealthy have a lessor tax burden on their earnings than middle class wage earners due to their ability to use deductions (and there are many more than just mortgage interest) along with the fact that investment and dividend earnings are taxed at a 15% rate. The real point I was trying to make is that changing the tax structure and increasing taxes for the upper income brackets is not "discrimination" as Mr Vail stated in his letter. I really think it's a matter of fair and equitable treatment of earnings....

oldSchoolMAN, you're darn right when you say that the silent majority are the Americans that go to work in the morning! And I intend to do something about it.

Beginning tomorrow, I'm going to start taking up a money collection to purchase wind-up alarm clocks for all these bums sleeping in OUR doorways, OUR parks, and under OUR bridges. That way, these socialist losers can be up bright and early and off OUR streets and out of sight before real Americans head out the door to go to their jobs.

How much can I put you down for?

Hacksaw,

You may, or may not, accept this information, but I think it is pretty accurate from all of the sources that I have read. Naturally, there are exceptions for different individuals. There are other sources for basically this same information if this one doesn't work for you.

"The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percentâ��those below the median income levelâ��now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and donâ��t include payroll taxes for Social Security and Medicare."

http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes

Kona, It doesn't surprise me that a small portion of the population pays a large % of the total tax bill, because that group holds the majority of the wealth. The statistics are believable, but they don't give any indication as to the effective tax rate that individuals are paying or if they are paying "their fair share". Saying that the richist 1% pay 37% of the taxes is fine, but if the effective rates for these taxpayers is below 15% then maybe it should be more!

Kacksaw, what is your definition of "their fair share". That seems like a limitless catchall that is in the eyes of the beholder. It seems to be never high enough for some people. At what point does "their fair share" become definable?

You do realize that whatever "their fair share" means, it will not make a dent in the national debt. Spending is the real problem and until that is addressed we will be rapidly approaching the economic black hole when a recovery becomes impossible.

You said, "Saying that the richist 1% pay 37% of the taxes is fine, but if the effective rates for these taxpayers is below 15% then maybe it should be more!"

Do you have any data which says that for the "rich" "effective rates for these taxpayers is below 15%"? Or, are you guessing?

Kona, My view of a viable approach to a debt solution would include a combination of spending cuts and revenue increases. I think this is a view shared by most people.

By "fair share" I mean an effective tax rate similar to a middle class wage earner.

I think the underlying issue is that the entire tax structure is riddled with deductions and loopholes and that makes it very difficult to compare individuals with dissimilar circumstances. I also believe that members of the higher tax brackets have the ability to take advantage of the complexities of the tax code to their advantage. More deductions mean more income sheltered from taxation.....Using a previous example of Mr Romney, if he paid an effective rate of 14% on his millions in income and oldschoolman paid an effective rate of 15.3% on his 40k in earnings, then I would say Mr Romney did not pay his fair share! This is not to say Mr. Romney did anything illegal or unethical, this is only an indication of a system that is too complex and needs to be simplified to level the playing field.

I will agree with you entirely when you suggest that we have a dysfunctional tax system. I would like to have the IRS downsized to approximately zero and have a national sales tax that would eliminate boatloads of paperwork and all deductions. The "rich" would pay more because of their larger purchases and the "poor" would pay very little because of small purchases.

Naturally, this won't happen. We will keep muddling along with our dysfunctional system.

I'll second your motion, Kona. Our government is so bloated the cuts should be at the Department level, not the pennies they keep talking about. Eliminating the Departments of Agriculture, Education, HHS, HUD and Energy would be a good start. All are redundant at the state level. The military should be downsized and we should quit meddling in the affairs of others unless they meddle with us. The EPA should also go. A national sales or VAT tax would be the best way to go.

Here's an idea....how about the gov't discontinue the cost plus bidding process. Have contractors bid a contract then stick with their number.....The way it's done currently rewards contractors for going over budget.

and as long as I'm on my soapbox....the only way anything changes in congress is with term limits.....career politicians have only two goals...to get themselves rich and re elected. Not exactly the best interest of the country.

I'm glad to see my letter ignited such a vigorous and thoughtful discussion. Some response to Tom Vail. You are quite right. I am discriminating. I believe the rich, myself included, should pay a higher rate than the middle class and those less fortunate. Why? Not as punishment. Not to disadvantage or oppress a minority. To the contrary, the rich can pay more and still live very, very well. Trust me on that. They do not need a 15% capital gains rate to maintain their standard of living. They can afford more, and that will in some measure help keep the federal budget balanced. The economy will be more vibrant with a thriving middle class paying a lower tax burden while those who are most advantage carry a burden that will not weigh them down. The wealthy class depends on a thriving middle class for business to thrive.

OldSchoolMan is also right that everyone should carry their load. I am not advocating freeloaders. But don't over glamorize the rich. In my case, I was given many advantages by my parents, federal school loans, good health, and well trained employees that helped me get where I am. Did I work hard? Yes. But if I had been born into other circumstances I could easily have struggled.

Let us reward hard work and initiative and discourage freeloaders. But recognize that the rich are very often the beneficiaries of opportunities not granted to everyone, by nature and by good fortune. It is not unreasonable to let them carry a larger percentage of the burden for the systems that keep order, protect us, and educate the young.

My letter was pretty snarky, I'll admit. I get a bit peeved at the sanctimony of the wealthy who seem to feel they are islands of industry. We are all woven together. We should each carry our portion of the load to keep our nation strong.

Scott,

I think you are ignoring the reality of the situation.

You wrote, "It is not unreasonable to let them carry a larger percentage of the burden for the systems that keep order, protect us, and educate the young."

They do collectively "carry a very large percentage of the burden for the systems". It is just political fodder to say they should pay more. How much is "more"? I do not belong to the "one percent", but the 15 percent capital gains moves capital considerable better than a higher capital gains rate that you propose. It is the velocity of change (movement) in capital assets that produces tax revenue, not the one time gain (fewer transactions) from a higher tax table.

Kona,

Well, I'd say that the top 39.5% rate that was present under Clinton is reasonable. The economy did fine then and we ran a surplus. Of course, the middle class was paying more as well. I am not convinced that a higher capital gains rate would stifle the markets. Germany has a capital gains rate of 25% and weathered the market downturn better than we did. It is an argument that I am not enough of an economist to be eloquent on, but I have a hard time feeling that passive gains should be taxed at a rate higher than work. If you feel taxes discourage activity, this tax difference suggests we are discouraging labor in favor of passive gains.

For me, the bottom line is that the top earners own an ever-increasing amount of American wealth and are paying historically low rates. They can pay more. I can pay more, without adversely affecting my family. Lower income taxpayers can't always say that. Taxes are the price we pay for a civilized society. It makes sense to tax progressively.

1) The 1997 deficit-reduction bill signed by President Clinton lowered the top capital gains tax rate from 28 percent to 20 percent.

2) The "surplus" during the Clinton Administration was solely the result of the dot.com bubble. It was a disaster when the bubble popped. Similarly, the housing bubble came close to bring our economy to its knees.

3) Germany is moving into perilous times. While different from our bubble, it is just as serious. Just as in the U.S. economies built on debt are/will be struggling. "BERLIN (Reuters) - Three years into the euro zone debt crisis, the gravity-defying German economy has stalled and some fear it could fall into recession in the second half of this year. Over the past week, Europe's largest economy has been hit by a series of increasingly gloomy data releases, showing declines in manufacturing orders, industrial output, imports and exports."

http://news.yahoo.com/german-economy-faces-recession-fear-threat-euro-zone-115550039--sector.html

4) You wrote, "I have a hard time feeling that passive gains should be taxed at a rate higher than work." I can understand the "feeling", but there is considerable belief that the movement (velocity) of transactions of investment property is the important factor in producing tax revenue.

5) You wrote, "we are discouraging labor in favor of passive gains". I don't think that is the case. It is not a zero-sum situation. They can be, and are mutually beneficial. It has always been understood how important that is and why capital gains have been given tax preference.

6) You wrote, "For me, the bottom line is that the top earners own an ever-increasing amount of American wealth and are paying historically low rates."

I agree. However, I think it is a side issue (politically motivated) compared to the problem we have of building an economy on debt. I do not have a problem of increasing taxes. Especially when only 50 percent of tax age citizens pay federal taxes. This is an issue to gain political mileage to divert attention away from historic debts being piled up. It is being used to drive a wedge between different classes of citizens.

Thank you for your comments.

Well, thank you, Kona, for your well expressed opinions on a complex and difficult issue that most people had difficulty following even tangentially.

".... a complex and difficult issue that most people had difficulty following even tangentially."

That's a rather large assumption on your part, Scott.

Bravo Scott, I couldn't agree more!

Mr Gibson,

If you feel you are so rich that it wont hurt for you to pay more tax, DO IT! Send in an additional check to the IRS for as much as you want. But don't tell the rest of us what we have to do.
Don't forget that further implementation of ObamaCare is looming on the horizon. In a few years you may not be as rich as you think.

Oh and don't sell yourself short. Despite what your friend in the white house is telling you, you have a medical practice and you did build that.

Mack,

Mr. Gibson (Dr?) may have built his business, but he didn't build the infrastructure that it uses.....that is what Mr. Obama actually said.

Dealing is half truths (comments out of context) and misinformation does nothing to advance the issues at hand.Both sides do it, and it's an insult to the intellegence of the nation. The fact is, tax increases will be necessary for everyone if we really want to reduce the national debt. The unfortunate truth of the matter is that the money has already been spent and it's time to pay the bill.