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Forum Post: Simplest Suitably Progressive Tax: R*log(Income/Poverty)

Posted 10 years ago on Nov. 10, 2011, 11:07 p.m. EST by LogTax (71) from Swifton, AR
This content is user submitted and not an official statement

My attempt to come up with the simplest possible tax surprised me with what I call the log tax: R*log(income/poverty), which could be the entirety of our federal tax forms. Our current system is a clumsy, complicated and compromised approximation of a progressive tax, created for an economy that was orders of magnitude smaller. It turns out to be much more efficient, and shares the burden in a much more fair way, to use a simple, smooth curve instead.

R stands for revenue, and is the multiplier you need to replace all federal revenue. This year spending is 3.7 trillion, and to pay for that, R would be 8.83. This means if you multiply your income by 10, you add 8.83 to your tax rate. At poverty level, $11,161 right now for singles, you pay no taxes. Lower income levels pay taxes so low as to perhaps make tax subsidies entirely unnecessary. At $111,610 income per year, you would be paying a 8.83% tax rate, including SS, Medicare, the whole shebang. This turns out to be a huge tax cut for pretty well everybody below a 25 million income. It would reach 58%, if Exxon had to pay taxes on its record 45 billion profit this year. But the average business would be paying a rate lower than the lowest current corporate rate.

And it's very simple: it can fit on a bumper sticker, and that could be your tax form. You still have to work out your income, but then you divide it by 11,161, hit log on the calculator, multiply by 8.83, and that's your tax rate. A side effect of sharing taxes out with one, simple, fair rule is that when we debate about how much to spend on various things, each of us will be easily able to calculate exactly how much it would cost us, personally, and we'd have a much more solid, democratically suitable basis for those considerations, simply because of the clarity of the system.

  • So far, just about everybody who's looked at this tax system has liked it, including the flat-taxers. I have a more thorough writeup, with discussion of my methods and a very nice chart, here: http://www.scribd.com/doc/72320709/Log-Tax . I'd love to see this idea spread; conversely, if you know why it won't work, I'd appreciate hearing that too.



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[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

Something I've realized that I'd like to bring up front: this system would effectively give corporations a way to affect their tax rate - if wages went up, then the multiplier would go down, and it's those in the top ranges that would be the most affected by that. By shifting some profits into wages, they can save themselves some taxes on the profits. Combine this with the removal of the labor tax, and we have shifted the incentive structure from profit to wages.

[-] 2 points by invient (360) 10 years ago

For anyone interested here is the equation for R - btw you will need the income distribution...

R = revenue_target / summation of (log_10(income/poverty) * income)

[-] 1 points by JadedGem (895) 10 years ago

I really, really, really like this! Thanks for giving me a link to this post. I love that it keeps rates lower for most while paying off the debt. Would this still be possible if were capped at 65% or 70% even for the richest people? Would we still be able to get what is needed?

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Welcome, and thanks :)

Our spending this year is much higher than previous years, of course - from around 2.7 to 3.7 and counting. If this is a fluke rather than the new normal, and spending drops back down to say 3 trillion, then we can pay off the debt in 20 years with the tax rates at 45 billion, the record profit ever made in a year so far, just squeaking in at 59%.

Paying it all off in 10 years would put that rate at 70.1% - and it's about the same if we keep spending 3.7 trillion a year but took 20 years to pay it off. It goes up to 81.9% if we pay the debt off in 10 years while continuing to spend like we have this year. That rate is higher than I'd want it to be, but it is also not as high as it was during some very successful times in the history of our economy.

If we insist on this most-demanding case but cap the tax at 65%, the multiplier goes up to 12.55% to make up for the lost revenue; that puts the rates on income of $111,610 at 12.55%. Median income of $33750 pays 6%; a million in annual income pays 25.1%; 65% kicks in around a billion and above. That's still a tax cut on those making $2 million and less a year, which would include the small businesses, but it would be less of a cut. Still, it seems to me that the basic fairness of the tax distribution holds up pretty well even under that kind of stress.

[-] 2 points by JadedGem (895) 10 years ago

If people can pay on a home for thirty years, then 20 years is doable. I like the that it puts the taxes where they belong and favors the people who have been over paying. You shouldn't need a lawyer to figure out your taxes. Its simple, and it would cut the crap that has made it into tax law. We have taxed the very wealthy 70% before and country didn't fall apart. I think in this system far fewer people would wind up paying that than in the old system.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

That's right. With an 8.83 multiplier, you don't hit 50% until you get to about 5.2 billion - which means that even some of the Fortune 500 companies won't get to that rate - it's probably safe to say less than 500 entities would pay more than 50% rates. Paying off the debt in 20 years would produce 50% tax rates around $590 million income. I don't know how many individuals make that much - at least 400 - but it's less than 15000 companies (out of 2 and a half million companies), since only 15000 companies make more than 250 million income per year. So, in either case, very few make it to 50% tax rates - it seems safe to say less than 10,000 altogether.

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

The lower end rates are a little low so add a 5% national sales tax on everything except food, clothing, rent, and utilities. That way everyone is contributing something.

Taxing corporate profits is stupid because multinationals find ways to get out of it by moving production outside the US. Get rid of corporate taxes to favor businesses inside the US.

Instead tax capital gains on individuals when they sell stocks or collect dividends. This should encourage long term investment over day trading. The capital gains can use the same formula as ordinary income, but perhaps capped at 40% rather than 50%.

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

At the lower end of the income scale, even a little money means a lot. At the poverty level - you can be there while working full-time - they theoretically have exactly enough to live on. That being the case, I don't know how we in good conscience can demand that they pay up anything. They could argue, with some considerable justification, that our system isn't working out too well for them - that they are not well served, and ought not to be made to pay as if they were; even if they had it to pay. Frankly, too large a portion of corporate profits comes from exploiting these people, by forcing them to accept less than enough to live on.

As for taxing corporate profits, corporations want into developed markets, and that comes from the kind of work that is almost always done with taxpayer dollars. There aren't many options in the world where you can find a well-developed, efficient infrastructure, an educated workforce, and legal and currency reliability without a significant level of taxation to support that. Plenty of companies want into the American market; we are the fattest plate of bait on the planet. For any large corporation that leaves, dozens of smaller ones will come swarming in to build. Corporate rates would have to be pretty high to make our market not worth it - and they don't have to go anywhere near that level. Of course they complain about it - but that's really part of their job, to try to bring down the rates, no matter how low they already are.

Jobs going overseas is not so much about tax levels as it is about the sheer cheapness of labor in less developed countries. It takes a lot to compete with someone who works for 10 cents a day. But a broader base in our economy of people with discretionary income would create much more opportunity for local businesses to develop, and that's the kind of business that stays here, as long as we don't let the big chains talk us into ganging up on them.

I would just consider capital gains as part of income. I don't see any reason to give it preferential treatment - if I were going to encourage a part of the economy, I'd rather encourage the primary creation of wealth by labor, rather than the investments that depend on it. Like Lincoln said: "Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

Okay, here is my new formula.

Tax Rate = 50 - 50 * (0.5)^( (income - poverty income) / (25% income - poverty income) )

If we set the 25% tax rate income at $300,000 we have the following.

$ 30,000 = 2.2%

$ 100,000 = 9.6%

$ 200,000 = 18%

$ 300,000 = 25%

$ 500,000 = 35%

$ 1,000,000 = 45%

$10,000,000 and up = 50%

[-] 1 points by Thrasymaque (-2138) 10 years ago

The scale has to increase much faster than that! At $100,000 a year, you're almost around 40% in Canada

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

We don't have to do it just because you do ;p But seriously, if it meets revenue requirements surely there's nothing wrong with rates being as low as possible. My tax - 8.83*log(Income/poverty), which does meet revenue requirements this year - comes out at those levels as:

$ 30,000 = 3.8%

$ 100,000 = 8.4%

$ 200,000 = 11%

$ 300,000 = 12.6%

$ 500,000 = 14.6%

$1,000,000 = 17.2%

$10,000,000 = 26%

I don't get to 50% until you get to 5.2 billion in yearly income. And yet, it raises the revenue required, while significantly decreasing the burden.

[-] 1 points by OccupyForever (38) 10 years ago

What are your thoughts on this kids project? Might be paying a lot of taxes. http://billiondollar.me

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Apparently, he's gotten 1246 quarters so far, so a little over $300. If this is his career plan, I'd be surprised to see him get over the poverty line. But yeah, if he got a billion this year, that'd be 43.7% taxed. He'd have to keep the website for almost two years to get a full billion.

[-] 0 points by Thrasymaque (-2138) 10 years ago

You need to raise taxes so that your government can create social programs that help all citizens, like free health care.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Oh, I see. Well, once this is set up, it makes it easier to consider that kind of policy and get a good idea of what the impact will actually be. A given proposal will have a projected cost, and since everyone's taxes work in exactly the same way, it's easy to see what it will cost you as a taxpayer. That makes it a lot easier for voters to make rational, informed decisions about policy proposals like that - and also shares out the cost of them in the least burdensome way.

If it would cost a trillion bucks a year, that would make the annual spending 4.7 trillion and make everyone's taxes 27% higher (so, 11.2% rate at $111,610 income.) Those aren't the actual numbers, of course, just an illustration.

[-] 0 points by Thrasymaque (-2138) 10 years ago

That makes perfect sense.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago


[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

Is that 40% of ALL income or just 40% for income above $100,000? You have to take that into account.

I can fiddle with the 25% rate, but at least in all cases the super-rich have to pay near 50%.

Okay if the 25% is at $150,000 here are the rates.

$20,000 = 2.2%

$30,000 = 4.5%

$50,000 = 8.8%

$100,000 = 18%

$200,000 = 31%

$300,000 = 38%

$500,000 = 46%

$1,000,000 and up = 50%

[-] 0 points by Thrasymaque (-2138) 10 years ago

Your scale should be logarithmic, not linear. And "super rich" should pay 65%.

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

It's reverse exponential, not linear.

[-] 0 points by Thrasymaque (-2138) 10 years ago

OK, I see what you mean. Hmm... The percentages have to get higher much faster. You know what you should do. Create an online graphic where people can play with the parameters.

[-] 1 points by ARod1993 (2420) 10 years ago

I have Wolfram Mathematica on my laptop and I'm working on that now.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Awesome, I'm glad to see you guys interested and thinking it out!

This is what I would offer as considerations for possible curves: first, it needs to be strictly increasing, since it is clearly unfair for a lower income to pay a higher rate. Second, if you don't want things to blow up to an unreasonable degree, you'll probably have to stay away from curves that don't just go upward, but get steeper and steeper as you go (concave-upward curves.) Instead, to be able to get reasonable results across many orders of magnitude, you'll want a concave-downward curve that flattens out as it goes. But not too fast - I don't think a millionaire and a billionaire should pay anything like the same rate. And finally, the simpler the better.

[-] 1 points by invient (360) 10 years ago

Just wanted to keep this post near the top, I think it is important.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Thanks! It's good to see people are liking the idea, and are so interested in it. :)

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

Or if you stick to the ideal that no one should have to pay more than half their income in taxes the formula could be.

tax rate = 50 - 50 exp(R (poverty - income))

[-] 1 points by invient (360) 10 years ago

this obviously will not work either... for the same reason...

In addition, I did the calculation for various R, the current R being at 8 to 9, a cororation would have to make in the trillions to break the 100% barrier... and for a 12.4 R, the R needed to pay off all debt in 10 years, the mark was in the 100 billions, so I doubt there will be any issues with that.

Just to be taxed at the average tax rate (i.e. 18%) you would have to make 2 million in income or profit if you are a corporation.

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

A function that asymptotically approaches 100% makes more sense than one that's allowed to exceed 100%.

tax rate = 100 - 100 exp(R (poverty - income))

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

That's a very reasonable thought, and initially I had expected to end up with something like that, like a logistic curve. But when I checked the logarithm curve against the income distribution, it turned out to do a good job all by itself in staying under 100%, at least all the way up to low quadrillions (income per year!), which is a problem I think we won't have for a while (and of course, the multiplier would be dropping as those went up. If I add a trillion-dollar income to the tables, the multiplier gets very small.) At some point in the future perhaps we will have to switch to such a curve.

But for now I prefer the log curve for two reasons:

1) It is as simple as it can be, and I think it would be of immense value if at least one government policy could actually be easily understood - especially that policy issue that is most likely to engender resentment, taxes. People want their laws to be fair - if people can clearly see what the rules are, and that they are fairly applied everywhere, you have removed a large part of the reason for resentment. Therefore, I am in favor of the simplest thing that will get the job done right. - This is something that people could actually remember how to calculate.

2) Comparing the logistic curve to the logarithm curve, the main difference is that the lower end and working class end up paying much more, but once you get past around a million, it doesn't change much anymore - you pay as much as a billionaire pays. I think it'd be better to give relief to those who've been working hard but haven't been getting anywhere for the last three decades, rather than to those who have been making so much money over that time that they mostly spend it these days on buying each other. I'd rather make it easier to become a millionaire than make it easier for millionaires, right? Which economic setup would you rather come into? I also think that we have to realize just how many orders of magnitude we have in our economy. A billionaire makes a thousand times as much as a millionaire - how does it make sense they would pay the exact same rate? I want a tax cut below 25 million, and I think you'd be hard pressed to find anyone above that level who is significantly hindered by these taxes, in the sense of becoming unable to launch some valuable venture because of it. For those who decide to stick around, that tax cut should increase consumer demand by a huge amount immediately. It also decreases hiring costs for all businesses. That's exactly what is needed to set the economy going again. It's better, even for the largest companies, to get a slightly smaller amount of a much larger economy.

Perhaps one of the very best parts of this scheme is that it gives corporations a way to control their tax levels: the more they pay in wages, the lower the tax multiplier will go - and they are the ones most affected by that, the most motivated to bring it down, and simultaneously the ones most capable of doing it. Taxing profit instead of wages puts the incentives where we want them.

[-] 1 points by invient (360) 10 years ago

That actually wont work... income = poverty+1 ... and your taxed at 100% - some small fraction

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

No it works. Just choose a small R. Just set R = log(2) * (50% tax rate income - poverty income).

[-] 1 points by frostfern (59) from Grand Rapids Charter Township, MI 10 years ago

should be R = log(2) / (50% tax income - poverty income)

[-] 1 points by invient (360) 10 years ago

Won't this give the unemployed infinite money. 0 income and all. I know you have thought of this, just pointing it out for fun. Other than that it looks good to me. How we determine the multiplier is a little confusing to me. I wonder what would R need to be to pay off the national debt in 10 years.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Technically, you could use this to make a negative tax that gave money to those under the poverty level, but that would be a separate argument to make, and I was assuming it would just go to zero and that's it. But because this is a tax rate, it gets multiplied by the income, so when you got to zero the negative tax would be zero too. It would actually max out at around $250 negative tax, somewhere around $6000 income.

To get the multiplier, you just use log(income/poverty) and add that up for all taxpayers and see what total you get. If you got exactly the amount of revenue we need, the multiplier would just be 1. But we're spending 8.83 times that much, so the multiplier is 8.83 to make that much.

[-] 1 points by invient (360) 10 years ago

Ah, I see... so if you wanted to pay off all the debt with in the next 10 years (assuming the current spending)... the multiplier would be --->

$3.729 trillion spent per year * 10 years + 15 trillion (est debt) = 37.29+15 = 52.29 trillion total

52.29 trilllion / 2.7 trillion => R = 19.4

Of course revenue will likely change, and so will the budget... but its probably close enough...

At this rate a single person making 111610 would pay a 45% tax rate... at 25 million it would be 150% (yikes)... and at anything above that, you can imagine... I am using 19.4 * log_2 ( x/11161)... for log_10 the numbers are much more reasonable, at 111610 you get 20%, at 25 million 65% and for 45 billion you get quite a horrible number still 128%.

err I think I got it all wrong,, ill edit it later!

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Okay, one mistake I made was typing 2.7 trillion instead of 3.7. And perhaps I should have specified it's log 10 somewhere. If we wanted to pay off 15 trillion in ten years, that adds 1.5 trillion per year, for 5.2 trillion in revenue. 5.2/3.7 = 1.4, so all tax rates would get multiplied by 1.4 - the new multiplier would be 8.83*1.4, about 12.4. So at $111,161 it's 12.4%, and at $45 billion it'd go up to about 81%, which honestly is higher than I'd want to see it go. But given you're talking about paying off 15 Trillion in 10 years, it's surprisingly doable.

For these calculations, it may be easier to work from what you get with multiplier 1: about .42 trillion. Then you'd just say 5.2/.42 = 12.4. To pay off the debt in 20 years, it'd be 3.7+ .75 = 4.45/.42 = 10.6 multiplier. Although, actually, it should be noted that this year is significantly more spending than any other year. If we were spending what we did last year, an 8.2 multiplier would have us paying off the debt in 20 years, and doing it in 10 years would take about an 11 multiplier.

[-] 1 points by invient (360) 10 years ago

I fully support this then, what a simple great idea.... its like 9-9-9 but way f-ing better. Perhaps propose it to the official OWS people and see where it goes.... If not, I am sure some people in congress would be interested, since it would simply the tax code while making it progressive.

Also, just wanted to say thank you for going through those calculations... I knew I was off.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

No problem... I like to see people are thinking it through. I'm not sure how to propose it to the official OWS people, really. I've tried several things, including here.

[-] 1 points by Mooks (1985) 10 years ago

Overall I think it is a great idea. A couple issues though. Will this plan raise enough tax revenue? Also, I have hard time accepting such high corporate taxes since they will just pass the majority of those tax increases onto the consumer.

Considering everyone below $25M would see a tax cut as it is, I think a better idea that would allow more jobs to stay in (or come back to) America would be to keep corporate tax rates very low and simply increase the slope of the curve for personall income only. Large corporations are not any worse/better than small ones and and you really can't compare their profits. Company A may make $100Billion but only $10 per share, while Company B may only make $20Million but $25 per share. Should Company A really have to pay higher taxes?

When companies make money, it goes to shareholders. A large proportion of which are the super wealthy so those corporate profits eventually will get taxed anyways.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

The plan raises more than enough revenue - I used income distribution data in a spreadsheet to determine how much it would raise without a multiplier, and it was 2.7 trillion / 8.83, so 8.83 becomes the multiplier. My data was not complete, of course, so to be conservative I had to use the lowest available value for a lot of ranges. More complete data should allow the rates to be lower.

Corporations making less than 25 million in profit per year would be getting a cut - the average business makes half a million in profit and would be paying less than 15%, which is the lowest rate we have now. Right now they supposedly pay about 34%, but often pay more like 17% - but either way, it's a tax cut on the businesses that hire the most workers. In addition, notice that this tax plan would remove the 7% SS-Medicare tax on labor, making labor costs in America that much lower. This tax plan is actually an improvement from the corporate viewpoint, except for the largest 20,000 (out of 2.5 million.)

Would you rather make it easier for thousands of billionaires to double their income, or for millions to become millionaires? I think the latter would be a lot better, not just for those people but for the economy as a whole. It's not a good idea for disproportionate amounts of our economy to be gathered into fewer and fewer hands, for mostly the same reasons government control of the economy tends to go badly. A broad market, one with plenty of decision makers, is a healthier market than one dominated by the huge. Beyond that, giant corporations tend to stifle competition, as well, by controlling their part of the market. I'd rather have 10 times as many banks, each a tenth the size. Why encourage too big to fail?

Finally, corporations try, but they can't really pass all costs to consumers; they're already charging you as much as they thought they could get away with. Not all of it, but some of it, will come out of their profit instead.

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

I made a mistake typing this - it's 3.7 trillion in spending, not 2.7.

[-] 1 points by Mooks (1985) 10 years ago

For banks, yes more would be better. But what about capital heavy industries, like the automotive industry for example, that take advantage of their size to make affordable products? Many small companies would mean ridiculously expensive cars.

And the corporations will be able to charge significantly more than they do now because of the increased spending ability of the average American.

I own a dental practice and my profit margins have stayed either identical or increased in each of the last 8 years. This is despite federal tax increases, state tax increases, supplier cost increases, and salary increases for my staff. I do it by raising some of my fees every year. Large corporations will do it either by raising prices to take advantage of the new found spending power of the middle class or by cutting costs and making inferior products. Either way it is the consumer that suffers.

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

It's true that if more people have more discretionary income, probably prices will go up. But that won't cancel the benefit entirely, just mitigate it somewhat. Prices already go up all the time, as you note; it seems like our system has constant inflation built in. But at least we can give the consumer a break, even if that does mean everybody comes sniffing around for a piece of it.

I'm not sure that a GM half the size (if it came to that, which it wouldn't) wouldn't have pretty well as much benefit from scale as GM does - there is a diminishing return to these things at some point. And don't forget that the SS-Medicare tax on labor would be gone. But let's suppose that the car industries were really going to have trouble with this system. We could decide to give them a subsidy to avoid that - and we would all know exactly how much that would cost us to do, and we could decide if it were worth it, in a very clear straightforward way.

[-] 0 points by littleg (452) 10 years ago

There is no point in taxing corporations. After all they are just non living entities. If we tax the rich owners of corporations in their individual tax that is more than enough.

The billions of dollars of Exxon profit will ultimately reach some persons' bank account. It won't forever stay in the company's name. You see what I mean..

[-] 3 points by LogTax (71) from Swifton, AR 10 years ago

But it can stay in the company's name for a long, long time. For one thing, we are currently at record levels of cash hoarding, trillions in the largest companies sitting around waiting for the recession to end, and for something worth investing in to show up. Which of course isn't happening because consumer demand is so low, which is because employment and wages are so low, in part because these companies are holding on to their money instead of using it. Our tax system right now rewards that hoarding over using it, by taxing it at a lower rate.

Another consideration is that the infrastructure that supports corporations is very expensive - we incur large costs on their behalf, shouldn't they kick in on that? Corporations happily pay taxes elsewhere to enter developed markets - Hong Kong has high corporate rates, that support excellent infrastructure, and corporations mob to get in.

A final consideration is that you may not realize how much of our money is tied up in corporations. Taking out the corporate tax part makes the revenue multiplier go up to about 20, so everyone else's taxes would be 2.5 times higher.

[-] 1 points by littleg (452) 10 years ago

There are many reasons why corporations have been able to hoard so much money.

  1. Fractional banking supported by Govt and Federal Reserve. Banks lent 10 times the money that they actually collected from depositors to borrowers (working class people took mortgage and credit cards). Banks and corporations made huge amount of profits from this borrowed money while the borrowed money didn't actually exist in the first place. The borrowers went into debt during mortgage crisis while corporations took all the profits from Virtual money.
  2. Corporations believe that in the future the tax on the wealthy will be further decreased and then the richest 1% can enjoy all this wealth at even low tax rates. Once they know that tax will be increased in next 2 years you will see that all the profits will either be invested in expansion or distributed as dividends to shareholders.

I don't see both of these two problems being tackled for a long time given the scenario that democrats like Bill Clinton and Obama also support less taxes for the wealthy unlike a high progressive tax rate during 1950s.

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

I pretty much agree with that. The big financial giants were getting up to X 30 and X 40 leverage just before the crash. AIG had trillions in those derivatives with all of exactly zero to back that up (they claimed they were utterly without risk!) Then after the crash, we pretend they're actually owed as much money as they could possibly imagine getting before it.

Your point #2 becomes another argument in favor of this tax. :)

Clinton and Obama talk about small businesses a lot (so does everybody, actually, even those who seem to want to stomp them out on behalf of the largest corporations. But certainly encouraging small businesses seems to be agreed on by almost everyone as a key concern.) This tax scheme is a very large tax cut on small businesses - it's a cut all the way up to $25 million in profit per year. We have to realize the scale of our economy has made our tax system obsolete, and it's choking economic development while giving the super-duper rich - the top thousandth of the top percent - a virtual free ride.

It is a tax cut on economic development, creation of wealth, and a tax increase on large-scale accumulation of wealth by use of a dominant economic position.

[-] 1 points by AFarewellToKings (1486) 10 years ago

Sounds good to me. The folks over at the 99% Declaration would like to see this i'll bet. Number 5 on the SUGGESTED list of grievances is " A Fair Tax Code" https://sites.google.com/site/the99percentdeclaration/

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Thanks, I'll take a look at that.

[-] 1 points by Rico (3027) 10 years ago

You overestimate the intelligence of the masses ;o)

Did you watch the last GOP debate ? You're going to suffer the same fate as John Huntsman... way to "intellectual" for a country run by the "average" man !

[-] 1 points by LogTax (71) from Swifton, AR 10 years ago

Ha, good thing I'm not running for Pander-In-Chief... but most people can work a calculator, and 'log' is just one of those buttons. Once they see the chart and see where they are on it, they're alright with just skipping the math part. Plus, seriously, you can put the tax code on a bumper sticker, let's see it get simpler than that.

[-] 1 points by Rico (3027) 10 years ago

Are you kidding ? I'm an engineer, and in my experience, the "average joe" struggles with "average." ;o)

[-] 1 points by PartyX (202) 10 years ago

Andrew Jackson considered himself an average man...who balanced the budget I might add under his watch

[-] 1 points by Rico (3027) 10 years ago

Of COURSE we can impose exponential burdens on income to "balance the budget."

Where is "due process" and "equal representation" in a system that makes me or anyone else pay EXPONENTIALLY more for using FEWER government services than most ? "Taxation without Representation" is a known evil. How fair is "Disproportionate Taxation without Proportionate Representation" ?

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

First, it's not exponential, it's logarithmic. An exponential curve puts top tax rates well above 100%. This one actually becomes flatter as it goes higher.

I assume you're saying you'd be paying more because you make more. In that case, you're not using fewer government services than most - you're using much more, just not so direct. A tiny fraction of the budget goes to the services you're talking about. Much more of it goes to building the physical, legal and economic infrastructure that makes high incomes possible in the first place. How much could you make in an economically undeveloped country? A tenth as much? Economic development is not cheap, and if you want in on our market, built and maintained largely by taxes, you can pay your share of them. The more you get out of it, the more you should put back in. The costs of maintaining stock markets, high finance and property protection are very high, and redound almost entirely to the benefit of the richest. The very highest tax rate in this system is still below where it was at any time in this century, except the decade before the Depression and the couple of decades before our Recession - which is to say, it's a tax rate cheaper than the one that allowed for the most incredible economic development in our history.

By the way, given that you are quoting Revolutionary rhetoric, you may be interested to know that both Thomas Jefferson and John Adams were adamant about the necessity of progressive and inheritance taxation, to prevent the development of a new aristocracy of oligarchs. Do you think that's not what we have today?

[-] 1 points by Rico (3027) 10 years ago

LogBase10 of a value defines the power of 10 that equals said number. It is only limited to 1 if the value is limited to the base. Maybe you limited the input value, I didn't notice.

The cost of maintaining stock markets and high finance is paid by the investors and listed companies, not by the government. Nevertheless, I will grant you the point that the rich would not be rich if not for the general conditions fostered by government. The largest proportion of my federal tax dollar, however, goes to entitlements, and I fail to see how the people living off entitlements contributed. The one portion of government spending that clearly benefits the rich is defense; poor nations don't tend to get attached and have fewer foreign interests. The cost of defense, however, is much less than the cost of entitlements, so maybe we'll call that even.

I didn't say I was against progressive taxes. In fact, I favor them, but they can't be so progressive as to become theft and blow right through equal protection. I'm also very negative on people receiving unearned income, so yes, I am against passing on huge inheritances. As you probably know, however, it's pretty easy for lawyers and accountants to move assets before death and avoid the tax, so it tends to hit the average man more than the rich.

Yes, I agree. We have progressive taxes and inheritance taxes today ;o)

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

Regarding log base 10, don't forget that the rate is interpreted as a percentage, so effectively divided by a hundred. It could theoretically go above 100% - but you'd have to have an income in the low quadrillions to get there, so not really a problem for the foreseeable future.

Are you throwing pensions in with entitlements? That is something like 20% of the budget, but those people earned those pensions doing their jobs. Welfare, which is what you seem to be complaining about, is more like 12%, making it the fourth biggest chunk of the budget. Most of that, of course, goes to those who could hardly be expected to contribute much - children, cripples, the bedridden, the suddenly single mother of three. Some people get money who shouldn't, to be sure, but that's a much tinier portion of your taxes than you would think, given the amount that it's talked about in the media.

You say only defense clearly benefits the rich - but you also acknowledge that they would not be rich in the first place without the general conditions fostered by government. That is precisely the principal benefit I was thinking of, and it's worth quite a lot (really, anything that lets you stay rich.)

With regard to moving assets, it makes more sense to me to treat those movements as income that year for the one receiving it. It would be cheaper to do it in ten small installments rather than one big wad, but I don't know if that's really a bad thing.

[-] 1 points by Rico (3027) 10 years ago

Health, Medicare, Income Security, and Social Security.

See the numbers for yourself at http://www.investorguide.com/taxtrackr/

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

Medicare and Social Security is currently paid for by those who get it, it's not welfare in any sense. Health includes some welfare, but also includes stuff like the FDA, mine safety, research, and health insurance for the employees. Most of it's Medicaid, most of which goes only to people who seriously must have it either to live, or to live a productive life, and have no hope of being able to pay for it. Income Security has most of the kind of thing you're complaining about, but it too is mostly just the retirement plans of employees, as any employer must have. You're talking about fractions of fractions, that have been blown out of proportion to suit certain agendas.

[-] 1 points by Rico (3027) 10 years ago

I read an analysis 3 or 4 years ago stating that the money a person pays into Medicare and Social Security is consumed in the first 7 years. The remaining years are 'welfare' or more politely 'entitlements'. You are sore misinformed about medicare being only for those of limited means... it is nationalized health care for the elderly.

“When the people find they can vote themselves money, that will herald the end of the republic.” - Benjamin Franklin

[-] 2 points by LogTax (71) from Swifton, AR 10 years ago

That's a misleading analysis, because so far those programs have been paid for entirely by the people paying into them, all of whom are eligible to receive it. If you think about it, a system such as you have described would have collapsed long ago, rather than producing surpluses the whole time, even while being raided by congress. I can think of two main things that someone could use to arrive at numbers like that. One would be to decide the corporate side of that tax is welfare - but it's more like a pension. Another is the fact that the money you're paying in now is actually being spent now, too, on people who paid in long ago, with a long period of inflation between. Their dollar amount, if you made the direct, irrelevant comparison, would be unimpressive, it's what they made decades ago. In real terms, of course, what they've paid in has more than matched what they've paid out.

Welfare and entitlements are not the same at all; they have been systematically conflated by those who wish to now deny millions of people the retirement and health care they have been paying for all this time. They tell you they're taking it away from lazy youths who don't need it and didn't contribute, but then they slip the word 'entitlements' in there. Pretty tricky, huh?

The elderly, by and large, are of limited means. At some point, Granny simply cannot go and work to pay for her health care anymore.(I see all too many trying to do that - old people doing manual labor that is taking years off their life.) And at that point, they have paid into Medicare for decades and yes, are fully entitled to benefit from it now.

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." - Thomas Jefferson

[-] 1 points by andrewinsandiego (26) from La Mesa, CA 10 years ago

Are you really a billionaire? Is that what billionaires do in their spare time, post to the OWS forum? Or are you just one of those upper-middle class puds who's continually overcome by a baseless, fantasmatic identification with billionaires in order to feel aggrieved over....something?

[-] 1 points by Rico (3027) 10 years ago

Billionaire ? nope. Millionaire. I entered my net wealth into a calculator somewhere, and it reported I was in the top 5%.

[-] 1 points by PartyX (202) 10 years ago

How we manage money is the biggest fault of our government. Social Securtiy was set up in a way that the gov't can pull money out anytime it chooses. A lot of other systems are set up similarly. I think how much we pay for service preformed for the gov't is the bigger problem. Including, pensions and health care for unisured/medicare...

[-] 1 points by Rico (3027) 10 years ago

I say one vote per dollar paid in taxes. Most in OWS shouldn't be too concerned about this because we all know the rich pay no taxes !

[-] 1 points by PartyX (202) 10 years ago

I did not vote for Bush, nor his dad or even Ronald Reagan...

[-] 0 points by athousandmillion (1) 10 years ago

The problem with the occupy people is they do not exercise their second amendment rights. Just imagine, what will the police do when five thousand armed citizens say we are not going to be assulted by you today? Start a war? There are 300 million citizens in the U.S. and sheep as they are allow them selves to be hearded by a few sheep dogs. Pathetic!

[-] 1 points by JesseHeffran (3903) 10 years ago

That sound like a nuclear option which is suicide.