Let me guess – you already knew that, right? Because you can feel it in your pocketbook. From the New York Times:
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
Of course, there were some folks that made out like bandits over the last five years: those making more than $1 million:
The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
And what about the masses? Well:
Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.
I have never understood how so many people argue in favor of eliminating the estate tax, when it affects so few. I have never understood how so many people argue in favor of a favored tax rate on capital gains and dividends, when it affects so few. Two thirds of Americans make less than $50,000! By nearly any measure out there, that is far from rich.
Years ago, I asked an economist how it was that the American public bought into the idea that if they aren’t rich now, someday they would be, and, therefore, they wanted favorable tax treatments for the rich. He said he had no idea.
I don’t, either.
VIVIAN J. PAIGE | All Politics is Local 
But what is that service, TB? It is artificially created by the tax law itself. The other services you mention, accounting, financial, medical, education, etc. — even hair cuts are shoe shines — are indeed services that add to our wealth, in the sense that, at the least, they increase our sense of well-being.
My point was not to denigrate accountants — every well-managed home has one, if not one that is professionally trained. My point was that the effort they expend dealing with the complexities of the tax code is NOT adding to our national wealth. In fact, their efforts detract from the national wealth, because those efforts could be put to better use elsewhere were it not for our ridiculous tax laws.
The difference between a fee and a tax is that those who pay fees are paying for the use of something. Fees are avoidable — don’t use the road or the campground. With property taxes, one cannot avoid them by saying, “I’m not going to send my children to public school, so please reduce my property taxes accordingly.”
There is some crossover, such as excise taxes. We can avoid paying them by not buying cigarettes, alcohol, and whatever else has an excise tax on it. However, they are not avoidable in the sense that selling tobacco upon which the tax has not been paid is illegal.
First of all, I never said it compensated for all of the inflationary aspects. Secondly, you happened to have chosen to use in your example something whose value has not outpaced inflation. But I’ll play along.
Now, try finishing the math. The tax on a capital gain of $51 is $7.65. The tax on the same $51 at the ordinary income rate of 35% is $17.85. At 15%, the differential of $10.20 represents an increase in the basis of $68.
So yes, the investor is compensated.
You know, while you’re throwing out tax laws, why not jut through out all the laws? You know, the lawyers that spend all that time trying to figure out how to keep their clients out of jail – by your definition, they add nothing to the wealth of the country.
Accountants don’t add even to the sense of well- being, huh? And the “home accountants” are equivalent, huh? You have a problem, AEM, and it isn’t accountants.
You have gotten beyond tiresome, AEM. I think it’s time you find another sandbox to play in.
Vivian<
Agreed, both taxes end up claiming income. At least a sales tax does afford the individual more control over paying. Regressivity does not especially bother me. The Linder Bill (Fair Tax) deals with that issue by means of a “prebate,” however. You are correct, that you and I are not likely to a mutually agreeable position on this issue. Let’s not even get started on Social Secutiry.
Vivian — indexing the bases for capital gains for inflation is what I was looking for, which you know very well.
“Now, try finishing the math. The tax on a capital gain of $51 is $7.65. The tax on the same $51 at the ordinary income rate of 35% is $17.85. At 15%, the differential of $10.20 represents an increase in the basis of $68.”
The investor LOST in the transaction, because of inflation over the years he held the gold . Do you not agree? Indexing for inflation means just that. If inflation is high, the basis goes up accordingly, and one is not taxed on “gains” that are not real, but which are only the product of inflation. The worker in your example, however, has NOT lost in the transaction of selling his labor. Even so, replacing the income taxes with a sales tax would treat all income equally.
“Accountants don’t add even to the sense of well- being, huh?”
I certainly did not mean to say that, and I am sorry if I did. I meant only that their work on income taxes is artificially created by our tax code, and would be more useful elsewhere if we got rid of the ridiculous tax laws.
“[Why] not jut through (sic) out all the laws? You know, the lawyers that spend all that time trying to figure out how to keep their clients out of jail – by your definition, they add nothing to the wealth of the country.”
On the contrary. Laws in general, despite some notorious exceptions such as the recent “abusive driver fees,” provide security both personal and corporate. This increases our collective “wealth” considerably, not just in our sense of well-being, but materially as well. Lawyers provide a service in our knowing that we cannot be railroaded by a prosecutor with a grudge or an election to win. (The pittance we pay our public defenders is a disgrace.)
I do not see how the complexity of our income tax laws, and the efforts accountants and tax lawyers expend in try to abide by them, similarly benefit society.
“But what is that service, TB? It is artificially created by the tax law itself. The other services … add to our wealth, in the sense that, at the least, they increase our sense of well-being.”
I think the main problem here is that you use the terms wealth and well-being as if they measure the same things. When you speak of wealth, most people assume you are refering to economic wealth or real wealth. It makes no difference (in terms of value or contribution to GDP) WHY certain services and goods are produced.
Does the production of computer software contribute to national wealth? If people who created computer viruses, hackers, etc. didn’t exist we could probably agrre there would be no market for anti-virus software. Would I be happier buying other things with the money I currently spend on such software? Of course. Do such people impose a cost on me? Yes. Does this mean that the production of this software now contributes nothing to wealth? Absolutely not.
Unlike well-being, the measure of wealth is not a subjective one. It doesn’t matter whether or not you personally value the output produced. In fact, it doesn’t even matter whether the goods and services produced are “good” for you. Cigarettes, alcohol, pornography, tabloids, fattening food, …,(the usual suspects.) Do they enhance well-being or diminish it? Buy these goods, don’t buy them, it doesn’t matter. The production of each one is still part of GDP.
“The difference between a fee and a tax is that those who pay fees are paying for the use of something.”
A fee, therefore, is a usage or consumption tax. I see your point about whether or not a tax is voluntary. Calling it a fee or a tax, however, is just a matter of semantics.
You hit the nail on the head, TB! Your virus analogy is beautiful!
If political hacks stopped writing these stupid income tax laws, and instead raised money via a sales tax, the efforts of the accountant and tax lawyers could be put to productive use, rather than “counter-destructive” use.
Thank you.
“Buy these goods, don’t buy them, it doesn’t matter. The production of each one is still part of GDP.”
Another interesting addition to GDP is the working woman. A home-maker’s labors do not contribute to the GDP, but if she goes to work and hires someone to clean her house, then the house-cleaning contributes to GDP.