I have to say that I remain fascinated by the vote in Washington state that would have transferred a majority of the tax burden onto the upper wage earners (those earning more than $200,000 as individuals and $400,000 as married couples). Despite the fact that most Washington taxpayers would be financially better off under the law (estimates are that about 98% would pay no excise tax and would benefit from a 20% property tax cut instead), taxpayers sent an overwhelming “no” in response to the proposal. I wonder why that is. Altruism? Fear? Apathy?
So today’s Fix the Tax Code Friday question is:
I don’t mind if the tax code is progressive, but at least here in NJ, the current White House definition of “rich” isn’t all that rich. The cost of living is such that $250k is firmly working middle class. If you make the tax structure progressive, you need more levels. In Federal rates, lumping everyone who makes $370k and higher into one bucket is a bit of a broad brush. That would mean my wife and I are very close to being treated the same way as Warren Buffet would be treated if he lived in NJ.
Relying on high earners is risky business for a state. People with high incomes or vast capital have too many options. Many high earners and businesses have left California for lower tax states. This has, in part created the budget mess in CA. It is much better to have low taxes for all. Then everyone can afford to live in a state and you attract people and businesses from high tax states.
I am fascinated by liberals who think that soaking the wealthy is a panacea for all of society’s ills. I am further fascinated when they see that honest, working people do not subscribe to their belief in the unjust confiscation of an individual’s assets, just because they make a few bucks. Stealing is stealing, and most people believe it is immoral (except a liberal of course – to them stealing is justified as long as nobody steals from them).
Face it, corruption and incompetence in government is what is keeping is in this prolonged recession, and not a lack of a tax burden on the wealthy. “Tax the rich” only hurts the middle to upper middle class, as the super-wealthy can either avoid (not evade) tax or the additional tax burden does not hurt them.
If the government is serious about a “tax the rich” scheme, start the increase at $2,000,000 or $3,000,000, and make it a 50% rate, or 60% (HEY – IT’S NOT MY MONEY 😉 ). While I don’t think it is right to do so, at least that is where the term “rich” means something. Certainly not $250,000.
T-Bone, I am fascinated not so much by the response to the bill but more by the idea that the bill was actually supported by the wealthiest man in America – and opposed by those from his own company. It’s quite interesting, from a tax policy perspective, to see folks in similarly situated positions, wealth wise, take such polar views of the bill.
As a WA resident, I remain fascinated by the rampant misinformation about this bill. First, it did not reduce property taxes by 20%. It reduced the STATE portion of property taxes by 20%, an estimate in the news was that this would be about a 4% reduction, something like $120 for the average homeowner. The real story here is distrust of politicians. The law as written wasn’t that bad. It failed because voters think politicians would have expanded it down to the middle class. I’m below the threshold, and I voted no (if it wasn’t obvious).
T-Bone, I couldn’t agree more on the rate brackets.
Another Tax Geek, thanks for your comment. That was my mistake for not being more clear. I assumed that since the original post made it clear that these were state income taxes, that the property tax cuts were likewise understood to be state taxes. Sorry about that!
It’s all about framing. As soon as the bill is framed as “soaking the rich” it loses, because perceptions of tax fairness don’t allow most people to vote for such a thing, even when some extremely wealthy people are supportive of the measure. Progressives must find a way to defeat this sort of framing, because it is not very accurate, and because efforts to make all sorts of taxes more progressive will continue to fail.
And I suppose there is the possibility that higher taxes on the wealthy may end up chasing some of them away, but in California our historical budget problems are still much more about Prop 13 than anything else.
One problem is that when “tax” becomes a dirty word, all props having to do with it will be voted down by those who believe so. A lot of voters don’t think through the idea that taxes = more government money, in some cases because of government misuse of money and in some cases because of misinformation. Thus, the people see the word tax and raise and they vote NO.
“I am further fascinated when they see that honest, working people do not subscribe to their belief in the unjust confiscation of an individual’s assets, just because they make a few bucks. Stealing is stealing, and most people believe it is immoral (except a liberal of course – to them stealing is justified as long as nobody steals from them).”
As someone who is pro-tax, I’d like to respond. First, calling a tax raise stealing is purposely provocative; all it does is harm the discourse between you and anyone supports it. Secondly, I and many other people I know who are for tax raises are actually for them even when our own pay check is concerned. I repeat, I would not be against my own taxes being higher. I used to live in MA, where you could choose to pay higher taxes if you’d like, and I did so.
Thirdly, your comment implies that anyone who is for higher taxes in this situation is automatically not one of the “honest, hardworking people”. This is again harmful to the discourse. I’m American, I’m honest, and I work hard. I just have a different opinion than you on taxes.
I don’t disagree that calling $250,000 “rich” across the board is problematic. They should really figure out a way to make that number more fluid, to change based on cost of living.
I think the problem was that voters suspected that the minute any state income tax was put in place, it would be expanded downwards to everybody, without any reduction in sales or property taxes. I agree that the localities would have raised their share of the property taxes to keep the total the same. A 10% sales tax is already pretty steep, and we won’t even be able to deduct it next year, unless they pass an extender.
I’d prefer a state income tax and no or minimal sales tax as better tax policy, but voters are concerned we’d get an income tax in addition to the 10% sales tax, rather than instead of. The B&O tax reduction would have been nice, but nobody except business owners knows there is one. It’s on gross revenue instead of profits so it’s particularly hard on people with losses, which there have been a lot of this past couple years.
Coming from Ohio, a highly taxed state, we have already dumped our corporate income tax and personal property tax in favor of a gross receipts tax. Now we have elected a governor who promised to eliminate the individual income taxes! I’m wondering who is going to pay for all the state services?! Higher sales taxes just hurts everyone, maybe Ohio should consider just taxing state officials.
On the Washington state income/excise tax, it was fear. The voters simply didn’t believe that the politicians would leave the brackets as proposed and that eventually the middle income voter would become subject to the tax. Fear or distrust, you pick.
More and more people are becoming aware of the fact that ‘government’ is incapable of honesty and have decided to simply say “no.”
Until some modicum of confidence is restored in the government’s ability to perform some of the basic, essential functions without absurd outcomes, it’s equally absurd to talk about raising taxes on anyone.
Currently, Washington’s performance is like “The Three Stooges Get a Boat.”
Hijinks ensue.
I totally agree with you but how can I get the exact information about Alabama state tax brackets for 2010 taxes. I think e filing is the best method for state and federal tax filing.