Taxes

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No, a wealth tax is not unconstitutional

In response to a discussion about Elizabeth Warren’s so-called “wealth tax,” I recently had someone ask “How exactly does a wealth tax (which is not income) conform to the sixteenth amendment?”  (“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”)

Well, first let’s discuss the 16th and why it was passed. I will quote from this wonderful new book called “How to Argue the Constitution with a Conservative”:

You’d think it would be obvious that a country can ask its citizens for an income tax, right? Well, the United States had an income tax, too, ever since the Civil War. But when Congress tried to tax income from rental properties, well, that was the last straw. The 1% flew into a rage and a majority of the Supreme Court agreed that some income wasn’t really income. (It’s actually a lot more complicated than that, but let’s not write an essay here.) The only way to overturn a Supreme Court decision is to amend the Constitution, so that’s what we did, while pointing to the 1% and giving a Nelson laugh.

Chico: Taxes? I got an uncle living in Taxes.
Groucho: No, taxes … money, dollars …
Chico: That’s where he lives! Dollars, Taxes

The passage of the 16th amendment doesn’t mean all other forms of taxes are unconstitutional. After all, there are tariffs and capital gains taxes and inheritance taxes and property taxes and so on, and there were before and after the 16th amendment.
We have a wealth tax now — it’s called “property tax.” All Warren is proposing is that we start including other things into that tax besides your house, such as your yacht and private plane and your various investments — things that will not affect 99% of Americans in the slightest.

When you look at it that way, a wealth tax is an income tax, which is perfectly constitutional under the 16th amendment. It just means that the progressive tax we now have (where the % you pay goes up the more you have) gets to be like it was back when Eisenhower was President.

One problem is that many people don’t understand is how progressive tax works. When you hear that the top tax rate under Eisenhower was 94% you think, “Wow! Millionaires only got to keep 6% of their income?”

But that’s not how it works. You pay a certain percentage up to a specific amount. For instance, our current tax rates look something like this:

10% on taxable income from $0 to $8,700, plus
15% on taxable income over $8,700 to $35,350, plus
25% on taxable income over $35,350 to $85,650, plus
28% on taxable income over $85,650 to $178,650, plus
33% on taxable income over $178,650 to $388,350, plus
35% on taxable income over $388,350, plus
40% on taxable income over $400,000

If you earn more than $400,000, it doesn’t mean the government gets 40% of your $400,000. It means they get 10% of your income under $8,700 and then 15% on your income between $8,700 and $35,350, and so on. The highest rate is only for whatever income you have over $400,000. That’s how we were able to have tax rates in the 90% range on the very very wealthy without bankrupting them (while at the same time providing for budget surpluses). It’s also how we were able to have a balanced budget, pay for infrastructure like highways and roads, have very cheap public colleges, and otherwise do the sorts of things that make America great.

 

 

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“Taxation is thievery” nonsense

Nobody likes paying taxes.  Some libertarians take that to the extreme and claim that taxation is thievery.  They paint a picture of the evil government pointing guns at the helpless citizen (usually naked and wearing a barrel for some reason) implying that it is absolutely wrong for any government to demand that citizens contribute to society.

They long for a world where the government expects nothing from its citizens — you know, like no society that has ever existed in the history of the world.

Humans are social creatures, and unless you live in a shack in the woods away from everyone, you are expected to contribute to the society that provides benefits to you.  Even primitive societies demand that you take your turn gathering berries or weaving.

To demand otherwise is just selfish.

This does not mean that we can’t complain about the unfairness of our tax system.  I do that all the time.  We have a hugely unbalanced system where the average person foots the bills so the rich and the corporations don’t have to.  We could close loopholes and adjust our tax system to be fairer while reducing (if not eliminating) income tax on the majority of Americans — and we’d still be able to balance a budget.

And we can also complain about what the money is spent on.  I also do plenty of that.  We spend too much on things we don’t need, and not enough on things we do need.

There is a lot to criticize about our tax system and where the money goes.

But to turn that into “all taxation is thievery” — well, that’s just selfish nonsense.

tax

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Welfare drug tests and wastes of money

Another state has just spent a ton of taxpayer money forcing welfare recipients to take drug tests only to find that the number of welfare drug users is actually less than the national average. (If you think only poor people use drugs, you’re an idiot.)

Normally, conservatives hate wasting taxpayer money. But when Utah spent thousands of dollars to test drug users only to find twelve who failed the test (yes, you read that right), they considered the money well-spent.

Last year, Florida‘s program had a similar result, when the costs for testing far outweighed the 2% who failed the drug test.

“People who get government money should take these tests, and if they fail they should lose their benefits!” say some. Well, OK, but then let’s be fair about it. We should test all people getting government benefits, the vast majority of whom are elderly and/or disabled (You know, the evil “entitlement kings and queens” Romney warned us about).

Specifically, that would include:

The elderly who get Medicare and Social Security
The Disabled
Veterans who get any sort of veteran service
People who get student loans
Workers who become unemployed
Children who get school lunches
Parents who get child tax write-offs
People who get mortgage credits
Factory farm CEOs who get farm subsidies
Oil company CEOs who get “incentives”

Let’s see … is there anyone left who does not get government benefits?

Editorial cartoon of the day

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Taxes! I got an uncle living in Taxes…

Prosecutor: Something must be done! War would mean a prohibitive increase in our taxes.

Chico: Hey, I got an uncle lives in Taxes.

Prosecutor: No, I’m talking about taxes – money, dollars!

Chico: That’s-a where he lives! Dollars, Taxes! (from Duck Soup)

It’s tax day and Americans all over are complaining even though we have the lowest taxes of any industrialized country. Of course, they could be even lower for many of us if we just had a good, progressive tax system.

We’re the richest country on earth but yet our government is quite poor and in debt. Partially this is due to George W. Bush, who (a) started a war, (b) created a prescription drug plan and (c) cut taxes on the very wealthy without making any provisions for paying for any of these things.

The obvious solution when one is in debt is to increase one’s income. And, in fact, raising taxes on the very wealthy is supported by a majority of Americans. The problem is that the very wealthy have a lot more power than the majority of Americans.

Back in the old days after WWII and before Reagan handed the country over to the wealthy, we did great things. We built highways, created the internet and went to the moon — and these investments helped our economy and made us even richer. Now our infrastructure is falling apart (literally, bridges are collapsing with traffic going over them) and our science program is dead.

If we could just go back to the tax levels set by that radical socialist Dwight Eisenhower, we would create jobs, pay down the debt, and improve our standard of living.

The ultra rich though have managed to convince people that if you tax them fairly, it will hurt us because they are the “job creators.” This ignores all facts completely — we’ve had historically low taxes on these people for many years and no jobs have magically appeared.

One thing some people don’t understand is how progressive tax works. When you hear that the top tax rate under Eisenhower was 94% you think, “Wow! Millionaires only got to keep 6% of their income?” I know that’s what I used to think, especially after hearing George Harrison complain in Taxman: “If 5% appears too small, be thankful I don’t take it all.”

But that’s not how it works. You pay a certain percentage up to a specific amount. For instance, our current tax rates look something like this:

10% on taxable income from $0 to $8,700, plus
15% on taxable income over $8,700 to $35,350, plus
25% on taxable income over $35,350 to $85,650, plus
28% on taxable income over $85,650 to $178,650, plus
33% on taxable income over $178,650 to $388,350, plus
35% on taxable income over $388,350, plus
40% on taxable income over $400,000

If you earn more than $400,000, it doesn’t mean the government gets 40% of your $400,000. It means they get 10% of your income under $8,700 and then 15% on your income between $8,700 and $35,350, and so on. The highest rate is only for whatever income you have over $400,000. That’s how we were able to have tax rates in the 90% range on the very very wealthy without bankrupting them (while at the same time providing for budget surpluses).

Do I wish my taxes were lower? Of course. For those of us not earning a six figure salary, tax time can really hurt. One way we could fix that is by going back to the system that we know works, where the absolute richest pay a higher percentage.