pageok
pageok
pageok
Soak the Rich!:

Obama's tax plan, according to this article, would raise the marginal rate on the self-employed who earn more than 250K to 53%, including income and social security taxes (taxes would be lower for employees, but their wages will be reduced because their employers will have to pay half of the social security tax increase). The marginal state and local rate for residents of New York City is around 11.5%, which will likely not be deductible for federal purposes because of the AMT. I'm not sure exactly how the AMT fits into this (does anyone really understand the AMT?), but figure the top marginal tax rates for residents of NYC, DC, California, and similar high tax areas will be 60% or higher. Yikes!

I expect that attorneys, physicians, and other high earners are going to be negotiating for less income and more non-taxable compensation (reimbursement for continuing education vacation boondoggles, more money to pensions, and so forth), rather than submit to having most of their income siphoned off by the government.

I remember reading a few years back that the majority of Americans don't think that anyone should pay more than 1/3 of his income in taxes. A campaign issue for John McCain?

Mahan Atma (mail):
What's the Republican solution?

Apparently it amounts to sticking our children with the debt from spending god-knows-how-many billions or trillions of dollars in George Bush's wars.
6.22.2008 11:48pm
Suzy (mail):
I thought Obama's original idea was simply to raise the amount of income subject to soc. sec. taxes from 102k to a higher figure. That seems like a good idea to me, and I don't undertand where this twist on it is coming from. Is it simply that he hadn't worked out how self-employed workers were going to be affected, and thus wasn't very prudent in designing the plan? Or does he intend for it to have this effect, and if so, why 250k? Because that does seem like an income mark that is going to affect a lot of working professionals and small businesses, who will have to do backbends to avoid these tax consequences, if they can. Bizarre idea.
6.22.2008 11:48pm
highway61:
Good blog post = interesting fact.

Better blog post = interesting fact + analysis.
6.22.2008 11:51pm
DavidBernstein (mail):
Suzy, Occam's Razor suggests that the answer is that Obama realizes there are a lot more voters who make between 102 and 250 than who make over 250.
6.22.2008 11:53pm
DaveS (mail):
You're adding the wrong rates. If you're going to add in the state and local taxes back in, you've got to use the AMT rate for federal, not the "regular" marginal tax rate.

Also, your "earning more than 250k" claim is a bit misleading -- what you really mean is "having an AGI above 250k, after deducting home mortgage interest, charitable contributions, etc."
6.22.2008 11:54pm
jps:
I think this post misleads as to what a marginal tax rate is. 53% of income over $250 k does not mean more than 1/3 of total income.
It should also be noted that the top marginal tax rate was 50% for most of the Reagan administration (1982-1986). Prior to that, the top marginal tax rate was never below 63% from 1932-1981.

So clearly this is not some radical socialist agenda.
6.22.2008 11:56pm
John Howard (eggandsperm.org) (mail) (www):
Hmm, not a good campaign issue for McCain, because this is exactly what we blue-collar McCain supporters want to do to lawyers, etc. Let Obama make the case for this, and McCain quietly ride the coattails. If McCain objects too strenuously to this, he may just lose his base to Obama. But he should object in general terms, pointing out that Obama wants to raise taxes and spending and increase the size of government.
6.23.2008 12:02am
davidbernstein (mail):
Dave S., I just don't have any idea what the AMT rate is going to be under Obama; if you do, please tell. And I believe the SS tax, being based on payroll deductions from earned income, will kick in even if AGI is (well) below 250k, though it's possibel that the income tax rate will be lower if there are enough deductions.

JPS, when the rates were high in the past, there were also many more deducttions available, and fewer restrictions, e.g., on funding pensions and otherwise dodging the tax man. Not too many people were actually paying an effective 50% rate in 1982, much less the higher rates before that.
6.23.2008 12:02am
L.A. Brave:
Suzy:
The point of Social Security is that your future benefits will be comparable to your contributions. Or at least that was the point. Over time it has drifted from a forced-savings system to a wealth redistribution system.

The caps at least held the system close to its original purposes. People making $100k get an extremely poor return on the Social Security "investment" because, even though benefits are tied to your lifetime contributions, there are caps on your benefits later in life. Once you get to people making $250k or $1m, etc., though, Social Security would become pure redistribution without the caps, because your lifetime benefits will be very low compared to what you paid in.
6.23.2008 12:02am
John Howard (eggandsperm.org) (mail) (www):
McCain should link in torture - he would not only squeeze the lawyers, he'd waterboard them while squeezing them: "Are you sure that's all you've got?"
6.23.2008 12:04am
Bruce Hayden (mail) (www):
What's the Republican solution?

Apparently it amounts to sticking our children with the debt from spending god-knows-how-many billions or trillions of dollars in George Bush's wars.
Except that Obama has admitted that he wants to raise tax rates even if it does not generate additional revenues.

The problem is that a rise in tax rates does not necessarily result in an increase in tax revenues. Sometimes it does, sometimes it doesn't, and sometimes it even results in lower tax revenues. The simplistic assumptions behind the static analysis so prevalent on the left these days were debunked better than twenty years ago.
6.23.2008 12:04am
davidbernstein (mail):
John Howard,

I was thinking more along the lines of McCain making the general statement that Obama wants to raise taxes in general, and even thinks that some people should be paying 60% or more of their income to the government. True, and it's not a great soundbite to respond, "well I only want the top 3% to pay 60+%," because that sounds like too much to almost everyone, and you're basically conceding the point. One nice thing about America, class warfare is rarely a successful political strategy.
6.23.2008 12:05am
L.A. Brave:
DaveS:
Social Security and Medicare come off the top. The only deductions that escape their grip are medical premiums paid through your employer's qualified plan. Even your 401k contributions, which aren't subject to income tax, get hit with FICA.
6.23.2008 12:05am
Bruce Hayden (mail) (www):
The problem with wealth distribution in the SS system is that the program has been sold for 70+ years as a retirement program. But the more that you separate contributions from benefits, the more the program is going to lose legitimacy and start looking like other social welfare programs. It is fine when the welfare part is a minor part of the entire program, but not good when it starts to predominate.

Many of the next generations are already questioning whether they will ever recover the amount of money they are paying into social security. As it becomes ever more a welfare program, and they see themselves being the ones supporting it, many are likely to be willing to pull the plug on the program.
6.23.2008 12:09am
davidbernstein (mail):
I know that if I were approaching the 250K figure in salary, I'd try to negotiate a higher research budget, more research leave, a travel budget, etc., rather than find myself paying over 50% in marginal taxes. Whatever such an increase would raise in a static analysis that assumes no changes in behavior, it will raise a lot less in practice.

Another example: An MD friend of mine, lives in NYC, salary around 300K, also does side work for $75 an hour reviewing insurance claims. I think his leisure time is almost certainly worth more to him than working for a post-tax $25 an hour, so that income will just disappear.
6.23.2008 12:12am
Mike& (mail):
What's the Republican solution?

Apparently it amounts to sticking our children with the debt from spending god-knows-how-many billions or trillions of dollars in George Bush's wars.


If we're going to raise taxes, let's raise everyone's taxes.

Also, raising society security taxes is a scam, since SS taxes are supposed to be (mostly) proportionally pegged with the return one can expect from SS.

Obama does not have the integrity to say what he's really doing - raising income taxes.
6.23.2008 12:13am
theobromophile (www):
Okay, to all you old folks who went to school back in the days of tuition that could be paid with a full-time job... earning a lot of money does not equate to wealth.

The interest on student loans is tax-deductible (to a point, provided that the payor is not subject to AMT); the principle is not. I got off easy, with just over $100,000 in loans; many of my friends are in the $150,000 range. Those who are starting law school now will likely graduate with almost $200,000 in principle alone.

So let me see this the way that Democrats see this. You graduate from college (perhaps with some debt). You did well. You're smart enough to get into law school. You spend three years forgoing any salary, so you graduate at age 25 or 26 with no savings, no IRA, no 401(k), etc. You owe $20,000/year (or more) in student loans. You work 80 hours a week. So, according to Obama (et al.), if you're 30 years old, working 80 hours a week, just starting to replace your clunker of a car that got you through law school, still paying over $20,000 after taxes for your student loans, and working the equivalent of two jobs as you try to accumulate savings - you're rich enough to soak for more taxes.

Someone care to explain? (Don't even get me started on how this would apply to doctors. At least we're only in school for three years and don't have to defer our loans while we do residencies and internships.)
6.23.2008 12:13am
Lior:
Even before the Iraq war expenses, the actuarial deficit of social security meant that taxes would have to be raised at some point. Since the war expenses have also been deferred to the future, future taxes will need to be even higher. In both cases, raising taxes and balancing the books sooner than later is the prudent thing to do (and once SS's books are balanced it will be possible to talk about making it voluntary or changing it in some fashion).

On the other hand, naming the new taxes "Social Security" taxes is a bad idea. In the near future SS itself will not be in the red. Rather, the US has a large debt to the SSA (the so-called "trust fund"). This debt, is no different from the war debt, and should be paid by increasing general revenue (that is, by increasing the income tax and corporate taxes, or even better by scrapping large chunks of the federal government).
6.23.2008 12:15am
L.A. Brave:
theobromophile:
It gets worse. The student loan interest deduction phases out completely for incomes over $65,000.
6.23.2008 12:16am
Chris Bell (mail) (www):
Bruce Hayden:
Obama has admitted that he wants to raise tax rates even if it does not generate additional revenues.
Do you have a cite for that?

The problem is that a rise in tax rates does not necessarily result in an increase in tax revenues. Sometimes it does, sometimes it doesn't, and sometimes it even results in lower tax revenues.
I remember reading a paper arguing that Republicans should drop this argument because the point at which total revenue gains decrease is absurdly higher than you would expect.
6.23.2008 12:21am
Jim at FSU (mail):
I sure picked a hell of a time to go into patent law.
6.23.2008 12:33am
BGates:
Theobromophile - what you need to do, is go into the helping professions. You'll still have to worry about buying fresh fruit, and spending 5 figures on summer camp for the kids, but between the hospital salary and the book advances you and your wife will be fine.

Chris - Obama made that claim in the last debate with Hillary. Also, I remember reading a paper - do you have a cite for that?
6.23.2008 12:42am
Avatar (mail):
I'll be honest - I don't see the justification for phasing out Social Security deductions at an arbitrary level of income.

It's -not- a retirement plan. It never has been. It isn't going to become so in the future. It's a tax on your income. Hell, I get hit -double- on it because I'm my own employer, meaning that I'm paying something like 13% of my income in Social Security taxes. So why should I have to pay this tax on all my income (twice!) and you shouldn't have to pay it on yours? I'm certain you're not making less than I am...
6.23.2008 12:46am
gattsuru (mail) (www):
Hell, I get hit -double- on it because I'm my own employer, meaning that I'm paying something like 13% of my income in Social Security taxes.


Everybody gets hit double; self-employed folk are just the only ones to see it as visibly. When a dollar an hour raise costs my employer an extra 7.65 cents per hour, the numbers rather quickly add up and get in the way of that raise.
6.23.2008 1:07am
theobromophile (www):
but between the hospital salary and the book advances you and your wife will be fine

BGates - I know I've been fairly open about my affiliation with both Massachusetts and California, and also about my perpetually miserable love life... but it's still a surprise to learn of my change in sexual orientation via the Volokh Conspiracy.

Now, to address the substance (?) of your post: I wasn't commenting about the value of those professions to the people who practise them. I was commenting on the wisdom of assuming that income can be correlated with wealth in 2008, when it takes an enormous investment of capital to obtain that income.

LA - thanks. I was almost sure that the deduction phased out around $60k/year, but didn't want to be wrong. Would much prefer to be corrected in a way that strengthens my point. :)
6.23.2008 1:13am
Zed:
For a single person in 2008, the AMT rate is 26% between $46k and $112k annual income, 32.5% between $112k and $175k, 35% between $175k and $300k (roughly), and 28% beyond $300k.
Yes the rate goes up and then down, because of the phaseout of the AMT exemption after $112k. The above is assuming that the AMT patch is passed; it would be even worse without the patch.

So a single person making $250k a year will be taxed at 62% marginal rate if you add the AMT, Social Security, Medicare, and 11.5% state taxes together.
6.23.2008 1:32am
A. Zarkov (mail):
Here is my solution for the SS funding problem. Reduce benefits. 1. Raise the retirement age. Let's also remember that Social Security does more than track inflation; it boosts benefits as the general level of wages rises. The theory being a retiree deserves more money just because the country got richer. Thus 2. change the payout formulas. Finally 3. Make the trust fund buy tradable securities instead of the non-tradable special issue Treasury bonds used now to disguise the fact that the federal government spends the SS surplus.

We could also force the federal government to use accrual accounting instead of cash accounting. The latter disguises the massive unfunded benefits politicians keep handing out. After all, buy law any business with over a $1 million in receipts must use accrual accounting. Why shouldn't the federal government do the same.
6.23.2008 1:35am
A. Zarkov (mail):
"also about my perpetually miserable love life... "


That might be easily fixable.
6.23.2008 1:38am
whit:

Over time it has drifted from a forced-savings system to a wealth redistribution system


two points about ssecurity. it may be a wealth redistribution system, but blacks (most specifically black males) get the SMALLEST %age back compared to other groups (due to several reasons, including death rate at younger age, etc.).


Everybody gets hit double; self-employed folk are just the only ones to see it as visibly. When a dollar an hour raise costs my employer an extra 7.65 cents per hour, the numbers rather quickly add up and get in the way of that raise.



not everybody pays it. i used to work for a PD where we didn't pay into social security. that was a HUGE perk of that agency. many don't.
6.23.2008 1:54am
Chris Bell (mail) (www):
BGates:
Chris - Obama made that claim in the last debate with Hillary. Also, I remember reading a paper - do you have a cite for that?
Well, I only asked because I googled it and could not find the assertion. Now that you have given me a more pointed reference, I see that Obama and Gibson discussed capital-gains taxes during the last debate. (Which is different from overall tax rates, which is what Bruce appeared to be talking about.) During that exchange Obama talked about making tax rates fair, but he explicitly disputed Gibson's assertion that higher taxes bring in less revenue.

GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.

OBAMA: Well, that might happen, or it might not. It depends on what's happening on Wall Street and how business is going.

FWIW, Obama is probably correct that revenue would not go down by keeping the tax rate the same. (easy cite)

So Obama apparently never said "I will raise taxes even if we bring in less money." That's the assertion I thought Bruce was making. I asked for the cite because I couldn't imagine Obama saying something so blatantly dumb, and the record shows that when he was asked the question he disputed the assumption.

Thanks again for the condescending tone, though.
6.23.2008 2:05am
A. Zarkov (mail):
"So, according to Obama ... working 80 hours a week, ... $20,000 after taxes ... two jobs as you try to accumulate savings - you're rich enough to soak for more taxes."

That's right, as far as he's concerned you're a rich fat cat ripe for the plundering. Let me at to your list. You work in a big city law firm, where the cost of living is astronomical. Places like New York, San Francisco, Washington DC. As far as I'm concerned BHO is just another race hustler, a thin version of Al Sharpton in a fancier suit.
6.23.2008 2:24am
Asher (mail):
So Obama apparently never said "I will raise taxes even if we bring in less money."

Not so fast. Obama said that revenues might go up or might drop, but in no way did he indicate that he'd back down on raising taxes if revenues dropped or if he had reason to think they might drop. What he actually says is that he's committed to raising taxes not because he wants to decrease the deficit, but for purposes of fairness:

MR. GIBSON: And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

SENATOR OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year -- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.

So it sounds to me like he's saying that, whether revenues rise or fall, he still thinks taxes need to go up.
6.23.2008 3:16am
BGates:
Theobromophile - since you said you were trying to see things like a Democrat, I figured the Obamas were a nice example. They both graduated law school deep in debt. Michelle Obama famously (I thought) advocated that young people go into "the helping professions"; sure enough, she went to work for a hospital and he became a community organizer, yadda yadda yadda, she was making $300 grand and he was a millionaire author before this campaign started. If Barack thinks he's nothing special (and he has spoken "with deep humility"), he may figure his career path is pretty typical, in which case it would make sense for him to consider someone like you to be rich. Or imminently pre-rich.
On the other hand, Michelle still complains about her student loans (from the 80s!), and if she's not rich neither are we. Maybe the Obamas are more concerned about their own money than yours...nah, that's just cynicism talking.

Chris Bell - I'm sorry if I came across as condescending. I just thought the juxtaposition of your demand for a cite with the statement "I read something once" was kind of funny. Asher has the part of the exchange I had in mind.
6.23.2008 4:11am
Slocum (mail):
The only deductions that escape their grip are medical premiums paid through your employer's qualified plan. Even your 401k contributions, which aren't subject to income tax, get hit with FICA.

But capital gains, dividends, and, most importantly, income from S-corporations is not subject to FICA. One obvious response to applying FICA to high salaries is to structure more of the income as profit from the business and less as salary.
6.23.2008 7:44am
krs:
Maybe he likes tax protestor cults and wants to revitalize them.
6.23.2008 7:56am
Ted Frank (www):
I covered this on Above the Law four months ago.

@DaveS:
"having an AGI above 250k, after deducting home mortgage interest, charitable contributions, etc."

Not true. I have lots of Schedule A deductions that take my AGI from above the cap to below the cap, and I'm still paying social security tax up to the current cap.

The Obama tax plan is a good way to ensure that people in the middle class never become part of the rich. Perhaps Obama has other qualities that make him a good presidential choice, but his tax hikes will have a huge financial hit for recent law school grads.
6.23.2008 8:05am
gasman (mail):
Got to remember that there is a difference between Rich and High earners.
One becomes Rich by accumulating wealth. High earning is one mechanism of accumulating wealth, but still requires substantial savings and investment. High earners might become Rich depending on their behaviors.

Unfortunately, soaking High Earners has the likelihood of incentivising not earning maximally to one's capacity. With the buying power of the last dollar earned at 45% even in a lower tax state, time with family and avocation seems much better spent. Further, I can reduce my productivity (high earning status) and focus on things that generate wealth (rental properties, tax favored investing and the like) at the expense of generating taxable income.

It does seem poor public policy to have middle aged folks at the peak of their earning (and production) capacity underproducing and under earning, but that is the net result.
6.23.2008 8:12am
Bizzy:

Let's also remember that Social Security does more than track inflation; it boosts benefits as the general level of wages rises.

The quickest way to show a Democrat is lying when they claim "wages haven't kept up" is to suggest that Social Security benefits should be indexed to inflation rather than wages. When they excoriate you for wanting to reduce SS benefits, you have them.
6.23.2008 8:23am
Anderson (mail):
Obviously, we should pay for Bush's war in Iraq by raising taxes on those who make *under* $250K.
6.23.2008 8:41am
Joe Gator (mail):
The Bromo, I found out this year that you can only deduct up to $2500 in Student Loan interest, which I accrue in one year on my low-interest federal loans. Furthermore, the deduction ends once you make over $65K.
6.23.2008 8:51am
FantasiaWHT:

I expect that attorneys, physicians, and other high earners are going to be negotiating for less income and more non-taxable compensation (reimbursement for continuing education vacation boondoggles, more money to pensions, and so forth), rather than submit to having most of their income siphoned off by the government.


Or they will move to lower-paying but lower-cost-of-living places in the country.
6.23.2008 8:54am
theobromophile (www):
BGates,

No, I never said that I want to see things like Democrats do.

Even if I did, your explanation is clearly not directed at any statement in my post. Again, for the final time: my issue is that those who earn "a lot" of money expended a tremendous amount of capital that is necessary to earn that money. Your response was not directed at the cost (both capital and time) of making that income, but did include a lot of smug, self-righteous hand-wringing about the "helping professions."

Is your stance that anyone who doesn't go into a "helping profession" ought to be a cash cow for those who do - that the productive ought to pay for the morality of others?

Now, since you missed it the first time around: education costs a lot more now than it did in the '80s. It was once possible to go to law school, take out loans for the bulk of the cost, and go into public service. The loan payments are now so high that many students simply don't have that option. (Harvard Law grads do have that option: their alma mater has a very generous loan repayment programme.) Using an example from the 1980s only underscores my point: we're still stuck in a mindset that education doesn't cost very much.
6.23.2008 9:11am
theobromophile (www):
The Bromo, I found out this year that you can only deduct up to $2500 in Student Loan interest, which I accrue in one year on my low-interest federal loans. Furthermore, the deduction ends once you make over $65K.

Geez... anyone have any more bad news about how much student loan interest can be deducted? Do you also have to give a kidney at the end of it??

By the way, I'm a lover of chocolate, which is a food of the gods (theo-broma).
6.23.2008 9:13am
JunkYardLawDog (mail):
Zed, don't forget to add a few percentage points for sales taxes and property taxes to your 62% figure.

God only wants 10%. Who are the feds to want more than God?

Says the "Dog"
6.23.2008 9:47am
pete (mail) (www):

not everybody pays it. i used to work for a PD where we didn't pay into social security. that was a HUGE perk of that agency. many don't.


There are still some school districts in Texas where I am pretty sure you can opt out of paying into social security. For years the county in California where my dad worked let him not pay into social security because he had a government pension he ws paying into.

This is probably the biggest issue where the boomers and those older then them have screwed over my generation. I am 31 and no one my age that I know believes social security will be there for them. Yet the youngest workers, who tend to make the least, still are taxed to pay for the benefits of rich old people. At this poiint you could eliminate social security completely and I would be fine with it.
6.23.2008 10:10am
theobromophile (www):
A. Zarkov,

Re: D.C., San Fran, NYC, etc. Yes, I agree. Would you - or anyone else - have a good estimate of what it would cost an attorney to live in one of those cities, per month or per year?

"also about my perpetually miserable love life... "

That might be easily fixable.

Only if I switch teams, apparently. ;)
6.23.2008 10:23am
Houston Lawyer:
I suspect that the proposal to raise SS taxes on the wealthy would also include another thousand pages of regulations to prevent lawyers from paying themselves $250,000 in salary and taking the remainder of their pay in profits from a professional corporation. There are so many reasons to vote against this man.
6.23.2008 10:27am
Thales (mail) (www):
"The Obama tax plan is a good way to ensure that people in the middle class never become part of the rich. Perhaps Obama has other qualities that make him a good presidential choice, but his tax hikes will have a huge financial hit for recent law school grads."

Is this demonstrably true? A brand new law grad makes, at the top, $160K. This assumes the elite of the elite firms in NYCity (note that big firm lawyers with a slightly smaller nominal salary in other major cities may do much better b/c of NYC's cost of living). Most recent law grads make significantly less, indeed many *never* make that much money. How does Obama's tax plan increase the tax burden of law grads before they are making $250K gross? I'm asking as an open question and as a relatively well-off Obama supporter willing to take a tax hike if I see the money being used in ways I consider more prudent in the long term than the status quo policy. I'm not arguing with you, you might well be right. I would just like to see the numbers. I take it you are including the donut hole in Social Security in your analysis?
6.23.2008 10:54am
Zed:
Thales, once you add in bonuses, biglaw lawyers in many major cities start hitting the $250k amount, especially after a few years.

As someone who likes prudent spending, I would prefer that the government spend the money that they already have more prudently before taking any more. Lest you forget, Obama voted for more ethanol subsidies.
6.23.2008 11:02am
Malthus:
Those lawyers and physicians who end up paying about 60% of their income in taxes will just need to take classes in cabinetmaking, electrical and plumbing installation and oil-changing, so that they can take off a few hours high-tax of seeing clients and do for themselves what they now pay others in after-tax dollars to do for them around the house.

One of those professionals has to earn $90,000 to have the after-tax $33,000 to pay the tradesman for his labor in bathroom and kitchen remodeling from which the tradesman [paying an average 33% tax] gets some $22,000. Thus the physician who has learned to use a hammer can escape paying $90,000 for a $22,000 job, do it himself, and have a few beers in the process.
6.23.2008 11:05am
Pender:
God. Why must a voter choose between fiscal sanity and social sanity? I'll tell you what, Republicans -- you get on board with science and gay rights, and you've got a convert at least as long as Obama-style fiscal policy is the alternative.

On the other hand, it's not exactly like Bush was a patron saint of fiscal restraint either. If Obama represents the party of the checkbook, then Bush was the party of the credit card. If you look at history, there's no time that the rich get soaked more than times of massive government debt, which Bush did a great job of creating.
6.23.2008 11:19am
Thales (mail) (www):
"As someone who likes prudent spending, I would prefer that the government spend the money that they already have more prudently before taking any more. Lest you forget, Obama voted for more ethanol subsidies."

Well, I more or less agree with this approach. However, no one is seriously proposing eliminating or drastically cutting the largest drains on our federal budget, namely, defense (which term we will for budgetary purposes liberally construe to include the Iraq war, which has nothing to do with defense), social security and medicare. Under Obama's plan, at least we fund the other enormous expense, namely national debt service, more prudently than under McCain, who following Bush, shortchanges it (his proposal to make up the difference by cutting pork, while a laudable goal, simply doesn't add up). And of course, it seems eminently more likely that McCain would get us into another expensive war than that Obama would, simply given their relative views on the proper use of American military force and their past views on the most recent such war. And of course, Obama and the Democratic congress believe in pay as you go rules (as far as I can tell, McCain does not), so there is that at least to restrain new spending or tax cuts that are not paid for.

I support Obama, but agree that he is on the wrong side of ethanol, both in terms of subsidies and maintaining the tariff on Brazilian sugar and its products. This is perhaps explainable given the amount of corn grown in his home state and the timing of the presidential primaries, but it is unfortunate.
6.23.2008 11:26am
POST_RACIAL_OBSERVER:
"As far as I'm concerned BHO is just another race hustler, a thin version of Al Sharpton in a fancier suit."

http://volokh.com/posts/1214187519.shtml#389887
-----------------------------------------------------

Nice, Z. What an enlightened comment. Shame on you.
6.23.2008 11:57am
Dotar Sojat (mail):
After 35 years of working, I have achieved Obama's target income. Already stung by the AMT, I'm just going to work less, and thus be less productive and generate less income for my employer, and stay under the cut off (or the cut back in). Of course after still having to fund two college educations, pay the mortgage and plan for a retirement that I expect will not include any SS income after the Dems means test me out of it, I will reduce spending on other items. Gone will be the "luxury" of not mowing the lawn, and gone will be the employment of the guy who does it now. Painting the house will get put off, and that guy will lose that employment. Ditto other projects. Less spent on vacations, and less on entertainment, and those folks will lose those dollars. I will just dispose of less income and circulate fewer dollars through the economy to the benefit of fewer people. Its not that an upper income person does anyone a big favor by spending money in any certain way, and its not an altruistic act for which a pat on the back is deserved, but there is no civic duty to make more money in order to pay more in taxes. I suspect that others will similarly conclude that its not worth the marginal return on time and labor, and change their behavior accordingly. I'll be fine; others less so. The result of liberals' statist thinking will be to adversely affect the very people about whom they so overtly claim to care.
6.23.2008 11:58am
Snarky:

Except that Obama has admitted that he wants to raise tax rates even if it does not generate additional revenues.

The problem is that a rise in tax rates does not necessarily result in an increase in tax revenues. Sometimes it does, sometimes it doesn't, and sometimes it even results in lower tax revenues. The simplistic assumptions behind the static analysis so prevalent on the left these days were debunked better than twenty years ago.


All respectable economists agree that we are on the left side of the Laffer curve. Period. This isn't even debatable.

Guess what people. All that wasteful spending by Bush and Republicans in Congress was not free. All that debt that was incurred has to be paid.

And yeah, just as the Bush tax cuts went to the wealthiest in society, it makes sense that now tax increases needed to pay the deficit be paid by the wealthiest in society.
6.23.2008 11:58am
Zed:
What's funny is that Obama said the Social Security cap should be raised to be more "fair." In other words, it's unfair that the $100k earner pays SS tax on all of his income, but the "rich" $200k earner only pays SS tax on half of his income.

But wait a minute, with the donut hole from $100k to $250k, that $200k earner will still pays SS tax on only half of his income. What happened to fairness dictating that everyone should pay SS tax on their entire income again?

So according to Obama, fairness is a great principle but it's not so important anymore when pandering for upper-middle-class votes. Fairness only means shafting the minority of the top 3%.
6.23.2008 11:59am
Snarky:

So let me see this the way that Democrats see this. You graduate from college (perhaps with some debt). You did well. You're smart enough to get into law school. You spend three years forgoing any salary, so you graduate at age 25 or 26 with no savings, no IRA, no 401(k), etc. You owe $20,000/year (or more) in student loans. You work 80 hours a week. So, according to Obama (et al.), if you're 30 years old, working 80 hours a week, just starting to replace your clunker of a car that got you through law school, still paying over $20,000 after taxes for your student loans, and working the equivalent of two jobs as you try to accumulate savings - you're rich enough to soak for more taxes.


If your first job pays not only $250,000, but significantly MORE than $250,000 so that having to pay 7.75% in SS taxes matters to you, I would say that your student loans are insignificant.

If you make less than that, as basically all law school graduates do, these tax changes to SS do not even kick in. So stop the dramatic and misinformed whining please.
6.23.2008 12:01pm
A. Zarkov (mail):
theobromophile:

"Only if I switch teams, apparently. ;)"

I was hitting on you. No switching necessary.
6.23.2008 12:29pm
Joe Bingham (mail):
I remember reading a few years back that the majority of Americans don't think that anyone should pay more than 1/3 of his income in taxes.

A few years ago... that was before Obamassiah came... he taught us...
6.23.2008 12:52pm
Joe Bingham (mail):
What's the Republican solution?

Solution to what? Wealth?
6.23.2008 12:56pm
Joe Gator (mail):
Gone will be the "luxury" of not mowing the lawn, and gone will be the employment of the guy who does it now.

Believe it or not there are tax theorists out there who believe you should also be taxed on the "imputed income" you receive for mowing your lawn.

Snarky,

This quote

just as the Bush tax cuts went to the wealthiest in society

illustrates just where you and I differ. It is an amazing stretch of the language to consider a tax cut as a transfer of wealth. The government deciding to take less of the money someone earns than they have in the past is not a gift.
6.23.2008 12:57pm
eddiehaskel (mail):
First, can we all at least be honest about social security: the only reason there is any problem with SS is that the US government has been doing accounting that would be criminal if done by any corporation or individual. If one "balances" a budget by taking money from a fund that is not supposed to be spent . . . well surprise, surprise that when you go to that cookie jar it's empty.

If this is such a great country, then why shouldn't those who have benefitted the most from this greatest, pay for it? Simple as that.

And yes, tax cuts that target only one segment of the population are a gift, if there one is still running a deficit or still paying billions per month on a war, that cannot be won because there is no enemy.
6.23.2008 1:28pm
Bruce Hayden (mail) (www):
All respectable economists agree that we are on the left side of the Laffer curve. Period. This isn't even debatable.
Nice way to put it. If an economist disagrees with Snarky, he isn't respectable.

But we have any number of people here talking about the disincentive affects of raising tax rates. All sorts of talk about mowing your own lawn, doing your own plumbing. Or, maybe just working less.

I would have to put myself in that category - I am of counsel primarily for the significantly reduced billing target. I ski a lot in the winter, and my girlfriend has a ranch in Montana for the summer.

And, we are only talking the disincentive affect of raising taxes. There is also the problem that money is being taken from the productive sector and spent in the unproductive sector. Raising taxes when many think that we are going into a recession seems a bit questionable right now.
Guess what people. All that wasteful spending by Bush and Republicans in Congress was not free. All that debt that was incurred has to be paid.
Apparently, you consider the War on Terror to be wasteful spending but not all the earmarks that have been in the news recently.

Each of us has their list of wasteful spending. Yours is presumably headed by the war. Mine is headed by most of the rest of the government, and esp. including almost all social spending. If Congress had cut back in other places, the war would not have had such an effect on the debt. After all, the percentage of either GNP or tax revenues being spent on defense is significantly lower now than in any previous war, and indeed, during much of peace time. But Congress seemed to take the war funding as an excuse to crank up spending elsewhere too. So, it wasn't guns or butter, but rather, guns and butter, and a lot more on the side.
And yeah, just as the Bush tax cuts went to the wealthiest in society, it makes sense that now tax increases needed to pay the deficit be paid by the wealthiest in society.
The tax cuts only went to the wealthiest if you look at absolute tax dollars, and they went there because it is those with the highest incomes who pay almost all the taxes. But in percentages, the highest earners are paying more of the taxes thanks to those tax cuts, and you want them to pay an ever higher share.

And this is just another indication that Snarky's economics are a bit askew. Taxes were cut, and those at the top paid more as a percentage. I would suggest that all of those "respectable" economists he cited above would have predicted just the opposite.
6.23.2008 1:32pm
LM (mail):
Joe Gator,

It is an amazing stretch of the language to consider a tax cut as a transfer of wealth.

It's an amazing stretch of the language to consider it anything else. By your definition, a tax cut enacted Monday and repealed Tuesday causes the affected taxpayers a net negative transfer of wealth. That tortures the common meaning of the terms.
6.23.2008 1:38pm
respectable economist:
There was a WSJ piece the other day about a nobel winning economist, who was behind the Euro for the most part. He said our taxes now are too high and that eliminating the Bush tax cuts would lead to one of the worst impacts on the world economy we've ever seen. Don't know if I agree with him. However, I do think he falls into the camp of respected economists, and so Snarky's point is false.
6.23.2008 2:04pm
Joe Bingham (mail):
By your definition, a tax cut enacted Monday and repealed Tuesday causes the affected taxpayers a net negative transfer of wealth.

That's... not true. A tax cut is a declining to transfer wealth. If I decline to mug someone on Monday and then mug him on Tuesday, of course there's been a net negative transfer of wealth.

(Before you say that the transfers are morally different--I agree. That's not the question, the question is what constitutes a transfer.)
6.23.2008 2:07pm
Joe Bingham (mail):
(I'm not "Joe Gator," btw. Just responding to LM's silliness for the heck of it.)
6.23.2008 2:07pm
Ben P (mail):

The tax cuts only went to the wealthiest if you look at absolute tax dollars, and they went there because it is those with the highest incomes who pay almost all the taxes. But in percentages, the highest earners are paying more of the taxes thanks to those tax cuts, and you want them to pay an ever higher share.



I don't think this is quite true in either the premise or the assertion.

The Bush Tax Cuts quote "went to the highest income earners" for the simple reason that it was a cut to capital gains taxes.

If you look at who pays capital gains taxes, by in large the VAST majority of CG taxes paid are paid by those in the upper income levels for the simple reason that the top percentage or two gain much more of their income from Capital Gains than from things that fall within income taxes.

Now, don't take more than I'm saying for this. Saying that a capital gains tax is a tax directed at the top income earners is slightly misleading in and of itself, it's just merely a different kind of tax. There are significant economic rationales as to why the economic effect of cutting a capital gains tax may be better than cutting income taxes.


Second, I think your assertion is a bit of a non-sequitur. The percentage of income and the percentage of wealth controlled by the top 1% of people within out society has vastly increased over the past 10-15 years. This trend predates the Bush Tax cuts.

They're paying considerably more taxes because they've been earning considerably more income. The tax cuts may have affected this, but they're part of a larger trend. Again, don't take the wrong meaning from this. There's nothing necessarily wrong from gaining this wealth in my opinion, but that doesn't mean the tax cuts caused more income (particularly on the whole)
6.23.2008 2:13pm
DEM (mail):

I suspect that the proposal to raise SS taxes on the wealthy would also include another thousand pages of regulations to prevent lawyers from paying themselves $250,000 in salary and taking the remainder of their pay in profits from a professional corporation. There are so many reasons to vote against this man.


It will have to, because I can tell you right now I have no intention of forking over 60% of my income to the feds without a fight. I suspect that law firms will put the wheels in motion to go public, thus converting what is now ordinary income to dividends and capital gains. I presume those will continue to be taxed at a lower rate -- surely lower than 60%.

Another point is that unless there is some reform of 401(k)s, an awful lot of boomers will be shocked at having to pay rates that are substantially higher than the rates they avoided while they were working. If Obama wins, I am liquidating my 401(k) immediately at a 35% rate, as I see no end to the tide of increasing taxes.
6.23.2008 2:13pm
Joe Bingham (mail):
That tortures the common meaning of the terms.

Sorry, that's the part that's "not true" to which I refer in my comment.
6.23.2008 2:15pm
LM (mail):
Joe Bingham,

Before I answer, let me be sure I understand what you're saying. Because in response to:

By your definition, a tax cut enacted Monday and repealed Tuesday causes the affected taxpayers a net negative transfer of wealth.

you said:

That's... not true.

Don't you mean the opposite? The remainder of your comment suggests you believe that by Wednesday, there has a been a negative transfer of wealth (i.e., a transfer of wealth away from the taxpayer)?
6.23.2008 2:27pm
theobromophile (www):
Gone will be the "luxury" of not mowing the lawn, and gone will be the employment of the guy who does it now. Painting the house will get put off, and that guy will lose that employment. Ditto other projects. Less spent on vacations, and less on entertainment, and those folks will lose those dollars.

I'm sure there is a mechanic out there who would happily do the work on my car that I do myself, but I can save a lot of money doing it myself, and I actually enjoy the feeling of accomplishment when my car runs better after I play with it.

To be slightly more serious: I heard somewhere that the high French unemployment rate is due to their low hours. When people have free time, they will cook their own meals, clean their own houses, and, with a long maternity leave, watch their own kids. That translates directly into lost jobs in the food service, housekeeping, landscaping, painting, and childcare sectors - those very sectors that often employ low-income, low-education people, or young people who could be helped out by having a job.
6.23.2008 2:32pm
Think38 (mail):
The new top marginal rate under Obama's plan, assuming New York taxes and self employed:

FICA 7.65%
SECA 7.65%
Fed Income 39.4%
Phase out of itemized deductions 0.39%
New York 11.5%
Tax benefit of deduction of SECA and state taxes -7.55%
Total 59.04%

Same assumptions today is 45.22%.

Assuming the person is in the 35% AMT bracket gets you to 59.47%. Reduce the AMT bracket to 28% and 52.94%
6.23.2008 2:33pm
theobromophile (www):
A. Zarkov - maybe I don't need another team so much as a clue. Mea culpa!
6.23.2008 2:34pm
Ben P (mail):

To be slightly more serious: I heard somewhere that the high French unemployment rate is due to their low hours.


This sounds like a case for Stephen Levitt.
6.23.2008 2:35pm
LM (mail):
Joe Bingham,

OK, our comments crossed (not literally -- I forgot to refresh the page before posting). So we're in agreement on what you meant. I have to run to a brief meeting, so I'll finish my reply when I get back (or if I get stuck in traffic).
6.23.2008 2:36pm
Anil Petra (mail):
This is factoring in only Senator Obama's social security payroll tax proposal. Does anyone think he is content simply to let taxes revert to the rates under Clinton, an era he includes in those not fair for the lower and middle classes? We haven't heard yet what Obama thinks are the proper rates and structure of the income tax. He hasn't ruled out seeking significantly higher rates or imposing periodic "surcharges" on income or wealth.

What have we learned in the past two weeks? Not only that he intends to raise the social security tax significantly, but that he intends to use it (surely, as much as any of the match-ups Democrats make between Republican spending cuts and tax cuts) to fund a give-back of "a check to every family". He hasn't proposed any move that actually shores up the social security system.
6.23.2008 2:43pm
Dave N (mail):
Several posters made a fairly good point about local and state governmental service and the impact of FICA. If a state has set up its own retirement plan (typically known by its acronym, PERS--Public Employee Retirement System, California's is known as CALPERS because, well, California likes to be different) then those covered by such a plan are exempt from paying into Social Security--though they still must pay into Medicare.

My state has such a plan and almost all governmental employees, city, county and state, are covered by it, myself included. I still pay into Social Security for the teaching I do on the side. I also sleep well knowing my retirement is guaranteed through an actuarially sound system.
6.23.2008 2:48pm
Mary Katherine Day-Petrano (mail):
The question remains: what is the definition of "rich?"

Take my relative Todd. Ran into him at a funeral recently. He bragged about his six beachfront condos. Toddy thinks he's a multimillionaire. But given the inevitable and potentially rapid sea level rise due to global warming, I tend to think Toddy may be in the negative, given that his property is soon likely to be an environmental Superfund cleanup site.

Cheers.
6.23.2008 3:11pm
Andrew J. Lazarus (mail):
How much people feel they "should" pay in taxes is a stupid question—it doesn't make any more sense than asking how much chocolate cake people "should" be able to eat without getting fat. At the current moment, the expectations of what the government should do far exceed what could be financed with what people say is the optimal tax rate. Whether services should be reduced or taxes raised (or what combination) is an interesting question but it isn't addressed by the polls.

Any freshman econ student can figure out that when capital gains taxes are reduced, there will be a pent-up number of trades that are profitable are new rate X that weren't at old rate Y, and there will be a one-time bonanza of taxes on these trades. Empirical evidence suggests that in the longer run, reduced tax rates at the level Obama and McCain consider bring in less revenue and higher tax rates brining in more revenue. The conservatives' search for the economic equivalent of chocolate cake that makes you slimmer and stronger the more you gorge continues in the face of common sense.
6.23.2008 3:11pm
Mary Katherine Day-Petrano (mail):
Laissez-faire "trickle-dwon" economics, anyone?
6.23.2008 3:14pm
Mary Katherine Day-Petrano (mail):
Laissez-faire "trickle-down" economics, anyone?
6.23.2008 3:14pm
SuperMike (mail):
Usually, the arguments against raising marginal tax rates center on lost productivity due to the massive disincentives involved.
However, the examples so far for how this is going to dampen the economy are :
High-priced lawyers won't be as inclined to put in 80-hour weeks.
Doctors might drop their side jobs doing paperwork for insurance companies.

I know this is a legal blog, so most of the participants are in that orbit, but neither of those activities is exactly what I'd call the beating heart of the American economy.

I'm dead-set against this scheme personally (unless it'll help hasten a complete tear-down of Social Security), but you gotta admit, it has serious populist appeal. (Never mind that it's gonna get really tough to schedule a surgery the year it kicks in)
6.23.2008 3:30pm
DeezRightWingNutz:
RE: Left side of Laffer Curve

It appears many here don't understand the Laffer Curve, so I'll provide a couple of examples.

Pre-tax increase (30% flat tax)

Income 100
Tax Revenue 30

Post Tax Increase (33.3% flat tax)

Income 99
Revenue 33

Just because income went down, doesn't mean you're on the right side of the Laffer Curve. The curve shows revenues on the vertical axis and rates on the horizontal axis. The point at which a tiny rate increase wouldn't change tax revenues is the peak. Any tax rates to the right should be off limits because you could get the same amount of revenue with a lower rate.

If tax rates are cut and revenues go up (ceteris paribus), then you've demonstrated that you're on the right side of the Laffer Curve. However, ceteris is never paribus, so it's often hard to tell what the true effects of rate increases and cuts are.
6.23.2008 3:30pm
DeezRightWingNutz:
It will have to, because I can tell you right now I have no intention of forking over 60% of my income to the feds without a fight. I suspect that law firms will put the wheels in motion to go public, thus converting what is now ordinary income to dividends and capital gains. I presume those will continue to be taxed at a lower rate -- surely lower than 60%.

Have fun paying the ~40% combined state and federal corporate income taxes. That leaves you with a $60 dividend, which, taxes at ~%20 (state and federal), puts you in a 52% marginal tax bracket.
6.23.2008 3:34pm
Thales (mail) (www):
Interestingly, Jim Cramer claimed on Chris Matthews' show this past Sunday that Wall Street wants Obama running things even given the guaranteed increase in capital gains taxes. Apparently some folks there prefer fiscal responsibility and less saber-rattling to making a drop in the bucket more take home and think the Republicans have had a disastrous run the last 8 years. Who knew?
6.23.2008 4:47pm
Dotar Sojat:
Obama. Democrats. Fiscal responsibility. Change. Right.
6.23.2008 5:24pm
Dotar Sojat:
On the other hand, we haven't had much fiscal responsibility for a couple of decades................
6.23.2008 5:40pm
A. Zarkov (mail):
"Interestingly, Jim Cramer claimed ..."

Jim Cramer is pretty much a worthless source of information. Here is a video tracking Cramer's recommendations one week and then what he said the next week. You have to see it to believe it. This guy has some pair of balls.
6.23.2008 6:03pm
whit:

Interestingly, Jim Cramer claimed on Chris Matthews' show this past Sunday that Wall Street wants Obama running things even given the guaranteed increase in capital gains taxes. Apparently some folks there prefer fiscal responsibility and less saber-rattling to making a drop in the bucket more take home and think the Republicans have had a disastrous run the last 8 years. Who knew?



not that interesting considering that

1) cramer is a democrat
2) cramer's record (as noted in another post) is ABYSMAL, at least since he started mad money. i trade futures (and to a lesser extent - stocks) for income, and several friends and i have done some very successful "cramer fades" iow shorting stocks after he recommends them and/or going long after he says dump them.

he is approaching legendary status as a contrarian indicator.
6.23.2008 7:00pm
LM (mail):
Joe Bingham's,

So the question is whether, as Joe Gator says, "It is an amazing stretch of the language to consider a tax cut as a transfer of wealth." I replied that it would be a stretch to call it anything else, which you described as "silliness." I understand the ideological basis for your argument, but I think most people would consider the idea that a tax transfers wealth, but a tax cut doesn't, semantic silliness. The question isn't whether you like one more than the other, or you think one is a mugging and the other an absence of mugging. When a tax is passed, the government becomes legally entitled to the taxed amount. That transfers wealth from you to the government. Cutting the tax transfers it back. Without the cut, government money. With the cut, your money. If that's not a transfer, then please allow me to take the benefit of any such non-transfers off your hands.
6.23.2008 7:03pm
whit:

Another point is that unless there is some reform of 401(k)s, an awful lot of boomers will be shocked at having to pay rates that are substantially higher than the rates they avoided while they were working. If Obama wins, I am liquidating my 401(k) immediately at a 35% rate, as I see no end to the tide of increasing taxes.



this is what is so great about roth IRA as retirement vehicles. no matter what the future tax rates will be, you know exactly how much taxes you will pay in the future on your cap gains - ZERO
6.23.2008 7:06pm
LM (mail):

Another point is that unless there is some reform of 401(k)s, an awful lot of boomers will be shocked at having to pay rates that are substantially higher than the rates they avoided while they were working.

I suppose that depends on what you call an awful lot. If there will be an awful lot of boomers liquidating more than $250,000 a year from their 401(k)s, than an awful lot may be shocked at the tax. But remember, the higher rate will only be on the excess of $250,000, and it won't include Social Security and Medicaire taxes.
6.23.2008 7:17pm
Bizzy:

Believe it or not there are tax theorists out there who believe you should also be taxed on the "imputed income" you receive for mowing your lawn.

One of the reasons home ownership is so low in Europe is many European countries tax imputed rents.
6.23.2008 8:53pm
Bizzy:

this is what is so great about roth IRA as retirement vehicles. no matter what the future tax rates will be, you know exactly how much taxes you will pay in the future on your cap gains - ZERO

Sure, so long as Congress doesn't change the rules. They promised Social Security benefits wouldn't be taxed, either.
6.23.2008 9:01pm
Joe Bingham (mail):
So the question is whether, as Joe Gator says, "It is an amazing stretch of the language to consider a tax cut as a transfer of wealth." I replied that it would be a stretch to call it anything else, which you described as "silliness." I understand the ideological basis for your argument, but I think most people would consider the idea that a tax transfers wealth, but a tax cut doesn't, semantic silliness. The question isn't whether you like one more than the other, or you think one is a mugging and the other an absence of mugging.

You made exactly the mistake I tried to prevent--thinking the analogy depends on the morality of the transfer. The point has nothing to do with that.

When a tax is passed, the government becomes legally entitled to the taxed amount. That transfers wealth from you to the government. Cutting the tax transfers it back. Without the cut, government money. With the cut, your money. If that's not a transfer, then please allow me to take the benefit of any such non-transfers off your hands.

The point is that pre-transfer, the money belongs to me. Declining to transfer it does not transfer it back to me unless it's already been transferred. A post facto tax rebate is a transfer of wealth. Money that has not been transferred, however, is not "transferred" when someone decides not to take it. A statement that they're going to transfer it does not make it suddenly "transferred" before it's actually transferred, so a revocation of such a statement doesn't amount to returning ("transferring back") the money--they didn't have it.
6.24.2008 12:11am
LM (mail):
Joe Bingham,

If you don't think taxes and tax cuts transfer wealth prospectively upon enactment, get your banker or mortgage broker to run pro-forma numbers on the size of loan you could get with a given salary subject to a range of tax rates.
6.24.2008 12:30am
Rob Ives:
Tax policy discussion are very frustrating because often the discussion is limited to one or two taxes, or is couched in very general terms. The total tax burden boggles the mind. Here in Indiana, not a particularly high tax environment, I don't believe: 1. a substantial property tax on residences which is hard to define because the property value often makes no sense, but is actually more than 5% annually. (In the case of our home, more than 8% on real market value.)
2. An excise tax on motor vehicles (the present amount escapes me) 3. A 4% state income tax with more than 1% additional local income tax. 4. A 7% sales tax 5. A stupidity tax (State monopoly on legal gambling)
Of course there are a variety of other specialized taxes, including an inheritance tax which can be quite substantial. All of this before Uncle Sam takes his share. The total burden is enormous.
6.24.2008 1:40am
Rob Ives:
I note that I am too stupid to post at 1:30 A.M. (perhaps I should play the lottery). The Indiana property tax is more like .8% than 8%.
6.24.2008 9:51am
12345:
This thread is fascinating, and has let me to the conclusion that the only way to correct this is to simply wipe the slate clean and start over from scratch.

When educated people like those commenting on this board don't even realize how much of their income is even going to the government, something is very, very wrong with the system.
6.24.2008 4:29pm