December 13, 2012

Taking Charge - Fairness Begins at Home

Not protecting Capital income ought not convolute to discouraging Capital formation, is not the same thing as slapping the rich as a statistical group. Need is to go beneath the bullet point of 2% - 98% for achieving fair share.

Aggregate Statistics show that the rich people pay twice the proportion in taxes as they have income. That sounds not bad for progressive taxation. Yet there are such among them that pay a lower tax rate than their modestly paid Secretaries. The issue is perhaps not rich man taxation v/s poor man taxation, but lopsided taxation with babycuddle treatment of certain income types, and deductions that make the tax code one that does not provide fair contribution towards national expenses. The ones that are able to avoid doing their fair share towards maintaining the collective infrastructure, in which they do achieve, dump it on others in their class to cover their fair share as well! And this is the case in both higher and middle income brackets. Simply raising tax rates on a given class, or all classes, acutes the anomaly in each affected class, or should one say, atrocity.

Fairness begins at home. The 98% need to have a paradigm of fairness that is applied to themselves as it does to the 2%. And this implies, getting rid of the special treatments and deductions that help some buck the progressiveness of the tax code, and make it overbearing on others in their own class. 
There is not a dichotomy between labor and capital. Today's labor income becomes capital for tomorrow. The businesses of today need one to work for a few years, even couple of decades, not merely to save for Capital investment, but also to understand the nuances in today's technology enabled business approach. A better paradigm of fairness is required than the macro aggregate level 2% - 98% negotiations. Else, it does become like punishing a man for suceeding when he makes it in his ambition. Confiscatory taxation is not a good thought, something that even resembles it isn't something to court.

To finds its place and prestige, Labor also needs to take responsibility, and start to view things differently than rich man-poor man or Worker and Capitalist. Rather to see everything, and every income as Labor, and ask for equal treatment for taxation. Some of the things that can be done:

Reject High Marginal Tax Rates

Prefer removal of special treatments and deductions to uplift revenue with tax rate cuts - to even the burden within the class aggregate - to provide relief to those that are bearing higher tax rates than others of their class and beyond because the special income categories and deductions do not suit them.

Not Discourage Achievement

Keep marginal tax rates low, but make sure that there aren't income and usage categories that shield the application of those rates.

Reverse the Welfare and Deficits Debate

All Welfare can be funded with taxes on the portion of one's income upto $250,000 and say, half of Corporate Tax collections. Let the other half of Corporate Tax collections and taxes on the income slice above $250,000 alone to fund the servicing of Securitized Treasury Debt and Corporate Welfare. This arrangement will see the middle classes demanding rightsizing of Government welfare delivery machinery and procedurism, and rightsizing of the welfare benefits; while the rich will be the ones figuring out whether Govt deficits matter or not, with it's reflection falling on their own taxation. Because, in this paradigm, the middle class income portion (< = $250 K) pays fully for what the middle and poor class uses (welfare).

Take Charge

It's not about isolating and slapping the rich man, it's about even spread of the burden of paying for civilization. The even burdening includes doing it in one's own class at the same time - not simply increasing the burden on the aggregate of rich people. And staying ambitious about becoming rich oneself. Taking charge implies taking responsibility for fairness and seeing the same thought about progressive taxation smoothly run across the incomes, from the bottom to the very top.

Simple, Progressive, Unatrocious Taxation
Top slab rate at 38%, even 33% I would say.

Standard Deduction: $14,000
Itemized Deduction Limit: 22,000
Financial Income Exemption Limit: $18,000 ($28,000 for those 58 years or over)
The individual/family uses the ONE (and Only One) that is the highest for the individual/family. On the rest of the income, the slab rates apply. A few family oriented exemptions like dependent child credits can be additionally retained.


Tax Rates simply increasing is nobody's win - it'll actually be a slap on labor and mainstreet industry and ambition, to continue cuddling of casino (finmarket) income. If rates can be decreased by removing special treatments, even the casino players will likely take the common low rates in their stride.

1 comment:

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