First, there is no $97,000 cap on witholding tax. There is a cap on social security contributions. I will assume that this is what you meant.

You seem to think that not paying taxes is a “benefit” somehow. As though people should be thankful that they get to keep any of their money.

The convention center of which you speak was likely paid out of local property or state income tax dollars. This has nothing to do with Social Security.

Social security “premia” are capped because, as an “insurance” program, charging higher premia would mean having to pay higher benefits. I know that some people want to simply soak higher income people to pay for overly generous benefits for present and near-future retirees, but this hardly seems fair.

If you are complaining htat their social security check is likely to be a similar size, well, hey, call your congressman and demand that the social security administration be forced to release its benefits formulas, so we can see the people who are really ripping off the system.

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People Tax Rate Income Tax Revenue
10 0.05 10000 5000
20 0.1 25000 50000
30 0.2 30000 180000
50 0.25 50000 625000
30 0.35 120000 1260000
20 0.45 250000 2250000
10 0.45 1000000 4500000
170 8870000

In theory there would be 8.8 million currency units, with 17% carrying about 75% of the load.

The reality of the tax revenue system is more like the follows:

People Tax Rate Income Tax Revenue
10 0.05 10000 5000
20 0.1 25000 50000
30 0.2 30000 180000
50 0.25 50000 625000
20 0.35 120000 840000
8 0.45 250000 900000
1 0.45 1000000 450000
139 3050000

Now we have half the income, and the burden is being carried by middle income (sound familiar?) The rich have parked their money elsewhere and are not paying their taxes in the country because many other countries are attracting the rich.

Here is the tax income structure with a flat percentage tax that even rich people could digest (20%).

People Tax Rate Income Tax Revenue
10 0.2 10000 20000
20 0.2 25000 100000
30 0.2 30000 180000
50 0.2 50000 500000
30 0.2 120000 720000
20 0.2 250000 1000000
10 0.2 1000000 2000000
170 4520000

In this calculation the rich are carrying the load again, with the middle income and above enjoying a tax break. In comparison to the actual there is 150% more tax revenue, but less than the “theoretical.” But the reality is that you will never reach the theoretical because the rich will move away and end up not paying taxes locally.

I think Bush and his economic team knows this and did something that worked because people did move back. But I guess it is easier to say “tax the rich, tax the rich, no?” BTW I am nowhere near to being rich. I just find it interesting how smaller countries throughout the world have fixed their deficits.

Among the least fair elements of taxation today are the special tax breaks you get for being old. If you are 65 you get a special tax deduction from federal income tax (and from many state taxes as well). If you are old, you get special property tax rebates, because, well, just because. Here, the rich old, who own real estate, get their taxes subsidized by poor renters, who are usually younger professionals. This sort of taxation, in which the poor subsidize the rich should be stopped.

However, I agree with Chris’ basic assumption that high income people generally should pay taxes in proportion to their income, not out of proportion to it. High tax rates encourage the excessive use of tax favored investments, like municipal bonds, which funnel money to projects of lower value than those projects which might otherwise receive that funding (thus the need for the tax subsidy, which results in lower capital costs for municipalities to funnel to contractors and other political supporters).

Capital is the engine of the system. People who can manage large amounts of it are going to receive more of it. The relative “effort” excerted in a job isn’t the issue, it is the combination of the leverage that a job has (decision making vs. repetitive action) and the availability of people who can do the job at the margin. Many people may say, “I’d do that job for a fraction of the cost and be happy,” but when push comes to shove, they wouldn’t really want the job, and in any event, they don’t have the skills.

Farmers under a flat tax could suffer more than the average person. The reason? If the elimination of the current tax structure included many of the other tax benefits that farmers receive (subsidies), then they could become financially ruined in a more “balanced” market because corporate farms and foreign farmers would now have a huge one-up on them.

However, farmers could benefit with a flat tax if the benefits (some of them are the unquantifiable ones that I referenced in my first post) stayed intact. Benefits such as price controls, gov’t contracts, trade agreements, etc. all help alleviate those difficult times for the farmer by bringing consistency to their annual returns. A flat tax scenario has listed above could be absolutely ruinous to farmers without those “balancers”.

As for the wealthy leaving “high-tax” countries, it would be interesting to see how many people we’re talking about. I must confess some ignorance but I’m thinking that only the super rich are going elsewhere, which in the scheme of things wouldn’t equal to a large amount loss tax revenue that couldn’t be recovered elsewhere. If corporations are the ones fleeing the US, then this is another issue outside of this current debate.

Finally, I referenced in my first post the ability to frame certain arguments. Whoever successfully frames the argument, wins. I think Bernake’s comments are trying to do exactly that. If we eliminate looking at the program/policy implications of tax cuts, then opposing them becomes a bottom line decision (who wouldn’t be in favor of more money without any perceived harm?). However, policy is based on morality and therefore, financial policy must consider the moral implications. Doesn’t that mean if we want a lower national tax burden then we must trim or eliminate “entitlement” and other social programs? If you take the bait and respond to that last question, then I have just successfully re-framed the argument (something that Bernake was trying to do).

I’ll end it there since this is investorgeeks, not policygeeks. I’ll continue to read the site. Keep up the great work!