What are the most important issues facing the US today?

[Michael Ernest]

FS: Why should the rich pay an income-proportional Social Security / Medicaire tax when they don't get proportional benefits?
ME: I haven't suggested that they should.
FS: If we're talking charity, then yeah, the rich should pay in proportion to their income.
ME: Well, ok, but since it isn't required by law, I can't imagine why "the rich" should have to care what anyone thinks about their philanthropy or lack thereof.
FS: Or do you think fairness means that everyone is left after taxes with approximately the same amount of wealth as everyone else?
ME: I'm not sure what you would call such a system, but if you're aiming at Marxist socialism or Communism, you've missed the target.
There are three basic things you can tax: income (wages, tips, commissions), consumption (gas, sales, excise, duty) and wealth (capital, property). So far it appears we've only brought income into the picture.
If I wanted to make Al Sharpton's argument for him, I'd contend that rich pay quite a bit less, in proportion to their wealth, than the median-income taxpayer does. Does that argument hold up? Dunno. But it's no less unsupportable than treating the rich as wage-earners.

[Don Stadler]

Originally posted by Frank Silbermann:
Why should the rich pay an income-proportional Social Security / Medicaire tax when they don't get proportional benefits?
If we're talking charity, then yeah, the rich should pay in proportion to their income. But if we're talking about a government-run insurance program (e.g. old-age insurance or health insurance), then no, fairness means that your premium is proportional to your share of the benefit.

Why should the middle class pay an income-proportional SS/Medicare tax when we don't get proportional benefits? These were insurance schemes once upon a time but over time they changed into welfare programs. They have been very good for the current generation but are a very bad deal for most current workers, particularly those near the top of the income range.
Unless you think that paying 12 grand a year over up to 45 years for an annuity very little more than that is a good deal?
Since it's a welfare program I would like to see the rich pay their fair share.....

[Paul Stevens]

The rich have a lot of money, property, stocks, bonds, etc etc etc. So what? It is theirs and not the governments. Who cares if Kerry, Kennedy, Edwards have all that? It is their money.

[Thomas Paul]

Originally posted by Paul Stevens:
The rich have a lot of money, property, stocks, bonds, etc etc etc. So what? It is theirs and not the governments. Who cares if Kerry, Kennedy, Edwards have all that? It is their money.

The problem with taxing property is that you can end up having to sell the property to pay the tax man. Gardiners Island just off Long Island is a good example. The island is the largest privately held island in the US. The Gardiners have owned the island since the 1600's. The island is worth hundreds of millions of dollars. The two current owners are both very old. When one dies the other will inherit the remainder of the property. And there is the problem. Although the family is wealthy they could never afford to pay the inheritance tax except by selling the land. Right now they live on a small portion of the island and the rest is left as a nature preserve. Developers would love to carve up the island into mansions and yacht clubs. The family would love for it to stay the way it has been for 400 years. It would be shame if our tax laws destroyed one of the nicest nature preserves in our area.
http://www.newsday.com/extras/lihistory/3/hs310a.htm
http://www.ospreysguide.com/Gallery/galleryGard.html
[ February 11, 2004: Message edited by: Thomas Paul ]

[Steve Wink]

Originally posted by Thomas Paul:

The problem with taxing property is that you can end up having to sell the property to pay the tax man. Gardiners Island just off Long Island is a good example. The island is the largest privately held island in the US. The Gardiners have owned the island since the 1600's. The island is worth hundreds of millions of dollars. The two current owners are both very old. When one dies the other will inherit the remainder of the property. And there is the problem. Although the family is wealthy they could never afford to pay the inheritance tax except by selling the land. Right now they live on a small portion of the island and the rest is left as a nature preserve. Developers would love to carve up the island into mansions and yacht clubs. The family would love for it to stay the way it has been for 400 years. It would be shame if our tax laws destroyed one of the nicest nature preserves in our area.
http://www.newsday.com/extras/lihistory/3/hs310a.htm
http://www.ospreysguide.com/Gallery/galleryGard.html
[ February 11, 2004: Message edited by: Thomas Paul ]

Isn't there some way they can set up a charity or trust to preserve it? Or dare I say it, give it to the state?

[Paul Stevens]

Originally posted by Thomas Paul:

The problem with taxing property is that you can end up having to sell the property to pay the tax man. Gardiners Island just off Long Island is a good example. The island is the largest privately held island in the US. The Gardiners have owned the island since the 1600's. The island is worth hundreds of millions of dollars. The two current owners are both very old. When one dies the other will inherit the remainder of the property. And there is the problem. Although the family is wealthy they could never afford to pay the inheritance tax except by selling the land. Right now they live on a small portion of the island and the rest is left as a nature preserve. Developers would love to carve up the island into mansions and yacht clubs. The family would love for it to stay the way it has been for 400 years. It would be shame if our tax laws destroyed one of the nicest nature preserves in our area.
http://www.newsday.com/extras/lihistory/3/hs310a.htm
http://www.ospreysguide.com/Gallery/galleryGard.html
[ February 11, 2004: Message edited by: Thomas Paul ]

You are preaching to the choir.

[Don Stadler]

They may be able to sell it to the Nature Conservancy with tenancy rights for life or something.

[HS Thomas]

TP: When one dies the other will inherit the remainder of the property. And there is the problem. Although the family is wealthy they could never afford to pay the inheritance tax except by selling the land.
DS : They may be able to sell it to the Nature Conservancy with tenancy rights for life or something.
A tax haven might be out of the question, I guess. (Too close to the mainland). But with the Internal Revenue Service cracking on all transactions it probably doesn't matter how far the haven is.
[ February 11, 2004: Message edited by: HS Thomas ]

[Michael Ernest]

Originally posted by Thomas Paul:

The problem with taxing property is that you can end up having to sell the property to pay the tax man. Gardiners Island just off Long Island is a good example...It would be shame if our tax laws destroyed one of the nicest nature preserves in our area.

The idea of owning property in perpetuity, and transferring it from person to another, is something our philosophy of taxation doesn't support. It's unfortunate in a case like this, where the intentions of the Gardiners seem noble and compelling.
It's too bad they didn't create a corporate structure by which family members could then be brought in and given shares of the property, or pursue some other method of maintaining a transferable ownership. In this case, some kind of trust, worked out with government, is probably the best bet. That's how we've managed to preserve places like Muir Woods.
It is still a precept of our economic system that while individuals can withhold wealth from the system to the degree they are able, they should not be able to transfer this right to other individuals in perpetuity.
A simple joint tenancy with rights of survivorship, come to think of it, would have solved the immediate problem...

[Michael Ernest]

Originally posted by Paul Stevens:
The rich have a lot of money, property, stocks, bonds, etc etc etc. So what? It is theirs and not the governments. Who cares if Kerry, Kennedy, Edwards have all that? It is their money.

Are you a capitalist or a feudalist?

[Jason Cox]

Originally posted by Paul Stevens:
The rich have a lot of money, property, stocks, bonds, etc etc etc. So what? It is theirs and not the governments. Who cares if Kerry, Kennedy, Edwards have all that? It is their money.

Just an interesting thought. I have no problems with individual wealth.
However, it does seem odd to me that no one gets wealthy on their own blood, sweat, and tears, but by their ability to have other people pretty much make their fortunes for them. In other words, the old saying "No one gets rich working for someone else" is very true.
What doesn't make sense though is that when it comes time to pay the piper, those with individual wealth seem to think the burden of payment should be shifted on the very same people who prop up their success.
Capitalism asserts that those who earn more money are those who take a greater risk. In other words, a person working on a factory floor isn't risking a fortune so they don't make a fortune either.
Unfortunately, we have turned capitalism on its head. Now, when a company goes under, the people at the top get huge payments and remain wealthy while those at the bottom suffer and enter bankruptcy.
Further adding to this odd conundrum, if a senior manager makes a bad decision it could cost people beneath that person their jobs. If, and I do mean IF the manager loses their job they will likely receive some sort of payoff and will probably make a lateral move regardless of past performance. On the other hand, the people who lost their jobs due to that manager will be lucky to receive three months severance.
But if workers do well and make the company productive, more than likely it will be their senior management that reaps the most rewards of their labor. Regardless of whether they are a good manager or not!
This was not how capitalism was ever intended to work. I'm not sure it's even capitalism anymore. It feels like something else.

[Matthew Phillips]

Originally posted by Michael Ernest:
There are three basic things you can tax: income (wages, tips, commissions), consumption (gas, sales, excise, duty) and wealth (capital, property). So far it appears we've only brought income into the picture.

Actually, this country did not have an income tax for over 100 years. In the 1860s, Congress attempted to institute an income tax, but the Supreme Court struck it down as unconstitutional. It wasn't until the early 1900s (I don't know the exact year off the top of my head) after a Constitutional amendment was passed that the income tax became a reality.
Out of the three options, I would prefer to see a consumption tax. I was going to post a 4th option, but then I saw a drastically horrible flaw with it and decided not to embarrass myself this time.
[ February 11, 2004: Message edited by: Matthew Phillips ]

[Thomas Paul]

Originally posted by Steve Wink:
Isn't there some way they can set up a charity or trust to preserve it? Or dare I say it, give it to the state?

So you are suggesting that they just hand their property over to the state? So instead of paying 48% inheritance tax they pay 100% inheritance tax.

[Michael Ernest]

Originally posted by Matthew Phillips:

Actually, this country did not have an income tax for over 100 years.

I only meant to say that our discussion here, not the US tax system in general, is focussed on income taxation, and so the idea of reaching 'fairness' is not complete.

[Matthew Phillips]

Originally posted by Rob Aught:

Just an interesting thought. I have no problems with individual wealth.
However, it does seem odd to me that no one gets wealthy on their own blood, sweat, and tears, but by their ability to have other people pretty much make their fortunes for them. In other words, the old saying "No one gets rich working for someone else" is very true.
What doesn't make sense though is that when it comes time to pay the piper, those with individual wealth seem to think the burden of payment should be shifted on the very same people who prop up their success.
Capitalism asserts that those who earn more money are those who take a greater risk. In other words, a person working on a factory floor isn't risking a fortune so they don't make a fortune either.
Unfortunately, we have turned capitalism on its head. Now, when a company goes under, the people at the top get huge payments and remain wealthy while those at the bottom suffer and enter bankruptcy.
Further adding to this odd conundrum, if a senior manager makes a bad decision it could cost people beneath that person their jobs. If, and I do mean IF the manager loses their job they will likely receive some sort of payoff and will probably make a lateral move regardless of past performance. On the other hand, the people who lost their jobs due to that manager will be lucky to receive three months severance.
But if workers do well and make the company productive, more than likely it will be their senior management that reaps the most rewards of their labor. Regardless of whether they are a good manager or not!
This was not how capitalism was ever intended to work. I'm not sure it's even capitalism anymore. It feels like something else.

Your statement of how capitalism works is not the way it was intended to, or does, work. You are overlooking a very fundamental precept of capitalism. You are assuming that there is some sort of requirement that people use their blood, sweat, and tears to benefit someone else. The people you claim became wealthy off of the blood, sweat, and tears of others had the full assistance of those others.
There is no requirement that a person has to go work in a factory for the wage that the factory owner is willing to pay. The factory worker enters that agreement voluntarily. Granted, the alternative is less attractive for some people.
In addition, we generally only see the end result and make the assumption that the wealthy person didn't earn it. What you don't see are the 70, 80, or 90 hour work weeks that occurred up to that point. You don't see the days spent at a job and the nights spend learning a new skill or improving an old one. We only see the end result where that person's hard work and good decision making is being put to the effort of investing in the work of others to gain more wealth.

[Matthew Phillips]

Originally posted by Michael Ernest:

I only meant to say that our discussion here, not the US tax system in general, is focussed on income taxation, and so the idea of reaching 'fairness' is not complete.

Sorry, I misunderstood you. I completely agree that the idea of reaching 'fairness' can't be achieved without discussing other forms of taxation. I'm curious, what do you think of a consumption tax?

[Jason Cox]

Originally posted by Matthew Phillips:


Your statement of how capitalism works is not the way it was intended to, or does, work. You are overlooking a very fundamental precept of capitalism. You are assuming that there is some sort of requirement that people use their blood, sweat, and tears to benefit someone else. The people you claim became wealthy off of the blood, sweat, and tears of others had the full assistance of those others.
There is no requirement that a person has to go work in a factory for the wage that the factory owner is willing to pay. The factory worker enters that agreement voluntarily. Granted, the alternative is less attractive for some people.
In addition, we generally only see the end result and make the assumption that the wealthy person didn't earn it. What you don't see are the 70, 80, or 90 hour work weeks that occurred up to that point. You don't see the days spent at a job and the nights spend learning a new skill or improving an old one. We only see the end result where that person's hard work and good decision making is being put to the effort of investing in the work of others to gain more wealth.

Hmmm...the funny thing is, I never said any of that. I never said they didn't earn it or that the wealthy never worked for their wealth. In fact, that's one of the reasons I mentioned up front that I have no problems with individual wealth.
My greatest concern is how the folks who are the "risk-takers" don't seem to be held accountable or put at any real risk anymore.

[Paul Stevens]

Originally posted by Michael Ernest:

Are you a capitalist or a feudalist?

I just don't have a problem with the wealthy having things. I don't feel that they got theirs because someone else didn't get theirs. I don't feel that they have to give it up because it isn't "fair".
They pay plenty in taxes that has been proven. Do I feel CEOs should be paid huge sums of money while sending jobs elsewhere to save money? No. Do I feel dividends, interest and capital gains should be totaly tax free. No.
My problem is with those who feel that the "rich" are not pulling their share of the taz burden. It simply is not true.

[Matthew Phillips]

Originally posted by Rob Aught:

Hmmm...the funny thing is, I never said any of that. I never said they didn't earn it or that the wealthy never worked for their wealth. In fact, that's one of the reasons I mentioned up front that I have no problems with individual wealth.
My greatest concern is how the folks who are the "risk-takers" don't seem to be held accountable or put at any real risk anymore.

In my first paragraph, I probably should have said "seem to be assuming" instead of just saying that you are assuming. The indication that you seem to think that the wealthy don't earn it was your statement:

However, it does seem odd to me that no one gets wealthy on their own blood, sweat, and tears, but by their ability to have other people pretty much make their fortunes for them. In other words, the old saying "No one gets rich working for someone else" is very true.

My point was that they do, we just don't see it.
People working 60 or 70+ hours a week are taking a risk. There is no
guarentee that doing this will pay off in becoming wealthy but that time is already lost to being used in another manner. The same thing applies to learning a new skill. Investing your money in corporate stock is a risk. Small businesses start up all the time. Some succeed and wealth follows. Some fail. Those that succeed often invest capital in other people with the intent to grow their wealth. Our society seems to have forgotten that both sides benefit from the employer-employee relationship.
I'm not directing this at you, but the key to capitalism is to not be satisfied with the bottom of the ladder. Far too many people seem to complain that they aren't getting their opportunities when they don't go out there and create them. I completely agree that there have been some very fishy things happening in the corporate sector. People who appear to have done wrong have not been held accountable. That is not a failure of capitalism and wrong doing is not the norm. That is a failure of law enforcement and the moral values of a few.

[Matthew Phillips]

Originally posted by Michael Ernest:

Are you a capitalist or a feudalist?

I want to be Supreme Emperor and be called Lord Bob.

[Michael Ernest]

Originally posted by Matthew Phillips:
Sorry, I misunderstood you. I completely agree that the idea of reaching 'fairness' can't be achieved without discussing other forms of taxation. I'm curious, what do you think of a consumption tax?

I think we need to account for all three -- because we do have all three, in various forms -- before we can say what's fair and what isn't. Starting with the premise that the government takes out of my dollar is a tax, and what I get to use as I see fit isn't, I'd be curious to know if "fair share" can be computed.
Lemme give you partial hypothetical. Let's say I have a corporation, wholly owned by me. We'll call it Lord Bob Industries. I construct it in such a way that I draw a minimal 'wage' but live in a corporation-owned house, eat corporate-purchased food, drive a corporate car, and so on. On one hand, these are all business expenses, and can be deducted against business income. On the other hand, since my wage earnings are paltry, I pay a minimum in federal income.
So while my net worth continues to expand -- I own Lord Bob Industries, and LBI offsets its profits with expenses, takes advantage of rapid depreciation schemes (like a car/tank with a GVW of 6000 pounds or more: thanks Dubya!), and the corporation declares a miniscule dividend -- I amass capital using income that doesn't get taxed. If I cash out, I'm taxed on the gains against that capital; if I'm smart, I have other depreciations on that schedule that will help offset part of the return. The rest...well, the rest I want to complain is taxed at too high a rate, cause that's the only real recourse I have.
I'm not saying the example here is completely sound, but I hope it has enough things right to suggest that a person in our economy using substantial capital assets has far, far more tax advantages (not just greater opportunities) than a person who simply generates income under someone else's capital base.

[Thomas Paul]

Originally posted by Michael Ernest:
Lemme give you partial hypothetical. Let's say I have a corporation, wholly owned by me. We'll call it Lord Bob Industries. I construct it in such a way that I draw a minimal 'wage' but live in a corporation-owned house, eat corporate-purchased food, drive a corporate car, and so on. On one hand, these are all business expenses, and can be deducted against business income. On the other hand, since my wage earnings are paltry, I pay a minimum in federal income.

I am fairly certain that the IRS considers all that stuff the corporation is giving you as taxable income. When I was Avis they got around the car thing by making us fill out all sorts of paperwork to show that we were evaluating the car for the corporation so it wasn't considered income. That only worked because we were in the car rental business.

[Paul Stevens]

Thomas is right. They are all taxed as income. I was given something out of a catalog once and had to pay taxes on it. Same thing would apply here.
Depreciation is only allowed for the company. The capital gains for the person cashing out can only be offset by capital losses.
There is also the alternative minimum tax which prevents claiming huge capital losses to avoid taxes.

[Frank Silbermann]

Michael Ernest: "It is still a precept of our economic system that while individuals can withhold wealth from the system to the degree they are able, they should not be able to transfer this right to other individuals in perpetuity."

What does "withhold wealth from the system" mean? What "system" are you talking about? Private property is private property -- it means someone owns it and it belongs to them until they give it to someone else. If the Gardiner family has owned the island for 400 years, then why shouldn't that family be allowed to own it for another 400 years? What right does a "system" have to take it from them?
Obviously, the government must charge fees of some sort to the governed for services rendered, but if we abuse that power to collectively vote ourselves other people's property then aren't we turning the government into a weapon of legalized armed robbery?
If laws are passed to prevent a family from keeping property into perpetuity, then it really isn't private property, is it? Those laws have essentially already confiscated it, and merely soften the blow for them and help us avoid feelings of guilt by letting the victim continue to use it for a while.
The substitution of creeping socialism in place of revolution does not make Marxism acceptable.

[Thomas Paul]

Originally posted by Don Stadler:
They may be able to sell it to the Nature Conservancy with tenancy rights for life or something.

But think of how awful that is. Here we have a piece of property that has been in their family for 400 years and they can't keep it in the family because the inheritance tax on the value of their property is so high that even a family of millionaires can't afford to pay it!
Inheritance taxes should be done away with. If the person who inherits the land sells it then they would pay a tax based on what they made by selling it. But the inheritance tax forces you to sell something just so you can pay the tax.

[Sadanand Murthy]

Originally posted by Michael Ernest:

The idea of owning property in perpetuity, and transferring it from person to another, is something our philosophy of taxation doesn't support.

Is this a personal opinion? If not, who says this & where is it said? Does the constitution (my assumption is you are in US) say so? And why should I not have the right to give my wealth to whomever I choose? Are we now saying that the State knows best? Is this another way to achieve what Karl Marx & his followers have failed time and again?

Originally posted by Michael Ernest:
It is still a precept of our economic system that while individuals can withhold wealth from the system to the degree they are able, they should not be able to transfer this right to other individuals in perpetuity.
[/QB]

The whole precept of democracy and the freedom that comes with it tell me that I've every right to give my things to whomever I wish to. The death & inheritance tax are, IMO, nothing but highway robbery by bandits that carry a government id.

[Matthew Phillips]

Originally posted by Thomas Paul:

The problem with taxing property is that you can end up having to sell the property to pay the tax man. Gardiners Island just off Long Island is a good example. The island is the largest privately held island in the US. The Gardiners have owned the island since the 1600's. The island is worth hundreds of millions of dollars. The two current owners are both very old. When one dies the other will inherit the remainder of the property. And there is the problem. Although the family is wealthy they could never afford to pay the inheritance tax except by selling the land. Right now they live on a small portion of the island and the rest is left as a nature preserve. Developers would love to carve up the island into mansions and yacht clubs. The family would love for it to stay the way it has been for 400 years. It would be shame if our tax laws destroyed one of the nicest nature preserves in our area.
http://www.newsday.com/extras/lihistory/3/hs310a.htm
http://www.ospreysguide.com/Gallery/galleryGard.html
[ February 11, 2004: Message edited by: Thomas Paul ]

I haven't visited the links yet, but does the couple have children? If so, they might be able to sell the island to their children now while it is a private residence and avoid paying taxes on it.