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Of course the answer is clear: we have them because the 1% wants us to have them. By guile, propaganda, and sometimes thinly disguised bribery, the 1% have crafted an overall tax system in this country that overwhelmingly favors the rich. This is borne out by Joan McCarter's recent diary: http://www.dailykos.com/... which I heartily recommend.

Why have we allowed this to happen? How can we reverse it? I have no answers; all I can do is to give my opinion as to what the problem is.

I think we can agree on the definition: A regressive tax is one that falls upon the lower income taxpayer more heavily than than on the higher income taxpayer as a percentage of income. We can define progressive taxes as just the reverse. For all practical purposes, there are no neutral taxes, although the Medicare tax comes very close. (It is slightly regressive because dividends and capital gains are not subject to it.)

What progressive taxes do we have in this country? We have the individual income tax, the estate tax together with the gift tax (basically siamese twins), and a few progressive state income taxes. There are a few "luxury taxes" that might be progressive, but they are inconsequential window dressing.

What regressive taxes do we have? All the rest of them, and there are hundreds. The principle culprits are, in no particular order, Social Security taxes, sales taxes, excise taxes, corporate income taxes (a debatable issue), road and bridge tolls, and property taxes. (Did I miss one? It's hard to keep track.)

The poll suggests ways to make Social Security taxes less regressive, and the results should be interesting. In a previous diary where mentioned the "third rail", I ran into a buzz saw; the comments seemed to favor the present regressive structure. Let's see what a poll reveals, but first, please consider my argument for a progressive Social Security tax structure.

I argue that our present economic environment is, to a very great extent, due to the people presently retired, and soon to retire. They built the roads, bridges, buildings, power grids, and the internet. Without their labor, we would today use slide rules for calculating, roads that might support 45 MPH traffic on a good day, and fans to keep us cool in summer. Automobiles would go perhaps 5000 miles between trips to the repair shop. TV's, when they were working, would receive 3 or 4 channels, but only if your roof antenna pointed in the right direction. Microwave ovens? What are they? Computers? Just a distant dream. Software? Does that mean velvet pillows?

Those who are now retired invented, developed, and built the technological marvel that enables us to produce so much more today than was possible back in their time. Even those who merely pushed a broom supported the technological and infrastructure development with their taxes and their purchases. And now the 1% wants to use all these marvelous tools without even a token acknowledgement of where these marvels came from. Their message: Let the poorest of the poor support the workers who are now retired. Let the entry level worker who makes a minimum wage be the mainstay of their income. We rich folks did it all for ourselves, by being born into a generation that was so industrious and so inventive, and we don't owe them a bloody thing.

I put this argument to Peter Ferrara (If you are unfamiliar with this scum, Google is your friend.) by email quite a few years ago. His response? Basically, he said that the rich don't owe them a thing. Their labor was bought and paid for; end of story. If they starve, it's their own fault. I was aghast at his attitude. How could anybody be so ... so inhuman? So unfeeling? So immersed in the pursuit of greater and greater wealth that they blithely throw anybody under the bus for a buck?

My position on this is that we should do what is best for society. It is mathematically obvious that the well-being of the 99% should supercede the well-being of the 1%. If some abstract notion of "fairness", such as the idea of a flat tax, results in greater misery for the 99%, then there is something wrong with that notion. (There I go again, preaching to the choir.)

Sorry for the rant; you've seen it dozens of times before. But, dammit, something has to be done before they lay claim to the very last dollar.

To get back to the topic of regressive taxes, let's consider federal excise taxes. Many of them have the purpose of building a trust fund to compensate victims of a particular evil, black lung disease, for example. If the mine owner is long since dead, and his company is defunct, there is still a fund to compensate victims. These excise taxes are obviously a good thing. But I am annoyed at the "sin" taxes, because they are regressive. As a former smoker, I am sympathetic to the aim of discouraging smoking, but I think that taxing the poor is not the right way to go about it. But let's face it, sin taxes are small potatoes in the grand scheme of things.

I criticized the corporate income tax in my last diary. But as a result of several of the comments, I am no longer entirely convinced such a tax is regressive. If we taxed dividends and capital gains as ordinary income, it might even be a positive tax. This is an issue on which I am suspending judgement, at least for the moment.

The federal tax structure, with all its flaws, is a model of fairness compared to state an local taxes. Each and every one of the 50 states has a decidedly regressive tax system. This is baffling, because Americans all understand that a regressive tax is unfair. So how can it be that all 50 states have selected a regressive--and sometimes cruelly regressive--tax system? Take a few minutes to check it out, if you have not already done so. It is nothing less than a national disgrace. On a population-weighted basis, all 50 states tax the lowest income quintile at roughly twice the rate of the top 1%--10.8% Vs 5.3%.

Now, my question is this: In view of the fact that the various states have a clear model for a progressive tax system, namely the individual income tax, why have all 50 states opted for a system that is clearly and blatantly regressive? I have my own theory why this is so, but rather than give my own opinion, I'd like to solicit yours.

Originally posted to Tim DeLaney on Sun Nov 27, 2011 at 08:57 PM PST.

Also republished by Social Security Defenders.

Poll

What would be the best tax to fund Social Security? (All options would be revenue neutral.)

26%9 votes
17%6 votes
26%9 votes
29%10 votes

| 34 votes | Vote | Results

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Comment Preferences

  •  Tip Jar (3+ / 0-)
    Recommended by:
    mimi2three, smileycreek, bibschol

    Occupy is the symptom. Fundamental reform is the cure.

    by Tim DeLaney on Sun Nov 27, 2011 at 08:57:58 PM PST

  •  Regarding why states don't have (1+ / 0-)
    Recommended by:
    Tim DeLaney

    progressive income tax, I can only answer what I know about Massachusetts, which is that its constitution forbids taxing the same kind of income at different rates...they do have a higher (double, I think) tax on investment income.

    As to the sales taxes in every state...I remember when Massachusetts first passed it, it was promoted as a way to bring in more revenue without raising other taxes....I was not yet voting age at the time, and it seemed to me a way to tax people like myself (kids) who could not vote but who did buy taxable items...seriously, though, I think sales taxes and lotteries became popular mainly as a way for taxpayers to push off some of the tax burden onto "other people" (non property-owners).

    I don't see how you consider property tax so regressive, though...as long as there is a sufficient resident's exemption, property tax isn't regressive, it's a tax on wealth rather than income.

    "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

    by Alice in Florida on Sun Nov 27, 2011 at 09:30:40 PM PST

    •  Property taxes (0+ / 0-)

      If you browse the link I gave on state taxes, you will find that property taxes are actually regressive.

      I admit that this was a surprise to me as well, but I have no reason to doubt the results of this study.

      Occupy is the symptom. Fundamental reform is the cure.

      by Tim DeLaney on Sun Nov 27, 2011 at 10:11:24 PM PST

      [ Parent ]

      •  Well, slightly regressive. (1+ / 0-)
        Recommended by:
        Tim DeLaney

        I think what we're seeing here is the fact that property is rarely entirely worthless (even the homes of the extremely poor are worth something) and that eventually the very rich see diminishing returns on home price (Few billionaires would spend 50% of their money on property)

        Not sure if those charts are adjusted to reflect how the poor who rent pay property tax indirectly via higher rents...

        •  I think taxes embedded in rent are included (0+ / 0-)

          My guess is that at some income level a bigger, more expensive  house is not a plus. It's more attractive to buy a vacation home in Acapulco.

          Occupy is the symptom. Fundamental reform is the cure.

          by Tim DeLaney on Mon Nov 28, 2011 at 09:21:05 AM PST

          [ Parent ]

  •  How about this deal? (1+ / 0-)
    Recommended by:
    Tim DeLaney

    Lower corporate taxes to a token amount or even zero but tax ALL income as ordinary individual income and go back to the pre-Reagan tax rates.  If corporations are going to have even MORE money, you'd also need a Constitutional Amendment overturning Citizens' United and get public-financed elections.  Maybe balance it with a $20 per ton carbon tax with low income offsets and get rid of the income ceiling on Social Security taxes.  

    This would provide a huge incentive to invest money back into the economy instead of just sitting on it like the rich are doing right now.  With so many corporations dodging tax law right now and getting NEGATIVE taxation rates, it's much smarter to go after individuals for tax fraud, both legally and politically.  

    The teabaggers would never go for it, though.  Even $1 of increased taxes would set off their Grover Norquist alarm and get them teabagged out of their own primary.

  •  Regressive taxes: proof media ownership works... (1+ / 0-)
    Recommended by:
    Tim DeLaney

    very well indeed for the 1%.

    Every discussion of tax policy and tax fairness is demagogued at the speed of light by Our Craven Corporate Media™, repeatedly portrayed as yet another attempt by 'those politicians to get their hands on your money'. That's how the Estate Tax was obliterated. That's how tax rates on billionaires were grossly mischaracterized as "their hands on your money".

    Ownership of America's journalistic machinery by a tiny clique of über-wealthy oligarchs has paid off extremely well for them.

    •  The propaganda war is fought with (1+ / 0-)
      Recommended by:
      Ralphdog

      Money!

      They have a veritable army of millionaire propagandists all writing Op-Eds, testifying before Congress, pumping up the RRR (Rich Republican Right) at their $100 a plate luncheons, and just schmoozing their buddies in Congress.

      What do we have beyond the Great Orange Satan? Warren Buffett and George Soros, of course, and I'm sure there are others, but we're being drowned out by the RRR.

      Occupy is the symptom. Fundamental reform is the cure.

      by Tim DeLaney on Mon Nov 28, 2011 at 10:15:08 AM PST

      [ Parent ]

  •  Good God. Florida is billionaire paradise. (1+ / 0-)
    Recommended by:
    Tim DeLaney

    No income tax, and brutal sales + excise taxes crushing the working poor into the mud. That and the "O.J. shield" that protects multimillion dollar residences from any financial judgements.

  •  Two reasons, two theories about taxes. (1+ / 0-)
    Recommended by:
    Tim DeLaney

    1) People who use the government services should pay the taxes for those services.

    2) People who have the most money should pay the most taxes.

    Idea #1 tends to yield regressive taxes (tolls, property tax, excise taxes) since the static cost is the same per user.

    Idea #2 obviously yields progressive taxes.

    Secondly, regressive taxes are easier to administer, since frequently all you need to know is that the transaction happened, and for what amount.

    To apply a progressive tax, you need to know something about the person (namely, their income.  Ideally, all their income and wealth)

    •  OK, (0+ / 0-)

      Regressive taxes are easier to impose and administer; I agree that this is a part of it.

      By the way, I saw an example of this during a Thanksgiving trip to Chicago. After installing an automated toll collection system a couple years ago (based on transponders), the Illinois Tollway is dropping the other shoe and nearly doubling the toll. If a worker with a median wage of $50,000 hits three toll booths each way to work (as I did in 1986), tolls alone would extract a cool 3% of his income.

      Occupy is the symptom. Fundamental reform is the cure.

      by Tim DeLaney on Mon Nov 28, 2011 at 09:49:22 AM PST

      [ Parent ]

      •  Tolls are kind of a best-case for a regressive tax (0+ / 0-)

        1) In theory, it's optional, unlike, say, sales tax on groceries (One has to eat, and few people are subsistence farmers)

        2) Administering a progressive version would be almost
        prohibitively hard, given that anyone can drive a given vehicle.

        3) As per theory #1, only those who use the service of the road are required to pay for it.  Ergo, the farmer elsewhere in the state doesn't pay anything for a service he doesn't use.

        •  In some cases it's optional, but (0+ / 0-)

          As a practical matter, toll roads are sometimes the only real option. If it takes an hour to get to work via surface streets, and 20 minutes via a toll road, calling it optional is a stretch.

          Besides, maintaining roads is one of the key duties of government. This dates back to the Appian Way.

          Occupy is the symptom. Fundamental reform is the cure.

          by Tim DeLaney on Mon Nov 28, 2011 at 01:56:17 PM PST

          [ Parent ]

  •  On Social Security (0+ / 0-)

    Leave it alone. It's current tax structure largely explains why it has been mostly bulletproof politically through its history.

    Consider this: FDR took top marginal rates from 66% at time right before passage of the Social Security Act to 94% during the war. So obviously not an enemy of progressive taxation as such. Yet his team devoted not a penny of that revenue to Social Security Title 2, the insurance plan we know today.

    Why? Because he knew what he was doing. On the base political level and not on some abstract social or economic justice angle. Social Security works as designed and before radically changing that design it might be worth studying the thinking of the designers.

    Social Security offers a progressive payout even as it based on what appears to be a regressive tax. This is true even though higher lifetime earners get larger checks in nominal terms. How then could it be progressive? The answer is in 'replacement ratios', and screwing with the current formula risks injecting class struggle between the working class and the middle class as opposed to near unanimous support for the program as designed. Because the downward transfer from the 80% to the 20% is to a degree invisible and frictionless. And the cap and the exemption of capital is what allows Social Security to tell the Top 1% to piss up a rope, SS draws nothing from capital and so owes nothing to capitalists.

    Another piece in its wall of protection. It will be fine if it can just be protected from its good intentioned friends, who long term may be a bigger threat than its obvious enemies.

    Tax the rich and use the money to educate our kids and give universal health care. On the merits Social Security should be around item 80 on the progressive agenda, to even talk about fixes is to concede the argument that it is fundamentally broken. Don't fall into tht trap.

    •  I have to think about this comment (0+ / 0-)

      On the one hand, you make some very good points. But I cannot help feeling that the minwage worker is getting screwed. Maybe (just maybe) in 40 years or so (s)he gets a reasonable payout. But meanwhile?

      Myself, if I were twenty-something I'd rather have something real today rather than pie-in-the-sky bye and bye.

      Occupy is the symptom. Fundamental reform is the cure.

      by Tim DeLaney on Tue Nov 29, 2011 at 10:29:50 PM PST

      [ Parent ]

  •  Why state and local taxes are so regressive (0+ / 0-)

    I said I had a theory, and here it is. It is more profitable to tax the poor, because they cannot easily escape taxation by moving out of the state.

    If a typical state were to impose an income tax as progressive as the federal, they might well lose upper income taxpayers, particularly those whose income source does not require them to reside anywhere in particular.

    Unfortunately for this theory, there seems to be very little correlation between the regressiveness of the state's tax system and mean household income. The lowest 40% on the income scale get hit so hard by sales and property taxes, that even fairly progressive income taxes cannot level the playing field. (Look at CA and NJ)

    If we could somehow outlaw sales and property taxes, the tax picture in all 50 states would improve dramatically with respect to fairness. But, of course, that's impossible given 'states rights' and the tenth amendment.

    The only sensible course of action is to educate the public. But I don't see Democrats campaigning to lower sales and property taxes as a method to improve fairness. Property taxes are especially insidious, since renters don't even see them, and they are generally regarded as a tax on wealth.

    I know it's not likely to happen, but why should we not have a net worth tax? The property tax could serve as a sort of precedent. Just define property as "anything of value".

    Occupy is the symptom. Fundamental reform is the cure.

    by Tim DeLaney on Tue Nov 29, 2011 at 10:35:51 AM PST

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