There’s more evidence that the efforts Minnesota has taken to more equitably share the responsibility for funding schools, roads, nursing homes and other critical services have paid off.
The state’s new Tax Incidence Study looks at all state and local taxes that Minnesotans pay, and measures those taxes as a share of Minnesotans’ incomes. This year’s version of this essential study from the Minnesota Department of Revenue has information for 2012 and projections for 2017. That creates a “before and after” picture of what differences the tax reforms of 2013 and 2014 have made.
- Minnesota’s tax system is still regressive – that means the percentage of income paid in taxes goes down as incomes rise – but will be significantly less so in 2017 than 2012.
- While the highest-income Minnesotans still pay the smallest share of their incomes in total state and local taxes, the gap between them and other Minnesotans has closed considerably. In 2012, the share of their incomes that the 1 percent of Minnesotans with the highest incomes paid in taxes was 1.7 percentage points lower than the state average. In 2017, that difference narrows to 0.9 percentage points.
- Average tax levels will be about the same in 2017 as in 2012. On average, Minnesotans paid 11.5 percent of their incomes in state and local taxes in 2012. In 2017, that number is expected to be 11.4 percent. (That’s considerably less than in the 1990s, when it was as high as 13.0 percent.)
Minnesota made this progress on making the tax system more fair through tax policy changes in 2013 and 2014 that, taken together, raised taxes on the highest-income Minnesotans closer to the state average, and lowered taxes for all other income groups.
The Tax Incidence Study identifies the five recent policy changes that had the biggest impact on the distribution of taxes in Minnesota. The three policy changes that did the most to make taxes less regressive were the “4th tier” income tax bracket on the roughly 2 percent of Minnesotans with the highest incomes, increases in the Working Family Tax Credit, and larger property tax refunds (primarily for homeowners but also for renters). The two most regressive policy changes were the increase in cigarette and tobacco taxes, and estate tax cuts. The cumulative effect of the tax changes passed in 2013 and 2014 was to make the tax system more equitable.
But it seems that some want to bring us back to the bad old days, when low- and middle-income Minnesotans paid significantly more than their fair share. There are a substantial number of bills moving in the Legislature that would cut taxes just for those with the highest incomes, such as:
- Estate tax bills, ranging from substantial cuts to full repeal. Full repeal would benefit 800 of the largest estates at a cost of $341 million in FY 2018-19, when fully in effect. Several other estate tax cutting bills cost more than $100 million per biennium.
- House File 63, which would exempt business owners from paying taxes on their business profits at the 4th tier income tax rate. This bill provides $355 million in tax cuts in the FY 2016-17 budget cycle to only 33,100 households, all of whom have incomes high enough to be in the top tax bracket.
Bills like these that provide large tax cuts to the highest-income Minnesotans should not be our state’s priority. Instead, we should continue the positive direction we have taken over the past two years, which has focused on making the system more equal.
In addition to the distributional impact of tax changes, policymakers also need to keep an eye on the overall size of tax cuts. The lesson of the late 1990s and early 2000s is clear: too much tax cutting in the good times was followed by greater reliance on property taxes, double-digit increases in tuition at public colleges and universities, and higher fees. That combination put more of the responsibility for funding public services on to low- and middle-income Minnesotans.
While the tax increases passed in 2013 are often mentioned in the current debate, this was followed in 2014 with two tax cutting bills that reduced taxes in the upcoming FY 2016-17 biennium by around $1 billion.
The state’s more positive budget situation shouldn’t mean a change in direction. As policymakers put together their tax bills this year, they should continue progress toward a fair tax system and a sustainable budget, rather than enact large tax cuts for a privileged few and put services Minnesotans count on at risk.
This post was written by Nan Madden and originally published on Minnesota Budget Bites. Follow the Minnesota Budget Project on Twitter: @mnbudgetproject.
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If you believe
that the purpose of taxation is to pay for government services, then a fair taxation system would be one where every citizen paid the same amount of tax, just as every citizen pays the same amount for a rail ticket or a loaf of bread. What a person earns is irrelevant to the costs of those government services.
But if you believe that the purpose of taxation is to engineer society, to somehow balance out the resources available to each citizen, then you would believe that the correct model would be to tax from each citizen according to his ability to pay and to give to each citizen according to his needs.
But then you’d be a Marxist. I just wish people would admit that.
Taxation based on ability to pay is not Marxism, it is just progressive taxation. You can argue that progressive taxation is a tenet of Marxism- though Marxism itself is not *only* an economic theory, it is primarily a political and social theory as well.
You’re exactly right
And it’s the political and social theory of Marxism that is behind the attempt to achieve economic equity through progressive taxation. It’s interesting that when the Soviet Union collapsed, one of the first things they did to purge the society of Marxist policy was to implement a flat tax.
If I’m ‘exactly right,’ that means your argument was far too simplistic in the first place. And yes, we should all want to be more like Russia: autocratic, homophobic, belligerent, untrustworthy, jingoistic, and hated by the world. Oh wait, I seem to remember a period of time between 2000 and 2008…
Perhaps you might explain
Dennis, how would you libertarian utopia be any less an exercise in social engineering? It requires that all citizens agree to its stipulations in order to function, and disobedience must be punished lest the entire system careen headlong into autocracy. Perhaps you really mean you don’t mnd social engineering so long as it results in outcome beneficial to you.
The only things citizens woud be required to do
would be to obey the law and live as free men. The reason the left has a problem with libertarianism is because they would be forced to be free men whether they wanted to or not.
You can’t ‘force someone’ into freedom. It’s paradoxical.
Actually
The removal of regulations would force people into an increased state of freedom. And some may not be comfortable with that. Imagine if we eliminated the speed limits…. Many people would fear the freedom and choices made by their fellow drivers. Some may even choose to stop driving.
The far right and far left seem to like government control… That is as long as it aligns with their views.
So, no speed limits = freedom? Be reminded that driving is a privilege, not a right. What you’ve proposed wouldn’t force people into freedom, it would force them into a highly dangerous situation. By that same logic, people should be free to drive while drunk. Or high. Or while texting. Or in a car with no headlights or brake lights.
Continuums
Zero rules = Anarchy, Increased Personal Freedom and Increased Personal Risk
Infinite rules = Totalitarianism, Decreased Personal Freedom and Decreased Personnel Risk
How to balance personal freedoms against personnel risk? It is an interesting topic.
What is the societal and personal cost of trying to protect everyone from every risk?
Progressive Taxation was Adam Smith’s Idea
In fact, it’s the first of his four principles of taxation that
“The subjects of every state ought to contribute to the
support of the government, as nearly as possible in proportion to
their respective abilities: that is, in proportion to the revenue
which they respectively enjoy under the protection of the state.
In the observation or neglect of this maxim consists what is
called the equality or inequality of taxation.”
You’re familiar with the trial and death of Socrates, I’m sure. In it, Socrates decides to accept his punishment, execution, because it is his duty to submit to the state from which he had received benefits.
Your revenues are a benefit of living under the protection of the state. In fact, the amount of revenue you enjoy is the best proxy for the amount of benefits you receive from the state.
It is not Marxist to say that a person who has more revenue should pay more to support the state. Not that it matters – the ideas should be evaluated on their merits, not on the authority or popularity of their authors.
How is it fair
that a person using much more of those government services pays the same as everyone else? Is it fair that a business owner using millions of gallons of water pay the same as a single person household? Is it fair that a business shipping hundreds of thousands of tons of merchandise over public roadways pay the same as someone driving a Camry? Is it fair that a business owner who uses the court system to enforce his patents/his contracts/his partnerships on a Monthly or weekly basis pay the same as a man who never uses that system? Is it fair that a business owner requiring constant monitoring by police and fire pay the same as a single family home owner? Is it fair that a business owner who produces mountains upon mountains of garbage pay the same as a single person who composts and recycles? The problem with people like Dennis is they have no clue what a drain on the system they truly are.
If you want to make it fair
make all those services fee-based. The income tax should be abolished anyway because it’s a tax on a man’s labor. We should be encouraging labor, not discouraging it.
A truly fair tax system would be a fee-based system where you would only pay for government services as you use them. People who don’t hunt or fish don’t pay for hunting or fishing licenses for example.
Tax on a man’s labor?
Only partly, and there’s not much “labor” going on any more. Putting aside the fact that women also pay taxes …
Income taxes are levied on such things as vested stock options, capital gains, bonuses, and other such passive and non-labor things.
Your Argument
You made a leap that the straw man argument “every single person pay the same” applied to businesses. But since you started the comparison, why would’t you apply the same litmus test the other direction?
That is, is it fair that some people pay much much more in taxes but don’t take advantage of public social services, such as housing subsidies, health care subsidies, mass transport, college financial aid, the way people with lower income do?
It depends…
on one’s definition of fairness. I use less government services than those who pay less taxes than I do. I don’t ask for a monthly check or food stamps or free transportation, etc.. I ask for one thing and don’t receive it. I ask to be left alone.
Everything is Relative
I find the Tax Incidence Study and people with the author’s view interesting, They seem to think that flat or progressive is the best thing for MN.
The reality is what does the Tax Incidence study look like for the other states? Just as States with relatively excellent welfare benefits will draw more poor people, States with relatively high tax rates will push away more high income / high net worth people. Especially those baby boomers who are free to take their wealth and move to a warmer climate for 6+ months per year.
Since the wealthy are already subjected to a very progressive federal tax system, why would they choose to stay in a state with the same once the kids are grown and they are retired? It would be like you choosing to pay more for a very similar product, which most people do not choose to do.
Correct “Everythign is Relative”
However the logic is flawed: Friends, weather, location, services, job, recreation, quality of life, vacation homes, drive-ability, safety, ego, proximity, etc. etc. are all part of the equation. The great thing about being rich, “money is really not a problem” What is a $20-40-100K additional tax bill to someone making $2M a year, 5% most of these folks can’t find ways to spend the money they make now, that is why they are rich! We should not attempt to take our middle class ideas and values and equate them to millionaires and billionaires, they see the economic world through different eyes and value statements.
Why do wealthy folks wine and dine at some of the best and most expensive restaurants, because they can, they like too, and it pumps up their ego. Exactly to the faulty logic point, they pay an easy 10-20X+ for an evening out vs similar. They think nothing about a single $500-700 meal for 3 or 4 people? That’s a lot of McDonald’s, Olive Garden, Red Lobster or Country Buffet, for us middle class folks. They fly first class I’ve seen as high as $10-14K on last minute booking, the seat 2 rows back is $1200. “Similar product”, is in the eyes of the purchaser.
Different Wealthy People
Dennis,
You must know a different group of well to do people than I know. Most wealthy people I know are wealthy because they save and invest. And a couple of percent of extra cost is definitely going to show on their radar.
Besides the highest bracket starts at $200K, not $2 mil.
http://www.revenue.state.mn.us/individuals/individ_income/Pages/Minnesota_Income_Tax_Rates_and_Brackets.aspx
I am sure you are correct that there are some big spenders, however I think they are the minority.
Maybe I do, maybe I don’t ?
Not sure where you are trying to go with this, what is your definition of well to do? That is different than frugal, or you could be well to do and frugal, but.
Lets look at some numbers,
Folks with Net worth > $2M ~ 1.8 Mil Americans ~ 1.8 M/333M ~ .5% of Americans
Folks making over $200K a year ~ 4.5 Mil (tax filers) ~ 4.5/333M ~ 1.5% of Americans
Couple points, folks make a lot of money but also spend a lot of money, yep there are folks on $200K a year incomes and $250K a year life styles, not sure that makes them poor?
Folks that equate life to $, depending on who is looking are missing living/life. One needs to look past the numbers and also add in the emotional issue, folks pay $80-100 every 2 weeks or more to get an emotional high from a sports event, play, theater, museum, meeting with friends. Things have to be pretty bad for a person(s) that they will give up family, friends, church neighbors etc. pick up and start all over again at (pick the age), moving/relocating is not with out its own cost & risk/reward.
When we are talking about “money” in terms of tax fairness, remember a couple points: LT Capital gains are in the ~ 15% tax area, no medicare, no social security, the first dollar labor makes gets hit with S/S and Medicare,make enough and Fed & State kick in, plus most folks spend near on, every $ they make, result most of each $ they spend also gets taxed when they spend it, ~ 7 5/8%. Our Capital gains folks on the other hand, already got plenty of $, and may not spend much relative to income. Thus the majority of their income $ don’t see higher than 15%. So how do we want to look at fair? There is a reason the rich are getting richer and the poor poorer, at an astronomical rate and from this perspective it isn’t because we have a fair tax system..
So we need to agree on what is meant by rich and fair?
Thanks for the discussion.
Clarificatiuon
You wrote “What is a $20-40-100K additional tax bill to someone making $2M a year?” My point is that wealthy people I know are wealthy because they manage their money closely. They will notice and work hard to avoid a loss of $20-40-100K.
Just curious, do you think that workers are owed all of their SS and Medicare benefits when they retire? And their disability benefits if needed? If so, why do you consider payroll taxes a tax? Why isn’t it just mandated savings and insurance premiums?
In my view, SS,Medicare, Disability are either legally mandated prepaid plans. (ie not a tax) Or if they are a tax, then all the paid benefits equate to welfare and medicaid which can be modified as desired. Most people want to call them a tax while demanding that they get their money back.
Its not a loss!
The tax bill is not a loss, Its a tax expense, If the premise you propose is correct, than rich folks would prefer to live in poor neighborhoods with low property taxes, because the tax on those homes would be far less probably close to 10X less than say lake of the isles.
Point being: Most wealthy folks enjoy their wealth and the security it brings them. As per earlier, need to clarify what you term as “wealthy”
To your curious question: (No) Reason: no different than; do you expect your car insurance company to give you all the premiums you didn’t use when you change carriers? Less a small administrative fee of course.
On my pay check it says Tax, my checks back in 1966 said Social Security. Call it what you want, but I think we all know have clear expectations on what it is for.
“In my view”: Not quite sure where you are going: I would agree S/S etc. is an insurance pool, maybe a bit to liberal for my blood, but as with the automotive example, I think folks give way to much credence to private industry and not enough to government programs, meaning, they should do more of an apples to apples comparison, they tend to use one ruler for private enterprise and a different one for government, and the government ruler always has farther to go to get the same perception of success. (In my opinion)
Back to Relativity
Wealthy people pay for value, just like most of us. If they can get that nice neighborhood for a lower tax rate, they will likely choose the better value. And as all our wealthy MN Baby Boomers start to retire and they have the option to live somewhere warm 7 months a year that has a lower tax burden, while still enjoying MN summers…. It actually sounds pretty good, especially as MN keeps raising taxes.
Thank you for your answer to my curious question. I am fine with either answer. Since it is a tax for this discussion, then all those benefits are just a government program like welfare and medicaid. And no one earned and/or is owed that benefit. Personally I think we should eliminate SS and Medicare and just have the needy use welfare and Medicaid. Though I am not sure people would be willing to pay a 15% tax for this.
The wealthy are definitely NOT taxed on their income in a progressive way. Their tax rate tends to be under fifteen percent on dividends and capital gains; hedge fund managers falsely claim that their salaries/fees are dividends and thus can’t be taxed at more than 15%.
There are lots and lots of ways the wealthy don’t pay what the official tax rates would have them pay. Same with businesses, especially when companies like Medtronic can simply pull a ruse like “moving the corporate headquarters” to Ireland to avoid paying U.S. or Minnesota taxes. By contrast, anyone on a pension pays full rate, without exception. That’s not fair, in that corporations like Medtronic are not pulling their weight.
And, a society without regulations may be what libertarians love to term “free”, but another word for it is anarchy, where anything goes. In such a lawless, anarchic society, being “left alone” means there’s no one to help or defend you when you’re sick or in trouble. Most of us realize that we do not live alone, although we may die alone, and that living in society requires a strong and stable state–anybody really want to live in the failed state called Somalia, for example?
Studies like Thomas Picketty’s show that the huge and growing economic and social inequality in the U.S. is due to the inheritance of wealth. Anyone who reads that study and others that are really very inclusive of all the data knows that the estate tax should be increased, and an annual wealth tax should be instituted across the country. To equalize opportunity, not outcomes.
If the government confiscated Bill Gates’ wealth
and the wealth of all other rich folks, how would that benefit you?
The push for “equity” in this country is nothing more than envy of what other people have. If you could wave magic wand and remove envy from the face of the earth, the democrats would never win another election and we all know it.
Taxation should be the system to pay for all the constitutional functions of government. People who use those services should pay for those services via fees, just as you would pay a carpenter or an attorney when you require those services.
First, Dennis, we’re not talking confiscation. We’re asking that billionaires like Buffett and Gates pays taxes at rates the rest of us pay. Somehow, in the 1950s when income taxes were paid at rates up to 90%, that still wasn’t confiscatory for the wealthy.
Second, we’re not talking about individuals. We’re talking about what’s healthy and beneficial to society as a whole. All of us, not just you, not just me. It’s that vision of being part of a large society, or not, that differentiates between ideologies on taxation and a whole gamut of other issues.
T2
Connie,
Actually many of the wealthy pay far more than you think.
http://taxfoundation.org/article/comments-who-pays-distributional-analysis-tax-systems-all-50-states-second-edition
I don’t disagree that some questionable activities occur, however the vast majority are paying more than their fair share. I mean they are only one person, just like we are. Yet they pay 100’s or 1000’s of times the taxes we pay.
The wealthy, who own most of the dollars and other tangible goods, may pay more in dollars (they have more of them). But in percentage of income, and percentage of wealth, the rich in the U.S. do not pay their fair share. Ask Warren Buffett, who advocates changing our tax laws to make the wealthy pay more, and thus make our tax system fairer.
Plus, and this is where you really should read Picketty: the wealthy now start out life at a position of advantage that puts them, as babies, way ahead of 90% of Americans, as babies. The latter–most of us–will never catch up. Especially as wages stagnate or fall for most Americans, and the wealthy refuse to consider that no one can live on $8 an hour.
The idea that we “earn” our economic situation is a crock, just as is the idea, or myth, of upward mobility in America. It doesn’t exist for the current generation: you’re either born with a comfortable financial situation or you’ll never have it. That’s what most Americans do not know enough to know, and what people who insist that only measure of fairness is the number of dollars paid in taxes, and not the percentage of income or wealth, want people never to question.
The economic class warfare waged by the wealthy in this country must be contested by those of us who were lucky enough to grow up in America before those at the top pulled up the ladder behind them. I’m simply not accepting the skewed rhetoric that the rich have been using to hoodwink the ever-poorer wage-earning public. Our system is unfair.
So
Connie,
So you are saying that people and families should have their money taken from them if they decided to work hard, save, invest, start businesses, etc. And the people and families who spend everything and accumulate no wealth should be the beneficiary of the first groups loss.
I will never understand that viewpoint…
Apparently I should take some money from my conservative daughter and give it to her more spend thrift sister each year to keep them equal.
Working hard and saving, but…
Tom,
I don’t think anyone’s saying we (“the people”) should steal money from people that “work hard, save, invest, start businesses, etc” and give it to slackers that don’t. That’s one of those loaded or skewed statements that make it seem as though there are only two, black and white choices:
Help and encourage people to work hard, save, ‘do the right things,’ and, eventually, reap the benefit of their hard work, frugality, investment and risk-taking (starting small businesses); or
Steal those people’s money and give it to the lazy and short-sighted that seem to think the world owes them a living.
“Which direction do you think we should go?”
One of the problems with that is, there are PLENTY of people that have worked hard and saved what they could for many years, and many people that are doing that right now, that have been losing financial ground at an unprecedented rate.
And while I have no quarrel with you at all that people working hard, saving and investing is a wise and noble way to go, in light of what I just said, a person has to ask the question, “Why isn’t that working for a huge and growing number of people?”
People “on the right” tend to answer that by blaming it on the government: It’s too big, money-hungry, stupid, inefficient, etc..
“The government is the problem.”
But to me, that answer is way too simple and reminds me a lot of what the leaders of supposedly “oppressed” countries say when asked to explain the shortcomings of their approach to things: “America” or “the Western World is the reason you’re suffering, not OUR policies.” (To name just one, see contemporary Venezuela.)
I don’t want to get into that endless back and forth, but the question of why so many Americans have been making little or no financial progress, or moving backwards, even though they’re doing most of what you would recommend, probably ought to be thought about and answered as honestly as possible, and not just blamed on the government… Everyone who thinks that can just keep saying that if they want to (it’s a free country, talk is cheap, and that answer doesn’t require any “work”), but chances are it won’t do much to help correct the (very real) problem.
And when it comes to what you were saying about your daughters, one of the things that always strikes me as odd about “The government is the problem” explanation is question of,
“What if it’s not?”
What might that mean for your daughters, as well as the millions of average, hard-working, but just treading water or slipping backward, Americans that haven’t and can’t accumulate wealth, but believe and say that too because it SOUNDS good because it provides a “plausible explanation” and gives them an “easy target” for the frustration, anger and desire to blame that stems from their financial woes?
If, by chance, it’s not actually the case the government is THE problem, the reality is – unless you’re well enough off to “help them out” via inheritance, etc. (and if you are, more power to you), the same income and wealth erosion that has been hitting everyone in “the bottom 90%” will be slowly but surely eating up an increasing share of THEIR income and net worth too, no matter how diligently they work, save and invest.
“The median U.S. household income in 2012 totaled $51,017, according to the Census data. Half of American households had income greater than this figure, half less. The Great Recession hit incomes hard across the board. Median household income declined 8.1 percent between 2007 and 2012. Adjusted for inflation, incomes are at their lowest point since 1996…
“Between the end of World War II and the late 1970s, incomes in the United States were becoming more equal. In other words, incomes at the bottom were rising faster than those at the top. Since the late 1970s, this trend has reversed.
“Data from tax returns show that the top 1 percent of households received 8.9 percent of all pre-tax income in 1976. In 2012, the top 1 percent share had more than doubled to 22.46 percent…
“After rising steadily during the three decades following World War II, wages have stagnated since the early 1970s. Between 1947 and 1972, the average hourly wage, adjusted for inflation, rose 76 percent. Since 1972, by contrast, the average hourly wage has risen only 9 percent.”
http://inequality.org/income-inequality/
If you believe the government has caused those changes, I’d be interested in knowing why you believe that. And I would be even more interested in knowing if you think something OTHER than the government (or in addition to it) has played a significant role.
Old Story
Hi Bill,
This will be repetitive for many readers here, but here goes.
I think the biggest contributing factor for the wealth gap is actually the buying choices of us American citizens. Pre-1980 American’s were willing to pay more for American made goods and services. Partially because most of the rest of the world took decades to fully recover from WW II.
After 1980, many Americans were unwilling to pay more for a higher priced lower quality product or service just for the good of American workers. And when they stopped caring, the “over priced” jobs went over seas in droves, and wages for many Americans stagnated. Where as investors like myself are able to buy stock in firms that support the desires of American consumers, be they Toyota, Apple, Samsung, etc.
Now I make an ok paycheck, but during the bull market years I have made almost as much from my investments as work. My point being that Investors make money where ever products or services are purchased from. However as long as American consumers demand low cost /high value products and services no matter the cost to American workers, low knowledge / skill American workers will be in a world of hurt.
Of course many think raising min wages, government benefits, etc will help… Unfortunately that also raises the costs of doing business in America, which makes it harder for our firms / workers to compete for the dollars or American consumers.
Interesting
Hadn’t read/heard your “old story” before and, oddly enough, it does make sense.
I appreciate that you replied to my request for an “alternative theory” to it all being the government’s fault and, when it comes what you had to say about your own experience with investing, and the “investor class” in general, I could yack with you all day about that.
Not because I think there’s anything inaccurate about what you said, but what it has to do with something central I think that has to do with what I said about people “working and saving and not getting anywhere,” the current overall economic condition and, of all things, education.
Here’s a hint in the form of a pop quiz. No need to answer, but what do these terms mean?
Asset allocation
Asset classes
Benchmark
Capitalisation shares
Distribution shares
Fund Management Ratings
Open-ended fund
Prospectus
Protected Mix funds
Sector fund
Small caps
Valuation date
Yield to maturity
Again… No need to answer, but, in general, I’m pretty sure you’re familiar with most, if not all, of those terms. And when it comes to what I could discuss with you all day, given the way “the economic deck is stacked,” I wouldn’t be surprised if a person’s familiarity with terms such as those (and all that goes with them) has a lot to do with their ability to increase their income (and wealth) in today’s economy (whereas, 50 or 60 years ago, it wasn’t anywhere near a “prerequisite”).
But, unfortunately, a comments section is no place for lengthy discussions like that.
But just wanted you to know that whether or not we would agree on much when it comes to the usual “conservative/liberal” worm wrestle perspective, your “willingness to explain yourself” or your perspective beyond the standard “Government’s the problem” thing I mentioned seemed to have a maybe inconsequential but relatively positive impact on my general thinking.
Dennis and your, “Yeah, so?” Not so much. Which is interesting considering that you two were kind of saying the same thing. But who knows? Maybe what you had to say will get me thinking something interesting a few days from now.
Simpler
I am pretty much a couch potato investor. When I was in my 20’s I kept my old truck and my wife’s old citation and bought a 1200 sq ft (total) house. This allowed me to fully fund my 401K so that I could maximize the company’s match. Which I invested in the the most aggressive diverse growth mutual fund. Now 25 years later that is a substantial nest egg.
This wasn’t complicated, it just meant being disciplined enough to “live below my means”, save, invest, stay the course through market crashes, etc. I realize this is hard for many people, however the idea that I owe more taxes because I did scrimp, save, invest, etc does seem silly to me.
That is unless one wants to encourage people to spend and live in debt…
Small Question
Why have executive salaries risen?
The median compensation of a chief executive in 2013 was $13.9 million, up 9 percent from 2012, according the Equilar 100 C.E.O. Pay Study,
$1M = 18 employees at $55K/year ~middle class W/benefits. The CEO makes more than 252 Employees put together. Point is: it really makes the term: “High cost of labor” pretty pathetic. How about high cost of management? Those folks are not typically magical, have they improved productivity, product, etc.? “Rigged game maybe?”
Looks like Bill and a few others have some very solid points: Blame the losers in a game rigged against them, and then claim foul “class warfare” when they want more fairness in the rules.
Wealth gap (as well as income gap)
“A new Pew Research Center analysis of wealth finds the gap between America’s upper-income and middle-income families has reached its highest level on record. In 2013, the median wealth of the nation’s upper-income families ($639,400) was nearly seven times the median wealth of middle-income families ($96,500), the widest wealth gap seen in 30 years when the Federal Reserve began collecting these data.”
http://www.pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/
Yeah, so?
Wealth is attained by investing in private enterprise that then pays you a return on your investment. The more you invest, the more likely that you will receive a favorable return and your wealth accumulates. Econ 101
The working classes in this country are lucky if they have enough money to pay their rent and buy groceries for their families. Is that the fault of the wealthy? Would taxing the wealthy at a higher rate on their investments somehow buy groceries for the working classes?
The gap is irrelevant unless you propose taking a large portion of that gap and giving it directly to other people. But that’s not done in an allegedly free society.
Yes!
Reason 1: The tax codes are skewed against the common man. LT Capital gains are taxed lower than sweat and blood labor. Many “tax breaks/tax relief” are only for people that make a lot of money.
Argument 1: There are many ways to gather wealth: How about capitalizing on misfortune to the tune of usury fees reaching 1000% + (All is fair in a free society) these folks become “Financial slaves” for their entire life. In short: wealth can be attained through legalized theft, and illegal theft, that would typically be your reference to all and any government taxes for any reason.
Groceries: Answer yes, less tax would have to be paid by the poor to cover the common good becasue now the wealthy are paying more of their fair share , i.e they have more “wealth” in their pocket.
Reason 2: Yes it is the fault of the rich: They are hording the wealth, the term is called greed, been going on since the beginning of time, they as noted have paid their politicians to skew the tax codes through our quasi corrupt political process. Point is exactly to the article They don’t play fair. The well to do have been and continue to play class warfare, and they have been very deft at wining while blaming the losers for cheating, They got theirs because the game is rigged for the wealthy, and I guess that’s OK in a so called free society.
Attention: Out-state/Rural Waitresses and Waiters,
Right now, a little after 10:00 p.m., as you Wait (or are at home, taking care of your kids and getting ready to Wait tomorrow), the Republicans in the Minnesota House of Representatives – maybe including YOUR representative – are in the process of debating and passing a bill that will DECREASE YOUR INCOME.
It’s House File 1027 and it’s short description says this:
“Minimum wage for employees receiving gratuities modified.”
You can read the whole bill here:
https://www.revisor.mn.gov/bills/text.php?number=HF1027&version=1&session=ls89&session_year=2015&session_number=0
The opening paragraph of the bill says this:
“A bill for an act relating to employment; modifying the minimum wage for certain employees receiving gratuities; amending Minnesota Statutes 2014, section 177.24, subdivision 1; repealing Minnesota Statutes 2014, section 177.24, subdivision 2.”
What that means is you’re one of those “certain employees” and it would repeal the law the Democrats passed last year that increased your income and, that you would get a pretty big pay cut (related to your tips, primarily) if it becomes law.
The author of the bill is Republican Pat Garofalo of District 58B (in case you happen to live there).
As far as the issue of taxes go, I guess the good news might be the person who owns the establishment you work in MIGHT have to pay more income tax and you’d have to pay a little bit less because he or she would be making MORE money while you would be making less.
But the main point is, be sure to think about how, when they were running for office last year, the Republicans said they would work hard to make sure the people of rural Minnesota “get their fair share” (of income losses, apparently).
Oh yeah… If you’re a “metro area” Waitress or Waiter the same thing would apply to you too.
Tell your friends and relatives.
Income
Bill,
I assume you realize that when the minimum wage goes up, so do the costs and prices we need to pay when we eat out, get gas, go to movie, etc. So all those older fixed income folks who like to go to McDonalds or the local coffee shop end up paying more with no benefit to the store owner.
I prefer work tax credits, at least then the older and low income Americans don’t have to pay for this Government mandated gift to minimum wage workers. It is only us Income tax payers that get hit.
Everybody who work pays income taxes. Not everyone who works meets the income threshold to pay _federal_ income taxes. Everyone who works pays taxes.
The income threshold one has to meet in order to pay federal income tax is, I think, about 10,150 dollars in a year. In any US state, that would be a pittance.
Really
This fact check disagrees. It indicates that 25% get more back than they pay in. Though it may not be that high, there are still a lot of folks who get more back than they pay in. Those Bush tax cuts were great for the low income folks. (child credits, work credits, etc)
http://www.factcheck.org/2012/09/dependency-and-romneys-47-percenters/
Yes, really.
You inferred that people earning minimum wage were not paying income taxes.
I corrected the statement.
You then changed the claim to “they get more back than they pay in.”
They are still paying in.
Withholding
I am not sure having monies withheld is the same as paying taxes.
If people have $1,000 withheld and and get a $5,000 refund back in child, work and/or learning tax credits at time of filing their taxes. I would say that they paid no income taxes.
It is an interesting concept, though somewhat pointless. The reality is that these low income folks are likely getting more back from the progressive taxes than they paid in “sales” and other regressive taxes. And if you throw in cash subsidies like welfare, housing assistance, etc, many of them are making money via government policy.
Yet this silly tax incidence study avoids addressing this reality.
Didn’t hear that last night
Hi Tom,
Work tax credits may be a great, or better, idea when it comes to getting more income to the folks that really need it, while saving everyone else money, but I didn’t hear Pat Garofalo, or any other supporter of his bill, talking about them (as in, “Let’s take this out of the minimum wage law and replace it with work tax credits which will increase waitresses and waiters pay more than current law will, and here’s how”) or anything similar (as in potentially reasonable alternatives that people from both sides could MAYbe agree on).
All I saw and heard in last night’s floor session “from the Republican side of the isle,” was, “These people’s pay must be limited and cut, if necessary,” period.
While you and many others may not agree with minimum wage increases, and while there may actually be better ways to reach the same objective, I doubt you would disagree that it is NOT a good idea to pass laws that limit or reduce ANYone’s pay.
Limit
Hi Tom,
No one is is trying to set upper limits. Otherwise someone would be proposing a maximum wage. And that sounds like a DFL thing. Most GOP folks want people to be paid based on what the market will bear for their individual skills, efforts, knowledge, effort, etc.
Too bad the old fixed income folks will need to drink their coffee at home…
On the upside, my daughters are making more and asking me for fewer subsidies.
“proposing a maximum wage”
Said no DFLer, ever
Oh Please
Commenters often propose capping executive compensation. And if they can’t cap it, they sure are excited about the concept of seizing it with higher taxes.
http://thehill.com/policy/finance/303089-house-defense-panel-rejects-obama-cap-on-top-executive-pay
http://www.bostonglobe.com/business/2014/10/25/growing-effort-limit-ceo-pay/1VKKZCuZMkXJvaQRmUb4RN/story.html
Commenters at the Hill & Boston Globe
aren’t the DFL. But I’m sure there’s many an ex-Target employee that would give you an earful on the wisdom of paying a CEO 300 times the average worker.
White House
Is this a better source. I assume Obama is a Democrat / DFL guy.
https://www.whitehouse.gov/omb/procurement_index_exec_comp/
I am thinking there are many many more employees and mutual fund investors who are thankful they do have a decisive CEO.
http://investorplace.com/2015/03/target-stock-tgt-target-stores/
How about the “decisive” CEO
that ran the company onto the rocks in the first place and left with 61 million in compensation for his abilities?
…does not limit the amount of compensation…
Literally, the very first paragraph (even the first full sentence) of the link you posted, explains that this is a compensation cap for employees of ‘government contractors,’
“The allowability of the compensation costs for the senior executives of Government contractors is capped by statute (10 U.S.C. 2324(e)(1)(P) and 41 U.S.C. 4304(a)(16), both as in effect prior to June 24, 2014) at a benchmark compensation cap amount determined in accordance with a statutory formula.”
That statutory formula currently allows for a total compensation cap of over 900,000.00 annually. I assume this means ‘salary’ and not other options, but I don’t want to dig that deep into the legal minutia to disprove this even more.
OK, I lied. I guess I will keep digging.
The current statutory compensation formula was last revised in 2012, when the cap was raised by 10%. The last time the statutory formula was updated before that, was 1997.
http://www.govexec.com/contracting/2012/04/omb-raises-salary-cap-contractor-executives-because-it-has/41866/
All of which is amusing, as it certainly pre-dates Obama, and that the raising of the cap happened UNDER Obama, but when you go to read more about it…
“In any event, any compensation cap amount provided by statute does not limit the amount of compensation that a contractor executive or employee may otherwise receive. The compensation costs in excess of the compensation cap amount are unallowable costs for Government contract reimbursement purposes.”
https://www.whitehouse.gov/omb/procurement/ccp
Repeat After Me
“If the minimum wage goes up, the cost of everything will go up.”
Writing that doesn’t make it more true just because you repeat it often. The ones who say it loudest seek only to gain profit by keeping certain wages low.
Saying that price and sales volume have nothing to do with each other, that any business wouldn’t consider that curve or other factors, and that a business is going to set its prices on its costs alone seems more than a little unrealistic.
Who Said Everything
Mostly it is the highly minimum wage local employee reliant products and services that will increase in price.
On the upside somethings will be automated or offshored, and those may fall in price.
Upside
I and a lot of people I know no longer frequent certain businesses that now depend on automated checkouts. Profits versus service. Hows that working out for them?
Busy
Cub and Home Depot still seem very busy when I am in there. Most people I know would are happier saving money and doing a little work. (ie pump gas, bag groceries, scan product, fill pop glass, etc) I am curious what employee hourly rate will drive even more automation and/or self service.
Just curious, what kind of car do you drive?
http://www.american.edu/kogod/autoindex/2014.cfm
18/55 = 33%
That’s a very high rate.
FAIR
I just asked Sean this on Give2Attain, I would interested hear what this group thinks.
“I don’t remember what you consider FAIR taxation. Here are the 3 ways I think about it.
1. Fair would be if we took the total cost of government, divided it by the number of adult able bodied citizens. And each adult then paid their fair share of the bill. (ie Dues concept)
2. Fair would be if total cost of government was divided by the total income of every adult able bodied citizen. And each citizen paid their fair share of the bill. (ie Percent of Winnings to the House Concept)
3. Fair would be if taxes and credits/programs were set to reduce the net income and wealth gap between the adult able bodied citizens. This means high income and wealthy people pay significantly higher rates than other citizens in attempt to attain a fair society.(ie Equalization concept)? ”
It seems pretty important to understand the definition of FAIR.
19 and counting
Will it hit twenty?
Just for You
And this makes an even 20!!!