The new AMT?
Pilitico.com posted an article on Tuesday addressing new legislation proposed by Charles Rangel concerning taxation. This article is a very partisan writing from a partisan website, however, it illuminates the importance and contravorsy of the Alternative Minimum tax.
“Robin Hoods expect [Rep. Charles] Rangel to swap the AMT for a new tax targeted exclusively at the highest-income payers. One often-mentioned idea, proposed by Leonard Burman, director of the Urban Institute’s Tax Policy Center, would impose a 4 percent surcharge on unmarried taxpayers making more than $100,000 a year and couples making more than $200,000. “
Would this be more fair than the AMT? I don’t know. I do know that as we progress through our careers and begin making investments, the 6 digit job often seems within reach. The existing AMT targets middle and upper level tax payers while the new one would be exclusively upper income people. How would you feel about such a change? This is an important question for corporate workers.
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Tags: Finance, Taxes, Work
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October 11th, 2007 at 8:08 am
I don’t support either tax; I see it as dangerous and unfair to punish success in a capitalist country.
October 11th, 2007 at 12:15 pm
I’m not sure how I feel about this, but here’s one train of thought. I believe the underlying message here is “tax anyone other than me”. Now, in a pure democracy whichever side of an argument has more supporters is supposed to win. So if we count the number of rich people, they are definitely in the minority when compared to the middle class group. So, if it all plays out according to basic democratic principals … the rich people will lose out.
October 11th, 2007 at 3:28 pm
verybadcat - I’m afraid your right. the government does put its hand into everyones cookie jar, especially the full ones. it definitely effects the economy making us a little less capitalist every time. I barely consider America capitalist anymore. We may be the closest to capitalist in the world, but our social services and international policy makes us far from true founding father capitalists.
Dan - It isn’t so much tax anyone other than me, its more so politic talk like “look at me i am taking from the rich and giving to the poor, vote for me.” followed by a good old Fred Thompson “I’m done. this is the part where you clap, now clap for me”
October 12th, 2007 at 12:33 pm
What empirical evidence do we have that shows higher taxes on the rich cause people to be less productive or somehow work “less hard”. I under stand the common sense sensibility in that statement, but logically it is equally as sound as the following line of reasoning … “if taxes are higher, the only way to put more money in my pocket is to work harder and earn a higher top-line income.” Why is this any less true than the “punishment”argument?
On a personal level, this is how I feel. I make pretty good money now, and I want to make more in the future. If the government came out tomorrow and said “i’m taking another 5% of your money this year”, I wouldn’t go into catatonic shut-down mode. I’d continue working. I’d hope to God the gov’t wouldn’t blow my money on something stupid and I’d hope they don’t go too far … but I wouldn’t stop working hard. And who knows - maybe our bridges wouldn’t collapse if they taxed the right amount and spent it wisely.
October 12th, 2007 at 3:29 pm
For the most part Dan your right. A 5% change will not cause many people to change their habits, however it will cause a marginal few to change their habits. Those few may decide they are better off taking advantage of more government programs instead of working more. As rates lower a persons time is worth more in terms of take home cash, changing their habits again to go out and make money instead of relying on government services. This is assuming people are rational as well as most other common economic assumptions.
The greatest evidence I can spout of the top of my head is the Soviet Union. In USSR you have a virtual 99% tax. This stifled production and innovation, people weren’t working as much or as hard. As rates lower the economy begins to boom and advance. Now that is the extreme, in reality we are only talking about the marginal group of people that may be as great as one million people, or as small as 10,000 people. It is easier to speculate with generalizations and assumptions as economics does. If I do find more empirical evidence, I’ll pass it along.
October 12th, 2007 at 3:34 pm
Ah evidence. From a not so bipartisan organization, but I think still makes some valid points.
http://www.ncpa.org/studies/s159/s159.html
There is a section on Tax Rates and Economic growth. The study has a graph that shows GDP compared to tax rate. The findings state that a countries GDP would be maxed at a tax rate of 19.3%. The curve of the graph demostrates that as the rate lowers society becomes more productive (GDP Increases and grows) and vice versa.
October 12th, 2007 at 4:43 pm
Thank you, Brandon! I appreciate your response. I understand the importance of GDP and I think it is a good jumping off point for the rest of the discussion. My only beef with GDP is that people treat like it is the ultimate indicator of wellbeing. A lot of pundits seem to think that GDP should always go up, at all costs. I think we should take a more holistic view of economic, civic and personal wellbeing. If people get divorced, GDP goes up (one home mortgage turns into two). But it also means a family gets hurt. Should we advise all families divorce in order to bolster our economy?
I think Canada is doing something very smart in this arena, they have started measuring a national well-being index. http://www.yesmagazine.org/article.asp?ID=640
November 18th, 2007 at 9:59 pm
[...] tax rate decreases tax revenue increases. We brushed on this earlier with my post concerning the AMT tax. In particular in the comment section some readers had a discussion on whether or not higher taxes [...]