http://www.sco.ca.gov/eo_fiscalissues_budgetreform.htmlCalifornia’s budget relies heavily on the personal income taxes paid by our wealthiest residents. In 2005, the richest 13.5% of California taxpayers earning more than $100,000 paid 83% of all income tax revenues. However, revenues derived from capital gains rely even more on our richest taxpayers. That same year, capital gains from the top five percent of taxpayers comprised $100 billion out of the $111 billion in total capital gains reported – an extraordinary 90%. Those revenues rise and fall dramatically with the stock market, resulting in California’s unstable and volatile revenue stream.
http://www.bloomberg.com/news/2010-12-14/new-york-state-may-face-deficit-topping-11-billion-as-bonuses-set-to-fall.htmlNew York state’s deficit may be 22 percent wider than estimated by the Budget Division because tax revenue, including from Wall Street bonuses, may be less than expected.
The division has forecast a 13 percent increase in taxable cash bonus payments to $39.7 billion, according to Erik Kriss, a spokesman. By contrast, Options Group, an industry consultant, estimates the annual payments will drop from a year earlier. Capital gains revenue also may fall short of estimates.
“The next administration will have to contend with a snowballing budget deficit that’s growing fast and picking up speed,” Dennis Tompkins, a spokesman for state Comptroller Thomas DiNapoli, said Dec. 10 by e-mail. “Next year’s deficit could total $11 billion or more.”
Last week, Morgan Stanley told bankers and traders to expect 10 percent to 30 percent smaller payouts than for 2009, according to two people briefed on the matter. The compensation pool for bankers and traders at JPMorgan Chase & Co. fell 10 percent in this year’s first nine months, while at Goldman Sachs Group Inc. the amount available was 18 percent lower, according to company reports last month.
Historically, when higher tax rates are put in place, the money in motion (the only money that is subject to taxation) slows dramatically, thus impacting tax revenues and it is a fact of life that the rich that have the most money to put into motion.
Before you start pointing at the taxation rates of the 40's, 50's and early 60's as examples to refute my argument, the global economic picture must be taken into account. Exiting WWII, the USA had, effectively, the only economy that was untouched by the violence of war: England, France and Germany all had a good portion of their economic capabilities damaged (or destroyed) by the ravages of war. US heavy industry, shifting from a wartime footing to a peacetime one, had massive markets for almost 2 decades into which our economic surpluses could go. This caused a lot of money to flow around, so much so that incredible level of taxation (that in any other economic time would have crushed the economy) could easily be absorbed.
As this period came to an end and the European and Far East (mainly Japan) came back on line, those markets began to contract as far as American exports were concerned. Couple that with the fact that with US industry running at damn near 100%, the difficulty in upgrading that industrial infrastructure to the same (or better) point of modernity that these re-established economies enjoyed, JFK had, in reality, no choice but to cut tax rates and then as the situation was exacerbated in the mid 1970s (as Euro and Japanese industries began to reach THEIR peaks and then with the oil shocks from the OPEC embargo), Reagan had to to the same to jump start the economy (Reagan's and both Bushes' real problems were taxes went down but government spending did not..talk about spending growing to and beyond your income).
None of this will matter or make an impact as you have already made up your mind that by increasing tax levies on the "rich" all the problems will be solved. Nothing is further from the truth. The "rich", with their larger discretionary incomes, can slow their buying and selling (remember: money in motion is, effectively, the
only money subject to taxation) and that impacts income tax revenues.
Economies are interdependent beasts, the "rich" help drive the jobs, which pays the not "rich" a wage who spend their new income on products and services which cycles back to the top driving the income of the "rich" and the government sits on the side collecting taxes which are used to create the environment in which both the "rich" and the "not rich" can strive to be successful (physical infrastructure, educational facilities, internal and external security etc). Note that this is not a "trickle down" model, but rather an 'spiritual child' model where the interaction of
all the economy's players interact to form a child.
If one of the players (and I just named 3, there are more) is not contributing at a healthy level the spiritual child is lacking something and is not healthy and the surrounding players begin to suffer to one extent or another.
Both mainstream political ideologies (left and right) have their own visions of what is the correct "balance" to maintain the child's health but both are wrong: sock the rich or soak the poor and you knock their relationship off the necessary equilibrium and the child suffers.
When it comes to economics I am neither on the right nor the left but a centrist: do what you must but only in small and easily reversible increments. Don't throw a giant boulder onto one side of the balance and hope it solves the problem. If it doesn't you have caused an even larger problem than when you started.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
