The Economy Bomb - Ticking Down Faster

Action America ^ | May 10, 2004 | John Gaver

[Remember_Salamis]

the bigger problem is capital flight. True, somebody will be there to fill the job, but what if they take alltheir assets out of country??? that's a bigger problem.

[taxtruth]

Scrap the code and do not start another new tax.

[ovrtaxt]

Because even with the way things are, you can make more money here.

These people to which the article refers are generally done making money, as the risk to losing it outweighs the possibility of making more. A NRST would keep them in the tax generating category, as they would be free to make as much income as possible with no taxation. When the time come to spend it, (and they will) taxes are collected.

I have a client whose job is the maneuvering of assets into trusts and insurance policies and such for the sole purpose of avoiding the death tax. This guy makes a living off of the fear of taxation. He told me he would rather see a NRST in place because active investors are much more profitable to him as a financial planner than people trying to hide their money.

[Gorjus]

Over time, this [rich people leaving] degrades the tax base and makes us raise taxes on those remaining.

Why? Why doesn't it just make room for others to become rich? If there is a need, that need doesn't go away because the one filling it leaves. It just makes room for another to become rich. The real wealth is the wealth of those who are willing to pay to have their needs met. That's where the income comes from that the top 1% of taxpayers earn. And that doesn't go away.

Again, some wealth is leaving the country. Both real wealth and unearned income. It always has. Even the modest retirement pensions of the ex-pats that I know of - who moved to where their limited income provides a better standard of living - represents wealth leaving the country. Other wealth is coming into the country. If that's the real issue, then the article is one-sided at best. Overall, this article and the reasoning behind it are flawed an unconvincing.

Put it another way: Suppose not one single rich person were leaving the country. Would it still be a good idea to move away from confiscatory income taxes on those who are best at providing goods and services someone wants to pay for? Of course it would be. So why dilute that strong argument with weak crisis-mongering that relies on unjustifiable assumptions?

[Gorjus]

[T]he bigger problem is capital flight.

Probably so, and since most capital is owned by corporations, this is identified not by counting taxpayers who emigrate, but by counting corporations who move their headquarters out of the country. If that had been the theme of the article, it would have been much more convincing (though it would no longer have been addressing personal income tax rates at all).

[Know your rights]

But on the average not as well (or they'd have already had those jobs), nor would the people who filled the new owners' old jobs do them as well, so income over the whole business would decline [if the original top 1% taxpayers left]

Perhaps, but by a whole lot less than the total amount of the original owner's income. As an example, if a MLB relief pitcher (one of those lives right down the street from a friend of mine - admittedly in the nicest house on the block) making $2 million a year were to leave the country, his replacement might make only $1.8 million a year

You're completely ignoring the second-order effects I noted (see above in bold italics).

It's not automatic that someone will fit exactly into the hole left by any individual rich man who leaves, but overall, that void makes it easier for others to become rich

But less rich than the previous occupant of that economic niche, and so on down the line, so the overall effect is a decrease in income. If it were otherwise, our country could prosper by deliberately throwing out successful people.

[Know your rights]

I dont believe there are 360K plus per year wealthy tax payers leaving the US. Where are they going

See post #56.

We would hear about this if it were true.

Right, the media never suppress important news ... particularly not news that challenges liberal shibboleths like 'tax the rich.' What color is the sky on your planet?

[Know your rights]

If there is a need, that need doesn't go away because the one filling it leaves. It just makes room for another to become rich.

Wealth generated is a function not only of the demand but of the ability to supply. Since a more qualified person has left and a less qualified person stepped in, that amount will decrease ... and this also applies to the job that person left, and the job left by the person who moves to fill that job, and so on down the line. The bottom line is that a person's income reflects their creation of value, and when they cease to create value in this country we are poorer by the entirety of that amount.

[Gorjus]

The bottom line is that a person's income reflects their creation of value, and when they cease to create value in this country we are poorer by the entirety of that amount.

Less whatever ability to create value is imported..,
Or created as people develop their skills..,
Or available through underutilized skill among people who are still here.

The key fact is that people in the top 1% of taxpayers move out of the top 1% all the time. They retire, they lose their positions, their company goes under, the stock market wiggles down instead of up. All those effects exist regardless of whether anyone actually leaves the country - and the economy doesn't collapse, nor do tax rates double on the next tier down. Neither will those effects happen if a few rich people emigrate a few years early instead of retiring. It's still a bogus argument.

[Know your rights]

The bottom line is that a person's income reflects their creation of value, and when they cease to create value in this country we are poorer by the entirety of that amount.

Less whatever ability to create value is imported..,
Or created as people develop their skills..,

Both of which would take place even if we didn't chase successful people out of the country.

Or available through underutilized skill among people who are still here.

That lessens the loss only if underutilization is greater at the lower income tiers; this seems unlikely, since underutilization is caused by government hobbling the economy, and the government messes with the higher income tiers at least as much as the lower.

[Gorjus]

this seems unlikely...

This whole argument - as I said in my first posting on it - sounds like something the liberals would put forth. It declares a crisis that doesn't exist, and it transitions from facts to 'seems likely' whenever the facts don't support the crisis statement.

It 'seems likely' to me that there is movement in and out of the top 1% all the time. People retire. People move up. In fact, every single person in the top 1% of income entered that bracket at some point, and will leave at some point. Which meant before they entered it they were creating less wealth than those in that bracket already - but had or developed the ability and so joined them. And there are plenty of others standing by to enter that bracket - many of whom (about 1.29 million families overall in this country) will someday make it. I thought only the liberals felt everyone was locked into a narrow earning bracket despite whatever they might try to do.

The whole thrust of this false crisis is the contention that by driving rich people out of the country - a problem of a magnitude never established and quite possible trivial - we are losing so much wealth that we will have to explode the tax rates in lower brackets in order to keep adequate revenue flowing to the government. Every single part of that argument is flawed - most importantly the basic contention that we need to keep the same revenue flowing to the government. If you want to worry about something, worry about the idiocy of penalizing the average middle class and upper middle class workers in their peak earning years who are not leaving the country. Focus on that problem. It will take care of the minor tail (emigration of rich people) on the great big dog of a self-destructive tax structure.

[leprechaun9]

For FY2003, the following is the breakdown on the sources of Government Revenues:

Personal Income Tax = 44.5%
SSI = 40.0%
Corporate = 7.4%
Excise = 3.8%
Other = 4.3%

The PERSONAL INCOME TAX BURDEN data:
Top 5% of Income Tax Payers:
1986 = 42.6% to 2000 = 56.0%

Bottom 50% of Income Tax Payers:
1986 = 6.5% to 2000 = 4.0%

With a small % of the Income Tax Payers paying such a large portion, and governments at all levels following this punitive practice, then when the economy tanked and the high incomes earners wern't making those big bucks, then all the government sows came up short of funds!

[boxsmith13]

this information would be available in census data. Rush Limabugh or Sean wouldbe talking about this. Instead it is a lonely shrill paleo-con

[Know your rights]

What makes you think the census tracks expatriates by income?

[boxsmith13]

show me that they dont.

I dont beleive there are 360k american citizens leaving the US every year regardless of income

[ExSES]

Ooops, you caught me!

Don't worry, when "Willie" is mentioned, I always process "Horton" first!!!

[Know your rights]

show me that they dont.

It's your claim that the census has this data, so you show me it's true.

I dont beleive there are 360k american citizens leaving the US every year regardless of income

Sadly for you, that *is* supported by the census: "According to the US Census Bureau, as reported in the "2000 Statistical Yearbook of the Immigration and Naturalization Service", by the Bureau of Citizenship and Immigration Services (BCIS), formerly the Immigration and Naturalization Service (INS), [...] last year, roughly 363,000 US citizens and permanent residents quietly left the United States permanently."

Are you for or against high tax rates on the rich?

[boxsmith13]

I am against high taxes on anyone.

That figure of 363,000 probably includes people who are transferred to a new job outside the United States. the clue to your over exaggerating is the world permanent. How can the census bureau know if when someone leaves the country it is permanent.