The whole IDEA of "tax the rich" is a fallacy. We simply do not tax wealth in America, we never have and hopefully never will. Tax revenue comes from the following: Income, investment dividends, and profits. Wealth is something that has already been earned and taxed. At one time, it was income, dividends, or profit, and a tax was paid on it. Now it is accumulated wealth, which has already been taxed.
The fallacy depends on you being stupid and not understanding this. You believe that when someone earns a high income, it means they are "wealthy" and that is often just not the case. 95% of small businesses in America, report their annual profits as personal income on an individual tax return. These aren't "millionaires and billionaires" but rather, normal hard-working entrepreneurs and business people. They provide the vast majority of jobs in America, they pay an enormous amount in maintaining their business, providing for their employees, not just payroll, but all the assorted benefits we've come to expect from an employer. They have to carry good insurance, which will protect them in the event of an accident or disaster, and this isn't cheap. They have to hire accountants and bookkeepers to keep track of the finances, lawyers have to be paid retainers, and there is a never-ending cost of compliance with various governmental mandates. All of this comes out of their pockets, before any profits are realized.
A person who happens to be "wealthy" might not actually earn ANY income. In fact, most of the time, they don't... and if they do, it doesn't fall into the upper income bracket. If a person has $6 million in the bank, and makes $30k in actual earned income for the year, they pay a relatively low tax rate, even though they are "wealthy" by most standards. Contrast that with, say, a person who has $0 in the bank and wins $6 million in the lottery. They aren't 'wealthy', they just had the fortune of winning the lottery this year, so they will pay the highest tax rate on their winnings. Next year, that money might all be gone and they may still only have $0 in the bank...or maybe that money isn't gone, but they just don't win another lottery, so they have no taxable income?
We don't tax wealth, we tax earnings, profits and dividends. What about the multi-billionaire who has a run of bad luck for the year and actually loses a couple of million? They don't pay any tax! They are still very wealthy... they just lost money for the year, so they don't have a tax liability. Meanwhile, someone else may have invested their entire life savings into a small business, which realized $250k profits last year... they will pay the highest tax rate possible. This is money they could have put back into their business, or used to repay their initial investment. So the man with billions has paid nothing, while the man who has his entire life savings on the line, pays the top rate.
Investment dividends are a source of contention for the 99%ers... For some reason, they feel it is "unfair" that people who use their money to invest and earn dividends, should pay the same rates as people earning incomes. The problem with this is, the money has already been taxed when it was initially earned. The person who owns that wealth, doesn't have to invest it or try to earn a dividend, they would ultimately like to be able to do that, but it's not required. They can take the money that has already been taxed, and put it in security bonds or invest in foreign entities, and any dividends realized won't amount to much, but they don't need much, they are wealthy. The purpose of lowering the rate of taxation on investment dividends, is to encourage investment.
You see, it's just plain better for everybody, if that "rich person" is using his or her wealth to build new plants or start new businesses, because that means jobs and livelihoods for others. No jobs are created when they sock their wealth away in security investments. That is what is currently happening, the people with the money to grow the economy and make things happen, are not being encouraged, they are being discouraged. The more we try to 'punish' them with punitive tax codes, the more they will find ways to shelter their wealth and avoid earning high returns on investment. Liberals want to rely on the "greed" factor, as if every billionaire is simply driven by greed to have more wealth, and that is a meme. I have known a lot of wealthy people, they aren't greedy, they are frugal perhaps, smart with their money, interested in the bottom line, but they aren't greedy... for the most part. There are always some exceptions.
Let's say you have a billion dollars in securities or bonds. Each year, that money will yield a dividend, but as long as you don't touch it and leave it where it is, you aren't taxed. Your wealth continues to grow, albeit at a much slower rate than if you invested in something more risky, a venture capital project or whatever. But the problem is, as soon as you withdraw that money from security trusts, it becomes 'taxable dividends' and you are subject to the highest tax rates. Is it better to leave that money alone, and earn 3-4% annually on the amount, while paying no taxes... or is it better to pull it out and pay 35% off the top, on the chance you will earn more than the 3-4% you would have otherwise? Remember, there is the distinct possibility you will not yield a profit, you may even lose money, and on top of this, you still have to pay the taxes on the money used. This is what many wealthy investors are facing, the prospect of having to pay enormous amounts in tax, on money they can leave alone and pay no tax on until they pull it out. This is why lower cap gains taxes are good, they encourage these people to take a chance, to take that money out of security and invest in something. The more you raise that tax rate, the more they are inclined to leave the money where it is and not take chances.
You can't tax the rich. You might believe otherwise, but this is a fact of life people need to realize. It's impossible to tax the rich. We can try, but we won't succeed unless the rich are willing to take the actions which would result in having to pay the taxes. Since most rich people have no need to earn incomes, they really don't care what you do with the tax rates. If you go with SF's idea of taxing people who make over $1m a year at a higher rate, guess what will happen? An awful lot of people will suddenly earn $999.9k per year! Anyone with an income over $1m will have their contracts renegotiated, so as to show an income below that threshold, and perhaps they will get access to the corporate complex in Hawaii, or use of the corporate jet? You see, rich people are very smart... that's how they attained wealth in the first place, by being very smart about money and finance. You won't trick them or fool them into paying what they don't have to pay. They simply won't go along with you on that. They will continue to find loopholes and shelters, ways to hide their earnings and dividends, and life goes on... only now, you have no one investing and generating economic prosperity.
We have to declare a ceasefire in the War on The Rich, if we ever expect to bring America back to the economic prosperity of old. We have to do things that encourage these people to take their wealth out of securities and shelters, and spend the living hell out of it... because THAT is how we realize taxable incomes and revenues. The more we try to implement new taxation, raise their rates, take away from their profits, the more they are inclined to shelter their assets and avoid taxation. The more that happens, the worse the economy gets, because "poor people" don't generate much economic prosperity, especially when they don't have sources of income provided by the "wealthy."
