A Good Lesson in Taxes

In this presidential cycle we have seen The Bern discuss taxing the rich often. Many of his followers are under the impression that the rich are not taxed enough and that if you taxed them some more all the problems would go away. Well they didn't say that but it's a good generalization. I saw an article in the NY Times which should serve as a reality check about taxes.

Before I get to the article I want to provide some background thinking: I knew someone who worked with Les Brown. He relayed a story to me. Basically it was that if you've only seen say $100 then you think that $100k is a lot of money. But people who have say a million. $100k is not really all that much. It is a matter of perspective. Now to the article:

Our top-heavy economy has come to this: One man can move out of New Jersey and put the entire state budget at risk. Other states are facing similar situations as a greater share of income — and tax revenue — becomes concentrated in the hands of a few.

While the amounts may be large by historical standards and the "one man" part may be unique, the general situation is an old one. It is why states do almost whatever they can to retain large businesses (who used to be the 'one man').

The New Jersey resident (unnamed by Mr. Haines) is the hedge-fund billionaire David Tepper. In December, Mr. Tepper declared himself a resident of Florida after living for over 20 years in New Jersey. He later moved the official headquarters of his hedge fund, Appaloosa Management, to Miami.

New Jersey won’t say exactly how much Mr. Tepper paid in taxes. But according to Institutional Investor’s Alpha, he earned more than $6 billion from 2012 to 2015. Tax experts say his move to Florida could cost New Jersey — which has a top tax rate of 8.97 percent — hundreds of millions of dollars in lost payments.

Hundreds of millions of dollars, off of one person. One rich person decides to move and state budgets are in jeopardy. Do you pay "hundreds of millions" in taxes? What this reveals is that the rich are, generally speaking paying the lions share of the taxes that the government spends. You, who makes the average salary of say $50k pay relatively pennies relative to these persons, yet get so many benefits.

If we were to look at this in black and white, one realizes that relatively speaking blacks as a group don't pay taxes. Yes we pay income taxes like everyone else, but there are so few "extremely rich" black people (and black companies of high worth) that generally speaking if black people didn't pay taxes, the impact on government revenue would be very slight. Yet Black people, as a group, are the beneficiaries of government spending well out of proportion of our monetary input. Continuing:

“If you’re making hundreds of millions of dollars and you’re paying close to 10 percent to the state of New Jersey, you do the math,” said Jon Bramnick, the Republican leader in the New Jersey Assembly. “You can save millions a year by moving to Florida. How can you blame him?”

Now personally I think 10% is fair, especially at that level of income. I have more issues with companies that don't pay any taxes based loopholes than by the tax rates discussed here. And I will say this: I agree with Sanders AND Trump that the hedge fund people who create nothing and produce very little jobs ought to be seeing a relatively higher tax burden than those who produce state income taxes in the form of many many jobs.

In California, 5,745 taxpayers earning $5 million or more generated more than $10 billion of income taxes in 2013, or about 19 percent of the state’s total, according to state officials.

There weer 38.43 million people in California in 2013. 24% of them were under 18. Removing those under the assumption they are not paying taxes we get 28,880,000 persons. Now if 5745 persons paid in 19% of the tax revenue then each person input .3% of the state revenue. The other 28,800,000 persons input 002% of revenue a piece or about 2 orders of magnitude less. Kinda makes you think about what kind of population you should have in order to have a stable tax base.