Why the "Minimum Tax on Millionaires" Is an Extraordinarily Bad Idea

[jordan179]

Making sure that millionaires pay at least some minimum percentage of tax sounds like a really good idea. I mean, by definition "millionaires" -- persons reporting a gross income of one million dollars or more in a year -- must have a lot of extra money. They're rich, right? So the Minimum Tax on Millionaires will just make them pay their fair

Comments

[ford_prefect42]

Are they really proposing to tax on *gross* income?!? Can you link this?

Also, from "debt clock",
The US has a population of 312M people, of which 112MM are income tax payors, of which 20M are government employees.

That leaves 98M out of the 312M population that may be receptive to this line of argument, *all* the rest of them are paid by the government. The private sector of the US economy is now smaller than the public sector all told. Which has "point of no return" written large all over it.

[jordan179]

Are they really proposing to tax on *gross* income?!? Can you link this?

I'm actually unsure, because Obama is being very vague about his plans. Remember "we have to pass the bill to find out what's in it?"

That leaves 98M out of the 312M population that may be receptive to this line of argument, *all* the rest of them are paid by the government.

Many working-class people are dependent on jobs from the private sector but pay no or very little net taxes. Also note that the population of 312M includes children, who rarely pay any taxes at all.

[ford_prefect42]

"Many working-class people are dependent on jobs from the private sector but pay no or very little net taxes. Also note that the population of 312M includes children, who rarely pay any taxes at all."

Granted the children portion, what fraction of the population of the US is under 18? According to the 2000 census, it was roughly 80M. So that gives a voting population of 240M

Now, as for the "below taxpaying income level" portion, I used the "taxpayor" number because if you're not a payor, then you're a beneficiary, but I will stipulate to that. Let's use the "workforce" number instead of the "taxpayor" number. That's 139M. Minus the 20M government employees and you have 120M out of the 240M.

Which gives us almost exactly *half* of the voting age population being paid for by the other half. The public sector and the private sector are equal in size. See my point?

[aldersprig]

(*) Which means not excluding those who have given up looking for work.

Yes, thank you. Or whose former job screwed them out of unemployment one way or another (*cough* my husband) and thus never counted as a stat despite being unemployed for 4 years.

[headnoises]

In Washington State, discharged military are offered (from memory) two-thirds of the time "unemployed" that any other job is offered.

Some folks refuse to take unemployment, too-- they're not counted as employed. Ditto folks like my sister, who's scraping by on two or three days a week in a department store.

[chris_gerrib]

You obviously never took Accounting 101. You are confusing the gross income of a business (sometimes called gross receipts) with the net income of the business owner.

In your example of the restaurant with gross income of $1.1 million and expenses of $900,000, the net income is $200,000. The corporation then owes taxes on $200,000.

The owner owes taxes on whatever portion of that $200,000 they take as salary.

Now, in your other example of the restaurant having gross receipts of $550,000 and expenses of $600,000, the restaurant books a loss of $50,000, and (assuming the owner had no other income) the owner owes no taxes.

This is really basic accounting.

[jordan179]

You're assuming that the small business is a corporation. Not all are. This is especially true if we move off Wall Street to Main Street.

[jordan179]

For instance, a large number of family-owned farms are unincorporated. Some can be fairly sizable enterprises in terms of gross income.

[ford_prefect42]

Actually, no he isn't making that confusion, you lack reading comprehension.

From the OP:
"persons reporting a gross income of one million dollars or more in a year"

He is contending that the Obama administration is planning on replacing the AMT with a tax on *gross* income above a certain level. Which contention may or may not be correct, but your entire line of argument here is based on your inability to read, not Jordans failure to comprehend accounting.

Although that does mean that in the lower income case (550 income, 600 expenses), the owner would have dropped below the "fair share tax" threshold and would thus be taxed on net rather than gross.

[spiffystuff]

Minimum income tax? You mean like, if someone has 1.5 mil in assets, but doesn't make any money that year (or perhaps even loses a chunk!) they'd still have a blob of federal tax to pay?
Is this a bill in the works? Do you have any links?

[chris_gerrib]

No, it's not a bill in the works. If you have assets but no income, you have no income to tax. (By definition)

[spiffystuff]

If you have assets but no income, you have no income to tax. (By definition)

I'd certainly hope so, but I wouldn't put it past some folks to try to redefine "income", or at least "income tax"

Also, glad it's not a bill, thanks :P

[luagha]

You may still be paying property taxes or a variety of other taxes, but those all depend on the type of assets.

[pathia]

The tax is for a minimum of net income for a year as far as I can tell. I don't think it works the way you're doing in this analysis.

[banner]

I think that as of this morning the fact that all of the investors are dumping everything in a global panic means that the above analysis is probably correct. When people hear they are going to be taxed on their gross and not their net, they stop investing.

[pathia]

Whether or not it's true, that would appear to be the perception. Of course it's a fairly silly thing to do to freak out over it right now, because I really don't see that going by the House right now.

Frankly to be honest, what did I do today? Dropped more money INTO the market :D

[chris_gerrib]

Which of course explains why Canadian stocks fell. After all, the evil US IRS will just romp across the border and seize all those Canadian dollars.

Or, it could be that "a grim economic outlook from the U.S. Federal Reserve and weak Chinese data stoked fears of a global recession," as the article said.