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Author: n8larson Big gold star, 5000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 443869  
Subject: Re: Boehner offers... Date: 12/5/2012 12:03 PM
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Wouldn't tax increases for everybody impose a disproportionate liability on the rich just as the Bush tax cuts disproportionately benefited the rich?

This is a time-honored disagreement in how to look at what constitutes "fairness" in taxes. Is it fair when everyone pays the same rate, or when everyone pays the same amount? Example:

Say the tax rate is 20%.
M.C. Taxpayer makes $50k a year, and therefore pays $10k in taxes.
Her brother, Richard Taxpayer, makes $500k a year, and therefore pays $100k in taxes. WOW! he says... of all the taxes being paid, I'm paying 92% of them! That's not fair, because we each had the same opportunity! We should pay the same amount! My tax rate should be lowered! After all, look at all the jobs I supposedly created!

Letting the tax cuts expire DOES affect the rich disproportionately, if you take the perspective that the wealthy are paying most of the taxes. HOWEVER: If you look at the proportion of PAIN it causes, you have to look at how much of their income actually gets spent. MC probably spends most if not all of the $50k, so an increase in her tax rate reduces what she can spend, hurting the economy. Richard (who goes by the nickname "Rich", by the way), however, can manage to squeak by spending $200k of the $400k he gets to keep. Increasing the tax rate for everyone to 25% in the example above means MUCH more pain for MC than for Rich.

Hope that helps a little.

-n8
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