Slashdot Mirror
FCC Rural Phone Subsidies Reach As High As $3,000 Per Line
jfruh writes "The FCC's Universal Service Fund has a noble goal: using a small fee on all U.S. landlines to subsidize universal phone coverage throughout the country. But a recent report reveals that this early 20th centuryy program's design is wildly at odds with 21st century realities: Its main effect now is that poor people living in urban areas are subsidizing rich people living in the country. The FCC says that it's already enacted reforms to combat some of the worst abuses in the report — like subsidies to rural areas that add up to $24,000 per line — but even the $3,000 per line cap now in place seems absurd."
That's not unique to phones. It also applies to highways, minor airports, housing tax incentives, and a number of other "American Dream" elements that really have nothing to do with having a successful society.
It depends on what they are including in that cost and how they are amortizing it. For instance setting up a local relay station for a small town including buying land, building the structure, outfitting it with equipment, etc, can represent a significant one time cost.
"That's not unique to phones. It also applies to highways, minor airports, housing tax incentives, and a number of other "American Dream" elements that really have nothing to do with having a successful society."
So it's not socialism? Damn!
Much like other government regulations, these subsidies were written with certain assumptions that haven't been reassessed over the years. In this case, the assumption that a couple copper wires were the primary driving factor in whether someone had access to modern telecommunications. Today, wires aren't actually necessary in most cases in the first place. The land line for dedicated voice service at home is rapidly fading into obscurity, and even home access to Internet services in some rural areas is arguably losing the wires and transmitting to antennas or mobile devices where conventional wired broadband is unavailable.
I'm just having a really hard time seeing this subsidy as necessary in this day and age.
In SOVIET RUSSIA... erm...NSA AMERICA, the Internet logs onto YOU!
It's rural areas being a drain on the nation's resources. They're anti-tax but demand huge government spending, just for them.
To "subsidize" the government-provide items you listed, you need to pay taxes. By and large, the "urban poor" do not pay much in taxes (except perhaps local sales taxes or use fees). The only reason "subsidize" makes any sense in the original article is that many poor people pay for telecommunications services out of their own pockets.
Airports and housing incentives may not be necessary for rural areas, but a certain base level of road infrastructure is absolutely necessary. It even makes sense for urban areas to subsidize roads in rural areas.
After all, how the hell else is the food going to get from the fields to the cities?
Also, if they're including manpower to actually run the cable. I know people who have the only house within 10 miles, and it's rugged terrain to boot. It's to the point where they had to sink telephone poles in the roadway itself (near the edge of the road) because there was no other way to run the lines through that area. I can easily see why it would take a lot of money to run cables in areas with mountainous or heavily forested terrain.
You say that, but you're only thinking of federal taxes. There's a huge poor tax in the form of things like sales tax, which hits basically every dollar poorer people see, but not the wealthier people in the world. I should also point out that while I'm an urban person, I'm not poor, and I pay quite typical income taxes.
I grew up in a fairly rural area. It's sort of like an onion.
At the very center of the cities are poor people, there's middle class urban dwellers surrounding them with a few high-wealth neighborhoods. Around them are poor people that live on the edge of the city. Around them are the middle-class suburbs. Further out are some higher wealth suburbs. Once you get past the suburbs, more poor people. Get out to the small villages and there's some middle and lower-middle class. Rural areas near these small villages have a healthy mix of wealthy and middle class. But you get way out there in bumfuck and it's all dirt poor people. Of course, there's exceptions at every level. There's going to be eccentric millionaires who want to live way out in the boonies, but they're largely outnumbered by the people living in shacks (and yes, America still has plenty of people living in shacks in the woods).
Its main effect now is that poor people living in urban areas are subsidizing rich people living in the country.
Uhhh, I grew up way out in farm country in Ohio. I have lived in five different major metro areas. The people in the country are not rich. What kind of bullshit psy-ops lobby-funded advertising is this, and why is it being parroted blindly here? Let's just do a quick bullshit check. One web search, second hit, talks about a study done in Oregon:
In 2011, the (per capita personal income) in non-metro counties was $31,383 and in the metro counties it was $39,267; a difference of $7,884 (25 percent). The difference was due primarily to the difference in earnings from work.
Obviously that's just one data point, feel free to do more comprehensive research yourself. I'll tell you from personal experience; people in the country make less money on average than people in the city. This report is some assholes like the Koch brothers, a lobby called "Alliance for Generational Equity," trying to create infighting so they can drown the government in the bathtub. Let's not start being their lickspittle mouthpieces, parroting their easily debunked lies.
Stop-Prism.org: Opt Out of Surveillance
I really wish that the press releases of shadowy "think tanks" (and consulting firms, for that matter) were treated with a little less credulity and more scrutiny. This study was published by a group calling itself the "Alliance for Generational Equity". Who are these people and who do they represent? We don't know. I did some Googling to see if I could find out more about them, but didn't find much. No Wikipedia article, nothing on SourceWatch. Nothing about their funding sources appears to be public. How do we know this "think tank" isn't just another sockpuppet of the Koch Brothers?
I was able to find some information about Thomas Hazlett, one of the authors whose name is on the study. He's a professor at the GMU Law School, which is not an encouraging sign (that law school is a notorious den of right-wing crackpots). Hazlett is also against net neutrality. This man is not on your side; he's a shill for rich plutocrats. Listen to anything he has to say at your peril.
1. When having a phone became a 'right'
It became a right when having a phone was a necessary step in getting a job, something we consider fundamentally necessary to taking part in modern society.
2. Why people have to have phone that requires 90% or more of the country to pay for it because of where they choose to live
Cart before horse problem. Their families lived there, then phones became necessary.
3. Why I should pay more because someone wants to live in a rural area where they can't make any money and don't have phone service. And where storms can bring down phone lines causing thousands of dollars in repair costs for a phone they don't pay for.
The same reason you pay more so someone else doesn't get robbed or shot. Enlightened self interest isn't a complex idea.
4. Why they can't move
Why don't you move to where they are to lower the cost per person of the line? Oh now moving is a huge onus to place on someone?
5. Why, after all of the above, if they don't have skills, can't live off the land, can't get a job, can't move, and are poor, we don't relocate them someplace else since they must already be living on the government dole. When you don't make your own way and don't contribute to society, you don't get to decide the rules that govern how you receive free money and other things.
Because they actually earn more than they cost, as part of a complex interconnected society, and their location may be important to maintaining the support network for the country's agricultural base? Who knows? You're criticizing totally anonymous people we don't even remotely know individually, which turns out to be easy.
OK, you can keep your broadband. Us country folk will keep all the lumber, minerals, and produce.
Yeah yeah, and we'll keep all the money, finished goods, and medicine(or at least the intellectual backing thereof). Or... it could be we live in a complex interconnected society, and every discussion of fairness doesn't need to slide into "well our subculture is better than yours".
1. It's part of the national infrastructure, just like roads and electricity and the USPS (although that one is becoming a bit outdated). The more widespread communication is, the better the country as a whole becomes.
2. This is the same argument used against... everything. The country works because the masses subsidizes the niches. I'm sure you use plenty of things that are subsidized by people that don't use them. Got kids in a public school? Landowners subsidize that even if they don't have kids. Drive on a public road? People who don't own cars subsidize that. The list goes on.
3. People can't make money in rural areas? Apparently you have no concept of telecommuting, farming, logging, etc. As for the rest of 3, refer to 1.
4. Why don't you move? You're likely not living in the most efficient place possible either. Also, moving can be damned expensive. Personally, I live where I do because I enjoy the area
5. If you actually read the summary, you'd realize they're talking about rich people in the country being subsidized by poor people in the city. Maybe you should move to somewhere with better literacy rates, it might rub off on you. But hey, it explains your signature.
Certainly not to the same extent, no.
According to the Institute on Taxation and Economic Policy, a Washington, D.C.-based research organization, Washington families living at the federal poverty level pay 17 percent of their incomes in state and local taxes, whereas the highest-income families pay 3 percent.
I'm not at all in favor of government subsidies, but I just needed to point out that....well....I dunno what rural-rich they're talking about. Sure we have the occasional successful author or entrepreneur, but they're vastly outnumbered by those living in poverty. Rural poverty looks completely different from urban poverty, but it's poverty nonetheless.
Anybody paying for phone service pays for this subsidy via the USF. http://en.wikipedia.org/wiki/Universal_Service_Fund
It's also worth noting that because of the way that the poverty level is calculated, people that are in urban areas don't qualify when they would be pretty well off in more rural areas, if they were making the same amount of money. Which makes subsidies to the poor at the federal level disproportionately favor the freeloading states over the states that actually contribute to the pot of money being used to provide the subsidies.
In the early 90s, an older couple in Eastern Kentucky decided to break down and pay for a landline telephone. GTE offered to drag them a line for $5000 or so (I forget the exact amount). Outraged, they appealed to the Kentucky Service Commission. The Commission discovered that GTE was going to have to pay almost $25k to get the line to them, and was already eating much more of the cost than could be demanded under the law. The couple chose not to get their phone line.
A friend of my father ran a lucrative contracting business that bid on GTE contracts. He kept mule drivers under contract, because they were often the only way to drag poles around certain parts of the Appalachians.
These days, this exact same couple would be able to pay $40 to $80 a month to get a cell phone. The tower will be a couple of hills over, with a microwave feed back to the home network and a small diesel generator on-site. For the cost of one phone line, an entire area can get phone and internet service.
The same economics are working in India and Africa. Excluding possibly power, there will be significant portions of the world that will never, ever be wired.
Not true.
The rich do not become rich by spending. Sure it probably is true that a larger portion of expenditures are subject to sales tax for the wealthy. But, ultimately, a smaller portion of their income is spent rather than invested.
And no, I don't give a rat's ass about them investing their money. Especially given that there's no guarantee that the investments will benefit me or other Americans. And their tax rates are lower than they are for people that are less well off.
There's a difference between an unfair burden to subsidize the wealthy(which doesn't describe all of the use of this program) and considering those living in a region to be worthless. I don't really think that anyone was leveling that accusation. I grew up rural, became urban, and that's life. At least we can all agree that suburbs are worthless, right?
As someone who lives in a rural area, even though I'm not rich, I can tell you that the quality of phone lines in rural areas are pretty much crap and you're better off going with a mobile phone. If the phone companies are being paid per active line, this whole thing will go away in a few years anyway.
THIS SPACE FOR RENT
It also works the other way around: rural folks subsidizing ridiculously overpriced housing, education, public safety, and other services that the "urban poor" use. Many of the "urban poor" are likely poor because they are "urban" in the first place. And what about the rural poor who really do need these subsidies?
That's the whole problem with all these "great society" programs: nobody really knows what the money should be spent on. Once you go down this road, you lose yourself in ever more complex and wasteful schemes of economic central planning, rent seeking, and outright corruption.
As a % of income, rich people pay maybe 1% sales tax, while poor people pay 5-10% sales tax or more.
% of income is a worthless metric. If your income is 95% spent on subsistence, even a 2% tax is onerous. If your income is spent 5% on subsistence and 95% on savings and non-essential expenses, even a 20% tax may not be onerous (except emotionally).
I hope no one needs help in figuring out which of the above are rich and which are poor.
But... reading the paper I smelled a preconceived agenda. The paper was sponsored by Americans for Generational Equity an ostensibly bipartisan group concerned with the fact that the "Pig in the Python" is getting closer to the snake's cloaca. And the group worries that said meal is (or soon will) be providing less nourishment than it takes to digest it. Read: The Boomers are greying and will suck the life out of the country before they become python excrement. Think of the children.
A look at the group's composition reveals a majority of Republican notables with a sprinkle of moderate Democrats. The FCC is a bipartisan body and fairly judicious by nature IMHO. I have to wonder what is really going on here. There are hundreds of more fruitful places to look fo WF&A. As for real waste? Check out the US military.
"No fear. No envy. No meanness." Liam Clancy
I work for a telco. We're required by law to provide phone service to everyone... period. In some counties we're required by law to keep 911 service working regardless of if they residents even want a phone, or even if the building is abandoned! We've got houses on top of mountains, we've got houses at the bottom of the grand canyon on Indian reservations that require microwave dishes to link the bottom of the canyon with the top. Or techs have to hitch rides on helicopters to service some of these people. The vast majority of whom are not rich at all. Rich people like to live in the countryside around cities or small towns, not in the Appalachians where these subsidies have the greatest affect.
Not that all the government subsidies are perfect. The most recent, the Rural Broadband initiative, is total pork. But the standard tax on lines that allows rural customers to get basic phone service? No, that's probably one of the most important programs in US history. If hadn't been enacted most of the country (geographically) would still be without service. If they were to drop it all together, rural customers would get cutoff almost immediately. We're talking entire towns. And before you start talking about cellphones, how do you think all the cellphone providers get their data links for those towers? The phone companies.
And the poor pay 0 federal tax, or even get a few grand back, while the "rich" (everyone who makes more than you) pay 10-40% of their income. So?
Gamingmuseum.com: Give your 3D accelerator a rest.
Then you should be railing against your state, or moving out.
Gamingmuseum.com: Give your 3D accelerator a rest.
I think the argument here is that the expensive phone lines are going to the homes of the eccentric millionaires. You're quite right that a lot of rural people are poor though.
There's a slight inaccuracy in your geography. Right smack in the middle of a city is often a glob of wealth in the form of corporate offices, cultural icons, and the like (think Park Ave, New York). The next ring is the dirt-poor urban people, mostly black or Hispanic. Then comes progressively wealthier and whiter rings of suburbs until you get about 30 or 40 miles from the city center, then it starts getting poor again until you're in the middle of nowhere with people living in shacks. Those rings can be somewhat distorted by natural features like major bodies of water, but they're very real. They can also merge into each other, as has happened along much of the Boston-Washington metropolis (it's possible to drive from Maine to Virginia while never spending more than about 10 miles in anything remotely resembling a rural area).
And as you mention, many rural towns have similar rings, but nowhere near as pronounced.
I am officially gone from
You know, I can't take responsibility for people who are foolish enough to play the lottery with their last dollar. That's not a tax, unless you want to consider it a tax on stupidity. Stop being stupid, and the tax is no longer levied. The PA lottery sends proceeds to programs for seniors, so if you proposed to eliminate it you'd be accused of ageism anyway. Government is the problem.
Guess who keeps raising the taxes on alcohol and tobacco? What was the first tax Obama raised when he came into office? Government is the problem.
Claiming that renters (there are renters outside the city, BTW) are paying property tax is also as dumb as claiming that when I take out a loan or use a credit card, I'm paying the bank's taxes. Again, if property taxes are too high and forcing up rents, guess whose fault that is again?
There is a cap on the SS tax because there's a cap on benefits. But I don't expect the Slashdot leftist to believe in fairness as much as the "fair share".
Gamingmuseum.com: Give your 3D accelerator a rest.
> 2. Most states also draw income from urban poor in the form of taxes on alcohol, tobacco, and by state-run lotteries
Cry me a river.
You just jumped the shark with that one.
A Pirate and a Puritan look the same on a balance sheet.
It's not considered evil. It's considered immune to a sales tax, or any other form of consumption tax.
"Capital gains" are taxed differently than "income". This leads to a situation where our tax policy ends up being quite regressive, in that the wealthy are paying lower tax rates than the poor. If this is truly what we want as a society, we should campaign to have the "income" tax brackets reflect this. However, I don't think you'd have much popular support for a policy that takes the tax brackets and flips them around so that the rate goes down as income goes up. That means that our tax policy is not only regressive, but it's also sufficiently misleading to have won the support of the electorate despite being against their own interests.
I'm not sure where you got the idea that investments are "evil". GP was merely stating that money that is invested is not spent, and therefore is not impacted by a sales tax. This is only "evil" if you believe that it is a moral imperative to pay sales tax. Reading comprehension FTW.
Chuuch. Preach. Tabernacle.
Please travel more.
In my state clothing and prepared foods are taxed. Rent would include property tax, since that has to be paid by the landlord. Sales tax on cars here is the same as every other item.
Fair tax is a simple scheme to move taxation to the middle class. The rich would benefit greatly at my expense.
But almost everyone I know spends all of their money on something
Almost everyone you know is far from rich. A wealthy individual will invest a considerable proportion of their income instead of spending it. It's not that they're buying items exempt from sales tax; they're not buying things period.
A poor person spends all of their income. This necessarily prevents them from accumulating wealth, or becoming rich. The rich, by definition, did not spend all of their income, enabling them to accumulate wealth, or become rich. Any of the income that they didn't spend (i.e. any of the income that contributed towards their accumulated wealth) was not subject to sales tax or any other form of consumption tax.
A jurisdiction has a certain sales tax rate, say X%.
A poor person, Mr. A, spends all his money. X% of his net income goes towards sales tax.
An upper middle class person, Mr. B, spends half his money and invests the other half. X/2% of his net income goes towards sales tax.
A truly wealthy person, Mr. C, spends one percent of his money and invests the remainder. X/100% of his net income goes towards sales tax.
Why would we, as a society, support a tax that has a poor person paying 100 times more, as a percentage of his net income, than a truly wealthy person?
Chuuch. Preach. Tabernacle.
Start doing studies. It is simply not that expensive to run and maintain cable, not even in rural areas.
Where I live (semi-rural outskirts of a major metro) the labor to string cable costs $1/foot and burying cable costs $8/foot. (source is a comcast field engineer) My nearest neighbor lives 600 feet away and the length of the line between my house and then next one is about 1200 linear feet due to how the line is routed. For someone on a farm this could easily be 3000+ linear feet. So there is your $3000 right there without even getting into the cost of the wire itself, the switchgear, signal boosters, customer service, engineering and the rest.
Now I have no idea if the subsidies provided are appropriate to the actual cost but it is genuinely expensive to run cable to rural locations.
And who's paying them ~$100,000 a year?
http://www.guidestar.org/organizations/26-2171390/alliance-generational-equity.aspx
Their web site www.truslseniors.org is down
Another question is, who the fuck is C. McClain Haddow, the guy who's running Alliance for Generational Equity?
http://reporting.sunlightfoundation.com/lobbying/client/alliance-for-generational-equity
Mother Jones has a hint.
The Artful Codger
Trashing the AARP with Grandma Green.
By Michael Scherer
July/August 2005 Issue
http://www.motherjones.com/politics/2005/07/artful-codger
The real pedigree of the group Green represents is hidden under layers of PR and politics. The Seniors Coalition was cofounded in 1989 by conservative activist Dan C. Alexander Jr., three years after he was sent to prison for arranging construction kickbacks as an Alabama school-committee member. Today, its top outside lobbyist is C. McClain Haddow, a former Health and Human Services official who spent time in prison with Alexander for failing to file a timely ethics waiver when he gave his wife a government contract. Haddow has also lobbied for generic-drugs manufacturer Mylan Pharmaceuticals.
The organization’s Washington activities regularly blur the needs of seniors with the agendas of corporate donors. After it took money from Microsoft in 1999, the coalition lobbied on antitrust litigation, and after it took money from Lottery.com in 2000, it lobbied on a bill that would restrict Internet gambling. Money also poured in from the American Petroleum Institute and the American Public Power Association—just as the coalition spoke out against the Kyoto Protocol and lower gas-mileage standards.
The Seniors Coalition is especially tied to the drug industry. PHRMA, the pharmaceutical industry’s trade group, gave the organization $2.2 million between 1999 and 2000 (the only two years for which full financial disclosure is available). Other drug industry sources funneled the group an additional $300,000 during that time. But Tom Moore, the coalition’s chief operating officer, writes in an email that only 22 percent of his organization’s funding comes from industry, and that the group “retains its complete independence in developing [its] legislative agenda.”
http://en.wikipedia.org/wiki/Astroturfing
There is some interest group behind this that is going to save a lot of money if they eliminated the Universal Service Fund (which has its pros and cons), and this outfit is crying crocodile tears over the urban poor. Or generational equity. I'd take them more seriously if they were up front with their real agenda.
1. If someone is living somewhere without phone access, then the person calling them for the job also doesn't have a phone. If someone is living where there is phone service, the infrastructure already exists. If someone is living where there isn't phone access but the job isn't there, they will have to move. Not a valid reason.
2. Phones are not necessary in an area where there aren't any phones. Everyone is in the same boat. They didn't talk to anyone when they moved there, nothing has changed or needs to change.
3. I pay to protect ME, not someone else. When I pay for highway usage, I get a benefit from it. What benefit do I get from this so it's worth me paying for it?
4. I don't need to move, I have a phone. Why should I spend money to support someone if I don't get a benefit from it. I don't mind having the choice to do it, but I shouldn't have to do it if I don't get a benefit from it. And by 'I', that also means society improves because of it.
5. People lived and farmed for thousands of years without phones. Subsidizing farmer's phones decreases food costs, but increases other costs, so it's a net wash since everyone eats, and a large portion of the population have phones. I can choose what foods to buy based on what they cost. If costs rose, farmers would then be motivated to find appropriate communication methods to keep their costs down. Providing phones circumvents that process.
As we have seen in home and college subsidies, providing free money does not keep costs down. Instead, it interferes with the normal supply and demand process and increases prices. When insurance became prevalent and more people used health care, costs went up because the cost to the consumer was less and they could afford more, higher priced, procedures regardless of whether they were actually necessary or not. Such as putting a cast on a break v/s putting in a plate and paying for the accompanying physical therapy.
Government interference with markets usually has unforeseen consequences which are rarely beneficial. A valid exception is to prevent a monopoly from using it's ownership of a product to keep competitors out.
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
No, farm subsidies have a small effect on lowering food prices, but a large effect on transferring wealth to farmers. This is a variation of the broken window fallacy. For example, subsidized corn ends up being used for purposes where there are better alternatives. Consumers are of course always going to need food, but they might choose a different mix in the absence of subsidies and use some of the wealth that went to domestic agriculture for other purposes.
Claiming that renters (there are renters outside the city, BTW) are paying property tax is also as dumb as claiming that when I take out a loan or use a credit card,
You got this one wrong. You have to examine the incidence of taxation. The property owner has to pay taxes but he pays this by passing the cost on to the people renting the property. The actual tax incidence is on the renters, not the landlord. The amount of the tax is irrelevant in this case in determining who is the one ultimately burdened with the tax even if the amount of the tax is just one penny.
For the same reason this is why gasoline taxes are fundamentally a regressive tax (hurts the poor more than the rich). The oil companies do not absorb the cost, they merely pass it along to their customers, more of whom are poor than are wealthy.
There is a cap on the SS tax because there's a cap on benefits.
That would be a more credible argument if they amount paid in equaled the amount paid out in benefits to each beneficiary. Most beneficiaries receive more in payments than they pay to social security. And let's be frank, there is a cap on SS tax because the wealthy are a powerful lobby and have undue influence when it comes to financial legislation. Your argument is just some sugar to help get rid of the icky taste of reality.
Especially since they get 83% of their first 20,000 too.
The money is taxed much more than twice.
For a company's worth to increase, someone must've given them money. They must've earned that money to begin with. The money was taxed then as well. The money is taxed not twice, not three times, but continuously.
And that's not a problem. The problem is when a person (corporate or corporeal) is taxed twice.
The corporation is taxed on net income. The corporation is taxed once.
Stockholders are taxed for any dividend they receive from the corporation. They are taxed once as well.
If stockholders choose to sell stock (sell more than they buy), then any gains are taxed there. Once.
Going by your logic, the money is being taxed infinitely many times. First at the corporate rate, then at the capital gains rate, then at the sales tax rate (when investors spend it), then again at the corporate rate (when corporations make profits), forever, as long as it keeps circulating. While this is true, it's far from insightful. Nobody cares when "money" is taxed, they only care when they themselves are taxed.
Chuuch. Preach. Tabernacle.
The guys producing the food win. As much as ag subsidies piss me off, a reliable food supply is the first order of business for any society.
Socialism: a lie told by totalitarians and believed by fools.
No, the reason that money from urban taxpayers was used to pay people to live in rural areas (an oversimplification, but still useful for addressing the point you were making) is because urban taxpayers need somebody to live in those rural areas and produce the things (such as food) that cannot be easily produced in urban areas. This particular subsidy was created because it was recognized that the utility of the telephone system was much greater if just about everyone had one than if there were vast areas where no one had telephone service.
That being said, I am not convinced that it was a good idea in the first place and lean towards getting rid of it now. I haven't studied the issue, but my default philosophy about government spending says that this is a bad idea and I don't have any facts which convincingly counter that.
The truth is that all men having power ought to be mistrusted. James Madison
1) Punctuation would make your objection much clearer. I'm not sure if my other points actually address your objection or not, but I'm making a good faith effort.
2) If there is no difference in capital gains as opposed to income, the incentive to invest in companies would be to profit from the investment. Any tax rate short of 100% would preserve this incentive.
3) My employer would do it the same way he does now, as this company was built with no third party investment. Consequently, I don't see how this would impact the viability of my job.
Brief aside: What does your objection have to do with what I said? I didn't say that there should be no difference between "capital gains" and "income", I merely pointed out that there is such a difference.
P.S. I do believe that there should be a tax difference between "capital gains" and "income". I believe that capital gains ought to be taxed at a much higher rate than income, since income usually results from productive activity. Capital gains, not so much. I fully support modifying the tax code to incentivize productive behavior.
Chuuch. Preach. Tabernacle.
Wealthy people can afford to avoid taxes, like sales taxes. In California, we have a fairly high sales tax, which has driven much of the commerce outside the state, and online. People shop online for everything simply to avoid paying almost 8% in taxes when they spend money.
Guess what else happens, businesses close, people lose their jobs. And liberals are dumbfounded why.
Taxes are a necessary evil, not a way to raise funds to correct the evils people see in society. IF you want to fix the evils in society, tax them. They will disappear, and you won't have to spend a dime of tax payer's money. My example, Cigarettes. Taxed in to oblivion, to the point where it is too damn expensive to smoke, and it disappears. Slowly, over time.
Wanna fix the "drug" problem and end the "drug war", legalize and tax drugs. We'll have all the money in the world to do whatever you want. Sin taxes can fund all the glorious projects we want, while reducing or eliminating the actual problems.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Which part is not true? That the wealthy pay lower tax rates than the poor? Warren Buffet disagrees. Of course, there's some argument that Buffett is misleading us since his secretary might make more than the average secretary. However, it's safe to assume that she makes less than Warren himself. The fact that Buffett's tax burden is proportionally lower than his secretary's (which nobody is arguing is a false statement) is clear, inarguable proof that our tax code is (or at least has the potential to be) regressive. That capital gains tax used to be lower in the past has no bearing on this fact. That children and cripples don't pay income tax has no bearing on this fact. That Social Security withholding is also regressive has no bearing on this fact.
But speaking of falsehoods... Sure, half of people don't pay any income tax. This includes children, the disabled, the elderly, those on unemployment. Does it also include the working poor? The last time I worked a full time minimum wage job, less than a decade ago, I paid income tax. I paid federal and state income tax. I was making the minimum wage allowed by law. And yet I paid income tax. Explain to me how that is possible. Are you suggesting that about half of people are being paid less than minimum wage? Are you suggesting that about half of people make more than I was but were saddled with a lower tax rate? Are you suggesting that my accountant, TurboTax, somehow failed me, but somehow gets these great deals on taxes for everyone else?
Chuuch. Preach. Tabernacle.
The highway trust fund was exhausted more than a decade ago. Maintenance expenditures now exceed all gas tax revenue let alone necessary reconstruction. General fund monies now subsidize highways and roads because congress is unwilling to raise the gas tax to re-stabilize the trust fund. Blame an irrational public that would rather draw debt or not fix the roads than see their gas taxes go up a nickel.
For most of human history, actually, organization, manpower, and "tech", such as it was, was the result of farming. Farming allowed higher population density, required better organization, and allowed society to support a few people with a job other than providing food. That really only started changing with the Enlightenment.
Socialism: a lie told by totalitarians and believed by fools.
The short-term rate scales exactly with the progressive income tax. The long-term rate is LOWER than the progressive income tax for the poor (as in it's more progressive), equalling it at the 25% bracket, and then remaining flat.
Not entirely accurate. Let me clarify, based on tax policy from 2008 through 2012. The long-term capital gains rate never equals the progressive income tax rate for the corresponding tax bracket. The long-term rate is always lower than the progressive income tax for the poor, for the middle class, and for everyone else. If you were in the 10% or 15% income tax brackets, you paid 0% on your capital gains. If you were in the 25%, 28%, 33%, or 35% income tax brackets, you paid 15% on your capital gains. Long-term capital gains tax is less than income tax, always, across the board.
In a vacuum, one could say that this is a our capital gains tax is progressive. However, we don't live in a vacuum. Not everyone gets their money from capital gains. Some of us actually have to, you know, work. In fact, it seems that these capital gains rates don't apply to the poor, because the poor don't have capital. And it seems that the income tax rates don't apply to the wealthy, because they don't need to work. The end result is that we have, effectively, two separate taxation schedules: one for the rich, and one for the poor. The rich have a long-term capital gains tax that is capped at 15%. The poor have an income tax that is capped at 35%. That's not looking very progressive from where I stand.
Fuel tax isn't entirely regressive. The truly poor don't buy fuel, as they have no motor vehicles of their own. Also, you'd be surprised by how much fuel supercars burn. However, excluding these two far extremes, your point is entirely valid and worthy of public debate.
Sales tax is flat, but consumption as a percentage of net income is most definitely not. The rich buy more expensive things, but a much smaller share of their income is spent on them. They pay less tax, proportionally to their income. This is regressive, by definition.
And that last bit, about rebating "necessary spending" sales tax, is starting to sound an awful lot like that [un]Fair Tax proposal I keep seeing thrown around here. I'd be fully supportive of a simplification of the tax code, I'd be fully supportive of a base income provided to all people, but I would not be supportive of any policy that is designed to make life comfortable for the poor and the wealthy at the expense of the middle class.
Chuuch. Preach. Tabernacle.
I guess I'm going to have to keep posting this every couple of months until you brilliant urbanists catch up with the early nineteenth century on the economics of cities.
There's a book - a dry book, I'll grant, but a damned fine one - called Nature's Metropolis: Chicago and the Great West. Its author, William Cronon, talks in an early chapter about the work of Johann Heinrich von Thünen. von Thünen recognized that cities function as concentrators of wealth that is fundamentally generated in their hinterlands, allowing specialists to turn the productive capacity of the land - food, energy, and raw materials - into everything from laws to technology. The wealth of a city is directly dependent on the productivity of its economic watershed. Chicago became an economic powerhouse because it was able to tap its hinterland more productively than other places - the prairie made building railroads less difficult and hence less expensive, while the availability of cheap water transport that allowed inexpensive trade via the Erie Canal allowed Chicago to tap into the markets of New York (and New York to tap into the productivity of the American Midwest - no small contribution to its rise as the preeminent city of the East Coast). Rail allowed transport of good across the gentle hill separating the Great Lakes and the Mississippi near Chicago. And so forth
In short, your cities depend on cheap West Virginia coal and Pennsylvania gas to power and heat themselves, dams in the Sierras to have enough water to drink, and farmers everywhere to be able to feed and clothe yourselves. Those roads you build at taxpayer expense in rural areas are convenient for the locals, it's true, but it's the city that primarily enjoys the benefit of decreased transport costs for its raw materials. It's hardly unusual for poor people to object to high taxes, especially when they understand that even taxes that are nominally spent on them - for roads, e.g. - will really end up in the pockets of a city guy who's friends with the politicians spending the money.
A jurisdiction has a certain sales tax rate, say X%.
A poor person, Mr. A, spends all his money. X% of his net income goes towards sales tax.
An upper middle class person, Mr. B, spends half his money and invests the other half. X/2% of his net income goes towards sales tax.
A truly wealthy person, Mr. C, spends one percent of his money and invests the remainder. X/100% of his net income goes towards sales tax.
Why would we, as a society, support a tax that has a poor person paying 100 times more, as a percentage of his net income, than a truly wealthy person?
1% is an unrealistic number, the lowest I've seen is the ultra rich spending 3% of their money, so I've used that instead.
Well let's fill those numbers in, and fix your gaping holes -- I'm pulling numbers from Illinois State.
A jurisdiction has a certain sales tax rate, say 10% (Chicago, and 1% on food, magazines, etc).
A poor person, Mr. A, spends all his money ($10000). 100% ($10,000) of his net income goes towards sales tax, most of it toward. ($1000)
An upper middle class person, Mr. B, spends half his money ($100,000) and invests the other half. 100000* 1/2 ($50,000) of his net income goes towards sales tax. ($5,000) immediately.
A truly wealthy person, Mr. C, spends 3 percent of his money ($1,550,000) and invests the remainder. 1000000 * 3/100 ($46,500) of his net income goes towards sales tax ($4650) immediately.
That is sales tax. Now let's add in the State Tax.
A poor person, Mr. A, with income of $10,000 pays 0% of his income on state taxes. ($0)
A upper middle class person, Mr. B, with income of $100,000 pays 3% of his income on state taxes ($100,000-$4100 in deductions) = $2,877.
A truly wealthy person, Mr. C, with income of $1,550,000 pays 3% of his income on state taxes ($1,550,000 - $4100 in deductions) = $46,377.
Now let's do federal tax.
A poor person, Mr. A, with income of $10,000 pays 0% of his income on federal taxes. ($0 -- and in some cases he actually gets a refund...)
A upper middle class person, Mr. B, with income of $100,000 pays ~17-20% of his income on federal taxes ($17,000)
A truly wealthy person, Mr. C, with income of $1,550,000 pays 35% of his income on federal taxes ($542,500)
Now remember that investment income, well, on average it should have made ~9% last year.
A poor person, Mr. A, with no investment income pays 5% for capital gains ($0)
A upper middle class person, Mr. B, with investments of (($100,000- $2877 - $17000)/2) $40,061 pays 15% on the gains (9%) = $540
A upper middle class person, Mr. C, with investments of (($1,550,000 - $542,500 - $46,377)*97%) $932289 pays 20% on the gains (9%) = $16,781
Blah blah blah... I got bored of crunching numbers with fake bullshit assumptions. The ultra rich don't only spend 3% of their income. They would be spending less than the upper class, and that's ridiculous. The upper class don't invest half their income, most less upper middle class invest much less than 20%. I only kept the numbers I had already crunched (with obvious omissions) to show just how stupid your comparison really is, even with bogus assumptions. Not every tax needs to be based on how much you make. I don't want to hand my waitress a W-2 when I go out to eat so she can properly calculate my sales tax. That is just a ridiculous notion. WHY should a person who makes more pay a higher sales tax? Sales tax is a tax on stuff you buy -- not how much you made, or what you may or may not also buy this year. You just sound angry and bitter that you are poor, and damn this rich people, cause well... they are rich.
As a side note, the bottom 50% ($26415) in 1999 paid 4% of the federal income. 10 years later, the bottom 50% ($32,396) paid 2.25% of the federal income despite making 22% more, they contributed nearly half as much towards the total. The same isn't true for the top 1%. The amount they contributed actually went UP.