However, it’s not cut and dried the other direction either. Conveniently leaving out FICA is critical to the current argument.

It should be obvious that there’s no *objectively* “fair” amount for people to pay in taxes – everybody has their own concept of what fair means, most often biased towards their own perceived self interest though not always. There are few facts to use for persuasion in terms of fairness; it’s mostly about biased judgement calls.

However, we can relatively more objectively look at measurable effects. If the rich are proportionately richer today than a decade or generation ago then either (1) today’s top 1%/10% etc are several times as smart, hard working, and deserving than the top 1%/10% etc ten/thirty/fifty years ago so this is in correct proportion to their contributions, or (2) the system overall is biased toward increasingly high rewards at the top – after taking all proportioning considerations into account.

The trick here is not to compare joe six pack with the 80 hour/week type A CEO, but the type A CEO of 1959 with the type A CEO of 2009. If the system is working, then the latter won’t be earning more (after inflation) than the former unless their productivity has also increased proportionately.

Has it? Are the richest 1% today actually far smarter and harder working than the top 1% before? Is the wealth escalation tied to true productivity gains?

And – if the movement of weath (not just income) upward continues unabated decade by decade for 100 years, what with the income distribution be like then? Is there some logical stopping place, a point where society or market forces or something says “Ok, it’s OK for the top 1% to own 99% of all weath but 99.5% would be just too much”?

Maybe that balance point won’t happen for another generation. But as long as wealth continues to migrate by the terabuck towards the top of the pyramid, it’s hard to feel that the taxation rate on the rich is ruinously high.

(Nor would I want it to be ruinously high – I don’t want to financialy destroy the rich, only to stop the upward hemmoraging somehow – not neccessarily through taxes – and find stability. Not equality – some will be much richer. That in itself can be based on meritocracy, which is a good thing to be preserved. But do they need to keep getting proportionately still richer every decade forever? That’s not about meritocracy but about positive feedback cycles taking the system out of the stable zone into unsustainability which will at some point collapse catastrophically. I’m coming more from science than politics here, though I fear some responses are likely to be knee jerk regurgitations of political ideology rather than fresh systems based thinking).

The beer parable is deeply flawed at the core, assuming that each drinker consumes equally but some pay much more. If that one top drinker also drank the majority of the beer and sometimes the low end left pretty thirsty, it might be closer to meaningful – we could then discuss whether he drank 50% but unfairly paid for 70%, etc. There are worthwhile discussions to be had. This parable however is more of a “look over there” distraction than a true illuminator of the tricky questions, however. The parable not so subtly biases the reader to think that the rich drinker is awfully generous and the rest are ungrateful as well as short sighted. (I think the point that those who pay the most in absolute terms will benefit the most from a reduction in absolute terms can be made without the unneccessary distortion of assumed equal consumption).

History Lesson: Why have capital gains (dividends and the sale of stock) at 15%. The government double taxes corporations on dividends is part of the reason. So I say, give a deductions to corporations for giving out dividends (this will also reduce the problem with over leveraging with debt). Put equity on the same par as debt for the corporation. Don’t tax the corporation on dividends or it’s equity.

What do we do for capital gains? We tax it at normal progressive rates. To all of you who think that will reduce the drive in invest, hogwash. People will invest regardless of taxes. Lower taxes very rarely encourages re-investment. All it does is increase the amount of money out there, lowering the value of the dollar. The vast, vast, vast majority of economists agree that Laffer curve is pretty much a joke outside very high tax brackets (like 70%).

Bush is now hitting the middle class with AMT. Bush’s massive debts due to out of control deficit spending has lead to inflation — an effective tax hike that affects middle and low earners who spend most of their income.

Bush has shifted taxes to states and municipalities so we got a tax hike there. And then there are the future tax hikes to pay all the interest on Bush debt.

The dishonest try to look only at the marginal ordinary income rates. It does not tell the real story.