Friday, April 16, 2010

On Tax

Saw a post here:

The complaint is about that over half of the population pays no income tax. Ten percent of the population pay 70% of all income tax.

For those who complained about "unfair share" of tax on the rich, let me also provide this statistics from government study of wealth distribution:
- top 1% of the poupulation owns 34% of total assets in this nation
- top 20% of the poupulation owns 85% of total assets
- the bottom 80% claims only 15% of the assets

As you know assets generate capital gain, interest, and rent. These income are almost effortless. (say compare to coal miners.) Those who wrote articles like in the above link never cite these statistics side by side with tax burden. I think we need to consider the whole picture. Tax is an unpleasant fact of life. But US tax burden on the rich is less than most, if not all, OECD countries. It is a necessary evil. And I think the rich should be a bit more compassionate toward society.

A recent report from WSJ: Wall Street Banks are lobbying against centralized clearing house for derivatives trading because $20 billion of revenue is at risk.

But without centralized clearing house, it means future government bailout is inevitable because society can not afford the melt down of the entire financial system.

From this example you can see anyone's wealth has to do with how the law is written. That centralized wealth I quoted above has a lot to do with US law and lobbying.

I think when considering tax policy we need to factor in these facts. The bottom 80% who owns only 15% of all assets obviously don't have the resources to do much lobbying.

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