Should the wealthy pay more in taxes?

...AND yes.

Taxes are necessary, in a government, to pay war debts. That is the one and only reason that the United States government started taxation in the first place.

In the past it was the rich that set up charitable funds, built hospitals, built libraries, created orchestras, commissioned artists and craftsmen, paid for research to solve humanity's ills, explored inaccessible parts of the globe and numerous other endeavors.

There were no need to have the government to force those good works out of the rich.

There is a proposal that makes perfect sense to me, someone who has not been formally fully educated in the social sciences.

The flat sales tax.

Rich people spend more money on things than poor people. (I'm not talking about percentage of income, just dollar-for-dollar.) That is a natural fact.

We know that whole STATES can be supported on sales tax alone. Texas, for one, does it.

And no matter how you try, there is no loophole that prevents you from spending money on, at least, food. And who spends the most money on the fanciest of foods? Not the poor.

The poor would be foolish to spend there money on large amounts of luxury. Who DOES spend such monies?

The rich.

It is not right to punish excellence or effort or success. If you do, you disincentivize those that CAN succeed.

The rich can STOP acquiring more money without hurting themselves They can just retire. When that happens companies close there doors and those jobs are lost forever. Who would be those that hold those jobs?

The poor.

DILEMMA:
On an individual level, taxation is extortion at gunpoint, so nobody "should" be forced to pay more in taxes. That said, the left has an important point that it is unjust for government to tax earned income at a higher rate than unearned income. They'd never accept income tax cuts down to 15-18% with no new taxes to offset them though. Similarly, but more correctly, the right (or rather, the conservative base) wouldn't accept a flat-out capital gains tax increase with no tax cuts to offset it.

Ultimately, the federal government needs to cut HUGE amounts of spending to prevent economic collapse. (Lack of revenue is not the real problem; nothing is ever "enough" for government gone rampant, which is why the government's revnue "needs" have grown so drastically over the past century in the first place.) However, it is difficult to get everyone to concentrate on this at once: The conservative base rightfully wants to address spending, the liberal base is rightfully unsatisfied with the balance of the tax burden, the GOP politicians wrongfully insist on keeping taxes the same, and the Democratic politicians wrongfully insist on increasing the capital gains (or worse, the income) tax. There was a chain email that passed around some time ago, and John Stossel has it on his site here (it's hard to get it posted, so sorry about the link butchering):
foxbusiness.com SLASH on-air SLASH stossel SLASH sites SLASH foxbusiness.com.on-air.stossel SLASH files SLASH FedGovAndFamilyBudgetDec11_6_0 DOT jpg
Instead of taking it as a wake-up call, people in the liberal base responded with another chain email that put the focus on the tax burden (I can't find it, but IIRC it was similar in style with a blue background).

If we want to fix spending, I think we're going to need to address the capital gains/income tax rate gap to get everyone's minds on the same page. It would be unjust to simply raise the capital gains tax to compensate, yet we can't realistically demand a drop in the top income tax bracket to 15-18% either for a number of reasons. (Most importantly, fiat money ensures the government wouldn't have to cut spending to compensate; they'd just have the Fed buy up more Treasuries with "printed" money to compensate instead, and the inflation tax is even worse.)

NARROW, FOCUSED SOLUTION:
Instead, I think it would be wise to simplify things and have the two rates "meet in the middle" by eliminating the capital gains tax, making the income tax apply to capital gains and other unearned income as well as earned income, and reducing all income tax brackets by a fixed ratio to compensate (aiming for neutral overall revenue impact for maximum non-partisan popular support). Instituting the same tax rates for earned and unearned income in this way would be a pretty quick and easy incremental improvement with a number of consequences, most good:

First, the bad: It would ultimately mean a higher rate for unearned income, thereby hampering the liquidity of the markets as people become more reluctant to sell and lock in a tax hit for any particular year. On the surface, it may also appear that retired seniors might also see a larger burden, but this probably isn't true: With the reduction in income taxes to compensate for capital gains being rolled into them, the average senior's average tax rate would probably remain comparable.

Now, the good: The poor would be essentially unaffected, since they pay virtually no income taxes. The upper-middle class would be largely unaffected as well, since their income comes from a balance of wages/salaries and investments, and the cuts to earned income rates would probably balance out the raises to unearned income rates on average. Instead, the middle class would see a tax cut, and the super-wealthy would finally pay the same rates as the upper-middle class to compensate.

Now, the really good: Leveling out earned/unearned tax rates would get everyone on the same page on this issue, so we could finally focus on cutting spending for once. Since the earned/unearned gap is currently used as an excuse to dodge spending issues and push for higher taxes, resolving it in an even-handed way (as above) would help us dodge the possibility of liberal politicians using it as an excuse to simply raise capital gains rates (or worse, confuse people and raise the higher income tax brackets, thereby hammering the upper-middle class instead of the Romneys and Obamas and Buffetts of the world).


I'd love for tax rates to be where they should be (zero), but in the meantime, I imagine that both the left and the right could support the above solution to the earned/unearned rate gap, which would let us concentrate more on the spending crisis from there on out. We'd still probably fight over alternatives to the progressive income tax, but at least there would be one less thing to fight over.