Growing Divide Between Rich and Poor

[Revoltingest]

Don't sugar coat it. It's gambling, except that when you lose the government brings bags and bags of taxpayer money to your door in a big truck. The bigger you lose, the more you can cash in.

You don't understand what hedge funds are, do you? I thought you were
supposed to be all about objective facts. Instead, I get hyperbole & MSN.
Did you forget that I'm supposed to be the one who spouts only opinions?
I now fear for your mortal soul. (I'll have someone pray for you.)

 

[Alceste]

You don't understand what hedge funds are, do you? I thought you were
supposed to be all about objective facts. Instead, I get hyperbole & MSN.
Did you forget that I'm supposed to be the one who spouts only opinions?
I now fear for your mortal soul. (I'll have someone pray for you.)

Oh no you don't! Or else I'm going to get a pack of hippies to send you their "good energy".

Hedge funds are basically bets on stock performance, aren't they? Fair warning: If the answer isn't "bankers are thugs and criminals and should all be rotting in jail", I may not be able to focus.

 

[ninerbuff]

Oh no you don't! Or else I'm going to get a pack of hippies to send you their "good energy".

Hedge funds are basically bets on stock performance, aren't they? Fair warning: If the answer isn't "bankers are thugs and criminals and should all be rotting in jail", I may not be able to focus.

My understanding is that hedge funds aren't regulated either. Nor do they apply to certain tax codes.

 

[Alceste]

My understanding is that hedge funds aren't regulated either. Nor do they apply to certain tax codes.

The entire, bloated derivatives market is horrendously under-regulated, and it allows bankers to tally up tens of trillions of entirely fictitious dollars (projected future earnings) as "profit". IMO, this is how it can be made to appear as though the US economy is slightly growing despite the fact many states are bankrupt and people are still losing their jobs and houses en masse.

 

[Revoltingest]

Oh no you don't! Or else I'm going to get a pack of hippies to send you their "good energy".

You'll have a hard time putting together a herd of hippies these days, but lest you forget,
I spent a lot of time with hippies in the 60s & 70s. I might already know your energy suppliers.

Hedge funds are basically bets on stock performance, aren't they? Fair warning: If the answer isn't "bankers are thugs and criminals and should all be rotting in jail", I may not be able to focus.

Tis the hedging of bets to reduce risk....unless done by reckless boobs who use constructs which
are too complex for their understanding, as was the case with some derivatives.

 

[Penumbra]

A lawyer friend of mine mentioned that "hedge funds" are another way the rich are rich. Can anyone explain how this works? Finance and investment isn't something I'm well versed in.

A hedge fund is a fund that consists of a collection of wealthy investors that put their money into a pool that is controlled by the fund manager. The manager uses a variety of investment tactics, including derivatives and short selling, to build wealth for the fund.

-People that put their money into the pool will grow their money if the fund performs well. They are taxed at capital gains and dividend rates, which are around 15%.

-The people that manage hedge funds make even more money. They get a management fee, which is a few percent of the total (and the total is often worth billions). Then they get a performance fee, which is based on how the fund performs, and again is typically a percentage. While these are technically "fees", a good portion of them are treated as capital gains as well, because they were derived from the performance of the investments. So, the hedge fund manager is taxed at around 15% or so too.

 

[Penumbra]

I don't see it as an either/or situation.

That doesn't sound much different from what we have now. Stockholders would get more income from corporate dividends, but
pay a higher tax on the income. What's the difference in the stockholders after tax rate of return?

The difference is that it's spread out.

Reducing corporate taxation boosts returns for shareholders. But then shareholders pay a tax based on their respective tax brackets rather than the current max of 15%. So wealthy shareholders pay 35-40% or so on dividends, while the small investor pays her tax bracket, somewhere in the 20%'s.

So wealthy shareholders end up paying more taxes, and the little ones end up paying around the same. This way, it doesn't lead to the top 1% paying a 15-20% tax rate. They get the 35-40% rate like they're supposed to.

As for venture capitalists &
real estate developers, you're proposing lower taxes on income, but with no deductability of losses. This would mean greatly
higher taxation in a weak economy, but relatively great rewards in a booming economy. This strikes me as the opposite of
stabilizing feedback, ie, when things get bad, taxation makes things even worse.
Have you ever done real estate development? It's a risky business. You can plot & plan carefully, but you cannot anticipate things
such as economic downturns, election of anti-development politicians, changes in zoning, changes in subdivision control, colliding
with crooked politicians with "needs", etc, etc.
You might think your changes punish excessive risk takers, but they really punish anyone who depends upon financing.

You're an independent landlord in the particularly hard-hit state of Michigan. I get it, and that's certainly rough.

But you're looking at this almost entirely through your specific situation rather than the problem as the whole. The problem isn't independent landlords in Michigan. It's people worth many millions of dollars who get by on a <20% tax rate.

That's why I've said small businesses, real estate, and venture capitalists and such can receive some flexibility. Streamline the system, and then give a few breaks where breaks are actually due. The details can be worked out, but the large problem of regressive taxation needs to be addressed.

The system is not currently designed for stability. Rather, it's bought by the top 1% to work for them.

 

[Penumbra]

Revoltingest,

If I can't appeal to your financial sense, let me appeal to your engineering sense.

Some systems are stable and some are not.

Consider the pictures of an exponential increasing oscillation, and a damped system below. (The details don't matter; just the general shape of the functions.)

Some systems have built in stabilizing functions, while others grow exponentially out of control. Any system will break if there's a large and uncorrected exponential increase.

Consider the example of two people, John and Jane.

John along with his wife Mary make $70,000 per year from their jobs, and have two kids and a dog to raise. Their yearly expenses after mortgage, food, taxes, supplies, and college savings, end up being roughly $65k or so. So they don't save much money, except for perhaps through their retirement plans (their one reasonable tax shelter) and home equity. They get taxed somewhere in the middle. (The poor and wealthy aren't taxed very much, but the middle class and upper middle class get killed in terms of taxes. The poor have other costs like medical debt, lack of education opportunities, and high interest rates on everything.) The end result is that John and Mary do ok, but they don't build much wealth or security. And they're pretty lucky compared to a typical household.

Jane and her husband Tom make $300,000 per year from their jobs, and have two kids and a dog to raise. Jane also gets stock reward of roughly $1 million per year from her executive position. Their expenses are perhaps a few hundred thousand after taxes and such. So they have a ton of extra money to save, and Jane in particular accumulates a lot of wealth each year. They're pretty smart, and put a lot of their money into good investments, which grow at a long term lower-double-digit rate of return. All the money they put into stocks and partnerships gets taxed at 15%, and after several years, they've got tens of millions of dollars getting taxed at only 15%. Even though their incomes are taxed at a progressive rate, their ever-increasing pool of investments is taxed at a regressive rate.

Eventually Jane and her husband get to the point where they're multi-millionaires, don't need to work any more, and can just chill. Their income from their wealth gets taxed at 15%, and continues to grow exponentially provided they are at least decent investors. Then they can pass that onto their kids, which is taxed, but provides millions left over.



The problem is that on one hand, we have a steady state, and on the other, we have exponential growth. The working and middle class stays where they are (or even go modestly downward, since things like tuition costs have exploded at a rate significantly higher than inflation). Those who get above a certain height, however, are free to soar away with reduced tax rates on their exponentially increasing wealth.

That's why, we get a trend like this:
Wealth And Inequality In America

Now, I certainly believe talented and hardworking people should be rewarded for their work. I'm not promoting from each according to their ability, and to each according to their needs. Rich people should indeed stay rich, to a certain extent.

But when one party doesn't grow, and the other party grows at an exponential rate, there is eventually a break in the system. That's why most developed countries have pretty reasonable progressive tax systems, where richer people get taxed at a higher rate. So they stay rich, but it's a dampening effect on their wealth that keeps the system functioning. The higher you go, the more you get taxed, and so the lower groups are lifted and the higher groups continue to perform well, but are at least kept somewhere in reach.

When you have a regressive tax system like in the US, the top 10% and especially the top 1% pay very little in taxes, and have all the extra money they need to continue seeking exponential growth in their wealth. The result is that the middle class have a large tax burden while the wealthy grow exponentially, and so a huge gap forms between the have's and the have not's.

 

[Revoltingest]

I concur that income disparity is a problem. I also agree that our tax system imposes incentives which are often very counter-productive. Example: 2 gals I know sought help from the gov't when they lost hubbies & became single moms. Both were counseled that they should quit their jobs because they would have more total income (in the form of various types of assistance) if they became unemployed. This mimics an income tax rate exceeding 100%. Certainly, we should have benefits not subject to severe reduction if the recipient increases work income, something which should be encouraged. Thus they could eventually get off the dole, rather than be trapped on it. I'm not so concerned with what is "fair", but rather with what results in people being productive & getting what they need. You & I are looking at about the same goals, but just have different views on how to achieve them.
Ever think of running for office? It ain't fer me, but maybe you could pull it off.

 

[Wannabe Yogi]

True.

Many people I talk to don't seem to think this is the case, because it's disguised. .

It is very true. Warren Buffett has said he pays a lower percentage of tax then his secretary does and he thinks thats unfair.

 

[Revoltingest]

You're an independent landlord in the particularly hard-hit state of Michigan. I get it, and that's certainly rough.
But you're looking at this almost entirely through your specific situation rather than the problem as the whole. The problem isn't independent landlords in Michigan. It's people worth many millions of dollars who get by on a <20% tax rate.

My situation is pretty typical for real estate investors, other than Michigan's travails. But I don't begrudge those who pay low capital
gains rates on income, particularly since they're taxed on the integral of the inflation rate times their basis. That makes their tax rate
far higher than 15%, after adjusting for inflation. Remember that at 7% inflation, your money loses half of its value in 10 years.

That's why I've said small businesses, real estate, and venture capitalists and such can receive some flexibility. Streamline the system, and then give a few breaks where breaks are actually due. The details can be worked out, but the large problem of regressive taxation needs to be addressed.
The system is not currently designed for stability. Rather, it's bought by the top 1% to work for them.

Even more than some regressive tendencies, I think our biggest problem is the high marginal tax rate relative to the average rate. Even if my average tax rate (ie, taxes paid divided by total taxable income) is only around 20%, my marginal rate for a self storage business is over 50% (self-employment tax + fed income tax + state income tax). What this means is that for any investment I would make in my business, to make an after tax return of 7%, I'd have to get a pre-tax rate of return around 15%. The result of high marginal tax rates is that I invest less than I otherwise would, which means less work for contractors.
So what are we to do? The Cato Institute once proposed (as I recall) a revenue neutral plan whereby:
- Everyone would pay 17%.
- No one would have any personal deductions.
- Everyone would get $10K per year.
If I remember the figures correctly, it would result in the same amount of money being collected as the then current system. The hand-out would make the flat tax progressive. The poor would have assistance, yet suffer little loss of whatever income they earned. And investors would have tremendous incentive to put money into companies & developments.

 

[Wannabe Yogi]

Hedge funds are basically bets on stock performance, aren't they? Fair warning: If the answer isn't "bankers are thugs and criminals and should all be rotting in jail", I may not be able to focus.

I am a bit of a hypocrite on this subject because I am up to my eyes in the stock Market. Folks in any market make lots of money and produce nothing of value for society.

 

[Penumbra]

My situation is pretty typical for real estate investors, other than Michigan's travails. But I don't begrudge those who pay low capital
gains rates on income, particularly since they're taxed on the integral of the inflation rate times their basis. That makes their tax rate
far higher than 15%, after adjusting for inflation. Remember that at 7% inflation, your money loses half of its value in 10 years.

The inflation rate is somewhere in the ballpark of 3%, not 7%.

Even more than some regressive tendencies, I think our biggest problem is the high marginal tax rate relative to the average rate. Even if my average tax rate (ie, taxes paid divided by total taxable income) is only around 20%, my marginal rate for a self storage business is over 50% (self-employment tax + fed income tax + state income tax). What this means is that for any investment I would make in my business, to make an after tax return of 7%, I'd have to get a pre-tax rate of return around 15%. The result of high marginal tax rates is that I invest less than I otherwise would, which means less work for contractors.

How much is your self-employment tax?

So what are we to do? The Cato Institute once proposed (as I recall) a revenue neutral plan whereby:
- Everyone would pay 17%.
- No one would have any personal deductions.
- Everyone would get $10K per year.
If I remember the figures correctly, it would result in the same amount of money being collected as the then current system. The hand-out would make the flat tax progressive. The poor would have assistance, yet suffer little loss of whatever income they earned. And investors would have tremendous incentive to put money into companies & developments.

Paying 17% per year won't stop the exponential increase of the wealthy. That's basically what they're paying now. Those numbers don't stabilize the system.

Plus, the same amount of money being collected in the current system isn't enough. We have huge deficits.

 

[Shadow Wolf]

I am a bit of a hypocrite on this subject because I am up to my eyes in the stock Market. Folks in any market make lots of money and produce nothing of value for society.

That's how you make money. For me, working hard to make enough money to live comfortable off of, pay for college, and raise a family just is not an option. For many people it's not an option. I've been studying trading strategies for awhile because when I get my car paid off in a few months I'm going to start investing a part of what would have went to the bank in stocks so that I too can make some money. Nothing big, but hopefully by the time I going enrolled in a doctorates program I will have made enough to not bury myself in debt, especially since I am strongly considering going back to med school after that so I can do both psychology and psychiatry.

 

[Revoltingest]

The inflation rate is somewhere in the ballpark of 3%, not 7%.

I was illustrating the concept of taxation of inflation. Certainly, inflation has been both higher & lower at various times,
but the phenomenon is independent of the actual rate. Be it 3%, 7% or 11%, if your investment increases by exactly
the amount of inflation, you would pay tax on the total increase in dollar value upon sale, even though it hasn't gone up
in real value at all. If your investment increases by more than the inflation rate, you'd still pay tax on the phantom
component, in addition to real gains. Even more vexing, if your investment goes up by less than the inflation rate, you
would pay income tax on an actual loss.

How much is your self-employment tax?

15.3% is what we pay in lieu of payroll taxes.

Paying 17% per year won't stop the exponential increase of the wealthy. That's basically what they're paying now. Those numbers don't stabilize the system.

It isn't designed to prevent increase of the wealthy, but rather provide for & encourage all to be productive.
We shouldn't let fear of the wealthy drive tax policy. Other than Microjunk bugs, how is Bill Gates harming
society? We're far more adversely affected by confiscatory tax policies which punish the poor when they get
off the dole, by high tax rates on carpenters, plumbers & janitors, & by taxing us on phantom profits.

Plus, the same amount of money being collected in the current system isn't enough. We have huge deficits.

The proposal I mentioned is from before the crash, & designed to show that for a given amount of tax revenue, some
tax policies create better incentives than others. If you wanted, you could have the tax rate be 20% instead of 17%, yet
still provide the needed incentives. It would still be better than the 50+% marginal tax rates common among small business.

 

[Wannabe Yogi]

I am strongly considering going back to med school after that so I can do both psychology and psychiatry.

Sounds like a great investment to me. It is also value added to our society.

 

[Penumbra]

I was illustrating the concept of taxation of inflation. Certainly, inflation has been both higher & lower at various times,
but the phenomenon is independent of the actual rate. Be it 3%, 7% or 11%, if your investment increases by exactly
the amount of inflation, you would pay tax on the total increase in dollar value upon sale, even though it hasn't gone up
in real value at all. If your investment increases by more than the inflation rate, you'd still pay tax on the phantom
component, in addition to real gains. Even more vexing, if your investment goes up by less than the inflation rate, you
would pay income tax on an actual loss.

That much is true, but even with phantom profits, that part is basically taxation on the time value of money. If money sat static and inflation passed it by while it stayed under a mattress, it would perform worse than money which was grown at a rate matching inflation that was then taxed.

15.3% is what we pay in lieu of payroll taxes.

It isn't designed to prevent increase of the wealthy, but rather provide for & encourage all to be productive.
We shouldn't let fear of the wealthy drive tax policy. Other than Microjunk bugs, how is Bill Gates harming
society? We're far more adversely affected by confiscatory tax policies which punish the poor when they get
off the dole, by high tax rates on carpenters, plumbers & janitors, & by taxing us on phantom profits.

It's not a matter of fear of the wealthy. It's a matter of mathematically noticing an exponential instability in the system. If one party is staying static or moving slightly downward, while the other party is growing at an exponential rate, the system has to eventually give. Addressing it before it breaks is preferable to dealing with it after it has hit the breaking point.

I don't fear the wealthy because, to be clear, I plan on becoming fairly wealthy. My proposals concerning things like raising dividend taxation increase my own personal tax rate, and will especially increase my future tax rate because dividend income will continually grow as a percentage of my total income.

And people like Bill Gates are the exception rather than the rule.

The proposal I mentioned is from before the crash, & designed to show that for a given amount of tax revenue, some
tax policies create better incentives than others. If you wanted, you could have the tax rate be 20% instead of 17%, yet
still provide the needed incentives. It would still be better than the 50+% marginal tax rates common among small business.

Even before the crash, we had deficits. 20% for the highest bracket still isn't enough to curb the exponential instability.

You keep bringing up small businesses but I'm not targeting those and I've made that clear. It's kind of a straw man at this point.

 

[Revoltingest]

That much is true, but even with phantom profits, that part is basically taxation on the time value of money. If money sat static and inflation passed it by while it stayed under a mattress, it would perform worse than money which was grown at a rate matching inflation that was then taxed.

The investor uses the time value of money differently. In cash flow valuation, it presumes a rate of return which is independent of (but ideally greater than) inflation. Other than governmental avarice, it makes no sense to tax the portion of an asset's gain in dollar value which is due only to currency devaluation. Indexing capital gains taxes to inflation also curbs governments incentive to impose inflation upon us. (The fact that money sitting idle in a mattress is a bad investment during inflationary times doesn't really matter.) You'll note that government economists always decry deflation. Heaven forbid that prices & costs should fall & the government would find taxes tumbling.

It's not a matter of fear of the wealthy. It's a matter of mathematically noticing an exponential instability in the system. If one party is staying static or moving slightly downward, while the other party is growing at an exponential rate, the system has to eventually give. Addressing it before it breaks is preferable to dealing with it after it has hit the breaking point.

I'm not convinced the system lacks stabilizing aspects already, nor that the effect you claim is exponential. The death tax is one. And there's also a tendency for the fortune of one generation to be diluted among subsequent generations, eg, the Kennedy family's bootlegging profits. The system stability analysis is complex, & more than I care to fully explore here, but let's look at this another way. The problem isn't so much the disparity, as it is that the lower classes perceive their needs aren't met. The mere redistribution of wealth is unlikely to solve this problem, since it has anti-productivity incentives. I prefer to focus upon what tax & regulatory structures would encourage success for the non-wealthy.

I don't fear the wealthy because, to be clear, I plan on becoming fairly wealthy. My proposals concerning things like raising dividend taxation increase my own personal tax rate, and will especially increase my future tax rate because dividend income will continually grow as a percentage of my total income.

Of course, this will make the cost of capital higher, which is a damper on the economy. I prefer taxation which curbs consumption rather than productivity.

And people like Bill Gates are the exception rather than the rule.

Whose wealth harms society? What percentage of society would such louts be?

Even before the crash, we had deficits. 20% for the highest bracket still isn't enough to curb the exponential instability.

The goal of that proposal is not to prevent runaway wealth, but rather to encourage all to be productive. Whatever the number would be (17%, 20%, 23%, etc), a flat tax with no personal deductions can garner the same revenue at a lower marginal tax rate than our current system. This would let lower classes get the same tax benefits as the wealthy. They would win not by soaking the rich, but rather win by their own hand.

You keep bringing up small businesses but I'm not targeting those and I've made that clear. It's kind of a straw man at this point.

Business (eg, carpenters, real estate developers, banks, venture capitalists, landlords, investors, consultants, stores) is no straw man. It is the engine which finances everything society wants. Incentives should encourage business to do what benefits society, eg, provide goods, provide services, be competitive, hire workers, pay dividends, avoid crime, repay loans, pay taxes. Some tax policies are better at maximizing this mix of goals than others.

 

[Revoltingest]

I am a bit of a hypocrite on this subject because I am up to my eyes in the stock Market. Folks in any market make lots of money and produce nothing of value for society.

They're a necessary evil....which make's them not so evil. Without such capital markets, business would have a much harder time
raising money to start or expand a business. You should take pride in being one of those who help business provide goods & jobs.
You might even be a saint. I've no use for day traders & such, but it wouldn't make sense to ban them.

 

[Penumbra]

The investor uses the time value of money differently. In cash flow valuation, it presumes a rate of return which is independent of (but ideally greater than) inflation. Other than governmental avarice, it makes no sense to tax the portion of an asset's gain in dollar value which is due only to currency devaluation. Indexing capital gains taxes to inflation also curbs governments incentive to impose inflation upon us. (The fact that money sitting idle in a mattress is a bad investment during inflationary times doesn't really matter.) You'll note that government economists always decry deflation. Heaven forbid that prices & costs should fall & the government would find taxes tumbling.

If people are finding that their rate of return on equity is not exceeding inflation, they need to find a new line of business. Indexing the tax structure to inflation adds complication in the system that is unnecessary.

I'm not convinced the system lacks stabilizing aspects already, nor that the effect you claim is exponential.

Out of developed countries, the US has among the largest wealth gap. The numbers, including sources I've presented, clearly show an exponential problem.

And I've described how the super rich have exceedingly low tax rates. Having a regressive tax system is not only unethical, but causes instability.

The death tax is one. And there's also a tendency for the fortune of one generation to be diluted among subsequent generations, eg, the Kennedy family's bootlegging profits. The system stability analysis is complex, & more than I care to fully explore here, but let's look at this another way. The problem isn't so much the disparity, as it is that the lower classes perceive their needs aren't met. The mere redistribution of wealth is unlikely to solve this problem, since it has anti-productivity incentives. I prefer to focus upon what tax & regulatory structures would encourage success for the non-wealthy.

There are dilution factors, but based on the rising gap, they clearly aren't enough. Smart re-distribution of wealth can result in increased productivity, not decreased productivity. A better educated and healthier population with improved national infrastructure and reduced deficits is productive, not anti-productive.

And I'm not proposing a highly steep progressive structure. I'm basically proposing that the existing progressive tax structure is actually what they pay, rather than purposely missing the types of income that the truly rich really make.

Of course, this will make the cost of capital higher, which is a damper on the economy. I prefer taxation which curbs consumption rather than productivity.

It's not going to raise the cost of capital higher by any reasonable degree. Especially dividends and personal capital gains of those worth many millions.

Remember, this isn't targeting small business owners or corporations.

Whose wealth harms society? What percentage of society would such louts be?

Their wealth doesn't directly harm society (unless you include wall street and their financial catastrophe, paid for by tax dollars).

Rather, the fact that their wealth is not taxed at an appropriate amount causes a rising gap between the top and the bottom (and really, the top and everyone else). The middle and bottom are remaining flat and even heading downward. We've got deficits, aging infrastructure, an education system that lags the result of the world, health care that is not accessible enough to those without a lot of money, and yet the top 1% hold more than a third of the total wealth. This would be bad enough if it was static and stable, but it's an increasing gap.

The goal of that proposal is not to prevent runaway wealth, but rather to encourage all to be productive. Whatever the number would be (17%, 20%, 23%, etc), a flat tax with no personal deductions can garner the same revenue at a lower marginal tax rate than our current system. This would let lower classes get the same tax benefits as the wealthy. They would win not by soaking the rich, but rather win by their own hand.

A flat tax does not address the exponential problem. Those with excess wealth have many times the compounding potential. Even a moderate boost in income results in dramatically increased compounding opportunity.

Consider an example:

John makes $50,000, and his expenses including taxes and everything are $46,000. He's got $4,000 left over to increase his net worth and seek a rate of return on his money.

Jill makes $70,000, and her expenses including taxes and everything are $50,000. She's got $20,000 left over to increase her net worth and seek a rate of return on her money. So, she makes 1.4 times the income of John, but her savings rate is 4 times higher than John.

Jack makes $140,000, and his expenses including taxes and everything are $90,000.
He's got $50,000 left over to increase his net worth and seek a rate of return on his money. So, he makes 2 times as much income as Jill, but his savings rate is 1.5 times higher than hers. And he makes 2.8 times the income of John, but his savings rates is 12.5 times higher than John.

Jane makes $3 million, and her expenses are $1 million. Her income is 21.4 times higher than Jack's income, and her savings rates is 40 times higher than his. And she makes 60 times as much as John, but her savings rate is 500 times higher than his.

Jenny makes $5 million, and her expenses are $6 million. She's an idiot.


Basically, there is a fairly inflexible "bottom", or minimal that is needed to survive and raise a family and live a modest life. People near the bottom (or under the bottom) have little or no ability to compound wealth. Any extra income above that, one can either be frugal or extravagant, or somewhere in between, and if they're smart about it, they will utilize a larger gap between income and expenses to derive a massively increased savings rate. (And the money they save, if put into cash, bonds, stocks, etc. will grow exponentially if they perform reasonably.)

This, combined with a regressive tax structure for those above a certain point, results in an instability in the system. Jane's tax rate will likely be the lowest of the bunch, depending on her line of business. At worst, she'll probably have the second lowest rate after John.

Business (eg, carpenters, real estate developers, banks, venture capitalists, landlords, investors, consultants, stores) is no straw man. It is the engine which finances everything society wants. Incentives should encourage business to do what benefits society, eg, provide goods, provide services, be competitive, hire workers, pay dividends, avoid crime, repay loans, pay taxes. Some tax policies are better at maximizing this mix of goals than others.

From wikipedia:
A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position.[1] To "attack a straw man" is to create the illusion of having refuted a proposition by substituting it with a superficially similar yet unequivalent proposition (the "straw man"), and refuting it, without ever having actually refuted the original position.

In other words, the majority of your argument has gone to the defense of small business owners, which I have specifically stated I am not targeting with my proposals.