by hilzoy
Possibly because of my immersion in posts about going Galt, I've read altogether too many blog posts and newspaper columns about the horrid, wealth-destroying, class-warfare-waging, socialist nightmare that is Barack Obama's tax policy. So I thought it might be a good idea to get a few basic facts on the table.
Obama is not proposing to raise the personal income tax. He is proposing to allow the Bush tax cuts on families making over $250,000 a year to expire. The Republicans wrote that expiration into law to conceal to hide the costs of their tax cuts. Under the law they wrote, the top marginal tax rate will go up from 35% to 39.6% in 2011.
If a top marginal tax rate of 39.6% is socialism, then there are a lot of socialists in the world. For instance, Japan, South Korea, Australia, along with a lot of the OECD: all have rates higher than Obama is proposing. (Note: I just chose some countries at random. I'm sure I could have found more.) No wonder the world economy is in trouble! There's socialism and class warfare everywhere you look!
But it's even stranger than that. Did you know that Margaret Thatcher (pdf) declared war on the wealthy, a war so extreme it makes Obama's seem meek by comparison? The top tax rate in the UK was 60% for most of her term in office, and 40% for the last year or so. At no point was it lower than what Obama proposes — and that's without taking into account the VAT.
Likewise, Ronald Reagan was apparently a Class Warrior: for six of the eight years during which Reagan was President, the top tax bracket was 50%. It's a wonder anyone worked at all! In Reagan's defense, though, he was just carrying on a long tradition of wealth expropriation carried out by socialists like Harry Truman, Dwight D. Eisenhower and John F. Kennedy.
All in all, it seems as though we've been suffering through an awful lot of socialism and class warfare all over the world, much of it at the hands of people conservatives claim to admire. If a top marginal rate of 39.6% is enough to make society's producers and creators go on strike, then Galt's Gulch must be getting pretty crowded.
So, are conservatives afraid of socialism, or is it the WORD socialism that has become a big bogyman ?
Intox. Intox. Wherever you look.
Words are rallying points, aren’t they ?
So, when are we going to start using our intelligence ?
It’s the word. Conservatives, Republicans, and Americans in general are prefectly happy to support socialist style programs and policies if they see themelves as the primary beneficiaries. In fact, there are more socialist style programs and projects in place in the red states or red parts of states than else where. In Washington, for example, Bonneville Power is the basis for the eocnomy the red part of the state along with subsidized access to public owned grasslands and forests.
No, Republican politicians don’t appeal to intelligence when developing their talking points. They appeal, one way or the other, to selfishness.
How soon we forget.
I don’t recall where I found it, but here is a bar graph showing the top tax rates annually since 1920. As I recall, the Reagan tax policy was a “simplification” from multiple progressive levels to three, which had the effect of eliminating the really high rates for those most able to afford it. Pretty slick move on the part of The Great Communicator, no?
I’m in favor of returning more layers. Since the advent of the three-tier system we have seen the growth of truly obscene incomes at the top.
One of the memes that frustrates me most is dumping off an those who “pay no taxes at all” referring to those at the very bottom of the economy who don’t earn enough to offset the standard deduction, but still get stuck with state sales taxes, various excise taxes and the biggie: payroll taxes from the first dollar they earn with no deductions.
International Women’s Day Action
Global Gender Caste Action
Please tell your friends about the petition.
http://www.petitiononline.com/savenow/
To: U.S. Government and United Nations
We call upon America’s government representatives and the international representatives of the United Nations to recognize the global threat of oppression and violence to women from Islamic supremacism.
We demand that they pass national and international resolutions condemning Islamic supremacism as a threat to women everywhere. We demand that these world leaders recognize the existence of Islamic supremacism, and we demand that they take measures to protect the women of the world from the Islamic supremacist ideology.
Women are being oppressed, beaten, murdered in America and around the world in the name of Islamic supremacism. Being “sorry” is not enough. We call upon the leaders of the world to take responsibility to SAVE WOMEN NOW from this cruel, vicious, and deadly ideology of Islamic supremacism.
Sign Here
http://www.petitiononline.com/savenow/
Read more about the action here involving 2 marches – in London and Wash DC here:
http://pajamasmedia.com/phyllischesler/2009/03/04/save-women-now-the-march-8th-washington-dc-rally-means-muslim-women/
Congressman Roy Blunt of Missouri described Obama’s health care initiatives as akin to going down to the DMV, and y’all know what that socialist paradise looks like.
Here’s what it looks like, Roy, as of last Wednesday. Short lines, a cheerful, efficient public servant who processed my registration paperwork in a trice and I was on my way. This despite the fact she isn’t paid enough, and her state retirement 401K probably looks as small now as Bernie Madoff’s black heart.
Also despite Republican efforts over the past twenty years to gut the DMV budget and close as many offices as possible so that the State’s most obvious point-of-sale could become a negative object lesson for the government-hating public.
I was half tempted to ask her for a preventative medical exam, too.
Now, go read Karen Tumulty’s piece in TIME about her brother’s healthcare ordeal in the great Randian wasteland of Texas.
I’ve decided there is a reason America prefers to bury their dead in individual graves with seeming dignity. It covers up the evidence.
If we buried the millions of people who are caught in this atrocious healthcare system and die early because of it in one big, fetid mass grave, we’d at least bear witness to how America’s healthcare system for the poor and uninsured and underinsured should simply be named SADDAM.
I think what Blunt and ilk are really afraid of is that Americans are too imcompetent, stupid, and bereft of the values to pay for and run a decent healthcare system that works.
He might be right.
Isn’t your argument, at the very least, incomplete? You don’t address the payroll tax at all. You don’t address Obama’s plans to increase the payroll tax on the top rates. You don’t address Obama’s proposals to change to the rules on deductions for the top rates. You don’t address deductions. The only thing you note that many countries have a VAT, but you don’t note the sales, state, local, and other taxes that vary from country to country.
In the past, Hilzoy, you’ve been careful to note that merely focusing on the Capital Gains tax rate creates a misleading impression regarding the actual taxes paid on capital gains. You have to look at the entire picture. I can’t think of a legitimate reason for you to be less careful when doing a comparison of income tax rates. Nor can I think of a legitimate reason for you to ignore the proposed payroll tax increases or changes in deductions.
Can you?
I’m in favor of returning more layers. Since the advent of the three-tier system we have seen the growth of truly obscene incomes at the top.
What’s an “obscene income”?
von: What’s an “obscene income”?
The average Wal-Mart employee earns $17,114 a year before tax. Wal-Mart health insurance only covers 43% of their employees, and Wal-Mart has approximately 1.39 million US employees. (cite)
The Walton family own $90 billion dollars of stock. (money.cnn) David Glass, CEO of Wal-Mart, is paid over nine million dollars a year.
That’s an obscene income.
Sorry: I wrote “capital gains tax rate” above when I clearly meant corporate tax rate. Blame it on the loss of an hour’s sleep last night due to DST — a fact that might also explain the significant holes in Hilzoy’s post. (Need …. more …. sleep.)
OK, what should Glass earn?
OK, what should Glass earn?
How about: the CEO of a business should earn no more than 40 times what the average employee of the business earns? That would give Glass an income of $684,560 per year before tax. In 2005, approximately one and half percent (1.5%) of households in the United States had incomes exceeding $250,000.
I didn’t just make the “40 times” up: though I can’t right now recall where I got it from. Wal-mart’s average pay is not much above the federal poverty level for a family of four – and the federal poverty level doesn’t take into account all basic needs. Glass earns over 36 times more than someone at the bottom end of the top 1.5% percentile.
You asked what was “obscene” and I’m giving you an example drawn from a specific company. I say that’s obscene. You’ve got another word for it? What?
I don’t find Glass’income obscene. More power and money to him.
I find the average Wal Mart employee’s income obscene. Much more power and money to them.
Yeah, I know. Prices will rise.
Then how about this? Don’t pay the employees at all, which would reduce prices to zero, benefiting all of us. Especially Glass, who if he had saved his $9 million a year for the past many years, could be paid zip, too, going forward.
I also find it obscene that Wal Mart shareholders and management expect the average Wal Mart employee to be obscene and not heard, especially on the unionizing front.
What is actually pornographic is the time and effort a guy making 9 million dollars and a family worth 90 billion put into skimping on health insurance benefits for their employees, not to mention the time and money put into lobbying against a rather mild tax increase.
Yes, I know all of this betrays an obscene lack of economic understanding on my part.
But every time I listen to folks explain why things must be this way in the tough rational world, I know pornography when I see it.
I find the average Wal Mart employee’s income obscene. Much more power and money to them.
As ever, you put things much more wisely than I do.
Also, you know: 40 times the average employee salary isn’t even a reasonable limit. It’s an unreasonable limit. It would still make David Glass one of the highest paid employees in the US, for a company that pays most employees at the poverty level or below. But at least it would be some kind of limit.
What is actually pornographic is the time and effort a guy making 9 million dollars and a family worth 90 billion put into skimping on health insurance benefits for their employees, not to mention the time and money put into lobbying against a rather mild tax increase.
I think calling that “pornographic” is an insult to honest, direct pornography merely intended to give your average wanker a stimulus.
Tsk, tsk. Hilzoy, it really is outside of too much to go injecting actual facts into such an enjoyable bout of hysteria! How can we get properly worked up if people keep injecting reality into the discussion????
Next you’ll be suggesting that people ought to actually, you know, think — and for themselves at that. Then how would they keep the one true faith?
von: I thought your comment made more sense the first time, insofar as it would seem to be individual tax rates that would make someone Go Galt. I didn’t include the fact that itemized deductions would be capped at 28%, and that capital gains taxes would go up from 15 to 20%, for two reasons: first, neither would have much effect on the Going Galt thingo (deductions cap would mostly affect people’s decisions about whether to do the deductible activity; cap. gains would still be taxed at just over half the level of normal income); and second, while I wouldn’t have made the international comparisons without knowing that the tax burden on the top bracket in Thatcher’s UK, for instance, was bigger than anything Obama has proposed, I didn’t want to get into the zillion and one different taxes in each of the countries I mentioned.
If you think this affects the overall point, do let me know how.
About that “obscene income” thing. I’m guilty of using a figure of speech that flew way over at least one head. I take it back. Play like I’m a Supreme Court justice saying “I know it when I see it.” I was commenting on progressive taxation, not earnings tiers.
von also mentioned the payroll tax rate which raises a couple of interesting points.
First, the cap on the “Medicare” tax was removed several years ago. My Social Security earnings statement reflects having paid the max into Social Security over twenty years, but not the Medicare portion. For my entire working career and beyond (including this year and next, btw) more than enough payroll taxes were collected than required and that SURPLUS was spent, replaced by a slick accounting tactic called the “Social Security Trust Fund.”
Second, the smoke and mirrors device called “employer contribution” is nothing more than another accounting device to mislabel earned income. For every dime “contributed” by an employer, someone earned another dime. If the earned dime didn’t exist, neither would the “contributed” dime. Ergo, the payroll tax is actually fourteen percent. The company subtracts employee wages as a business cost plus the so-call “contribution” portion as well. This sounds crazy to most people, but self-employed people understand it perfectly.
The larger point is that progressive taxes do not leave those at the bottom untaxed. A large and growing population filing returns with standard deductions pay a very regressive flat payroll tax from their first earned dollar.
“Short lines, a cheerful, efficient public servant who processed my registration paperwork in a trice and I was on my way.”
As I mentioned here at the time, that was my experience some 9 months or so ago, too. I was in and out in five minutes (getting a State ID, a non-driver’s license).
“Also, you know: 40 times the average employee salary isn’t even a reasonable limit. It’s an unreasonable limit. It would still make David Glass one of the highest paid employees in the US, for a company that pays most employees at the poverty level or below. But at least it would be some kind of limit.”
I’m not interested in putting upper limits on income (though I’m fine with increasing the progressive tax rate sharply at immensely high levels). Like Thullen, I’m interested in seeing everyone be raised over the line of poverty, and being able to afford adequate food, shelter, health care, child care, and other minimal basics for a decent life.
This is America: we can afford that. And still have oodles of very rich people, and people in between the rich and the poor.
If you think this affects the overall point, do let me know how.
Well, because you said that you were putting “a few basic facts on the table”, and then left out some highly significant facts.
Moreover, it affects the argument. OECD routinely does the kind of comparative tax studies that I think you should consider. They are available as Excel spreadsheets here: http://www.oecd.org/document/60/0,3343,en_2649_34533_1942460_1_1_1_1,00.html#table_I4) In 2007, with the Bush tax cuts in place, OECD calculated the “all-in” US tax rate (federal only) for the top bracket as 42.7%. That includes FICA and accounts for deductions, but fails to account for state or local taxes. That’s slightly higher than the comparable UK top bracket (41.0%) and roughly comparable to Spain (43.0) and Austria (42.7).*
Now, mind you, that’s taking into account the Bush tax cuts. If those cuts expire, and you add in a FICA donut, and you eliminate deductions — all as Obama plans to do — the US top bracket will likely be significantly higher.
deductions cap would mostly affect people’s decisions about whether to do the deductible activity; cap. gains would still be taxed at just over half the level of normal income
1. The deduction rule changes will also affect a persons desire to have taxable income above 250k. If you exceed the maximum deduction under plan Obama, there would be a big incentive to ensure that reported, taxable income remains under 250k. (I leave aside the whol “going Galt” foolilshness …. I’m talking plain-vanilla tax avoidance creativity, both legal and illegal.)
2. I didn’t intend to mention cap gains — I was talking about Obama’s bump up in FICA for the more than 250k crew. Obviously, the capital gains and corporate tax increase will further increase the relative tax burden on individuals.
Anywho, your post works as a bit of agitprop – which is fitting, since the going Galt BS is agitprop for some on the right. Still, I submit that it ain’t the kind of discussion we should be having regarding Obama’s tax plans.
von
*By the way, according to OECD, South Korea has a top statutory tax rate [income + SS/Med] of 38.5, with a “all-in” rat of 38.3. Contrary to your post, under the Bush tax cuts the US had a higher marginal rate than South Korea. The gap between US and South Korea will increase if Obama’s plan gets passed.
(I might be mistaken, but I think you misread the page on South Korea that you linked: as I read your linked article, that a 50% marginal tax applies to non-residents.)
By the way, if you look at the OECD’s detailed comparisons, you’ll see that the US “all in” top marginal rate is not really an outlier under Bush. It probably also won’t be an outlier under Obama, although our all in burden will increase.
The US is a huge outlier, however, in the threshold AW for the top marginal rate (8.7; the next highest is Germany at 5.9, and then every other country is below 5). In other words, you need to make a lot more money in the US to hit the top marginal rate than in other places.
Obama’s plan does nothing about that disparity. To the contrary, Obama would make the disparity more significant by promising tax cuts for folks in lower brackets.
This is one significant basis for the “socialism” charge, which you don’t address. Under Obama, 44% of the population will either pay no income taxes; many will actually receive money under the income “tax”.* (Many of these individuals will continue to pay FICA, however.) Meanwhile, the relative tax burden will shift within the 56% of people who do pay taxes from the low end to the high end. That’s a significant redistribution of income, and it’s something that is not captured in the kinds of comparisons that you’re making.
We are creating an income tax system in which the tax burden is falling more and more on a smaller group of people, while an increasing number are paying little or no income tax. I don’t know if that’s a good idea.
*http://www.economist.com/opinion/displaystory.cfm?story_id=13237211
You don’t address the payroll tax at all.
The only concrete thing I’ve seen for this is 2-4% on income over $250K.
You don’t address Obama’s plans to increase the payroll tax on the top rates.
If I understand this issue correctly, what Obama is proposing is not eliminating the existing PEP/Pease program, originally introduced under Bush 1. Again, if I follow it correctly, we began removing the PEP/Pease deduction limits in 2006, and they are scheduled to be completely removed in 2010.
Obama proposes restoring them. Or, more correctly, not repealing them.
They’re nothing new. They’ve been in place since 1990. And, again if I understand all of this correctly, their repeal was also intended to expire at the end of 2010, along with the rest of the tax cuts introduced by Bush I in 2001.
Net/net — even with the FICA and deduction stuff factored in, Obama’s proposals represent, at most, modest increases in the tax burden. They are noise when considered in the context of the difference between the US tax burden as compared to other OECD nations, or to the US in historical terms.
Nobody’s getting skinned.
I won’t be happy until the top marginal rate is back at 92% where it belongs and where it was when the US economy was enjoying GDP growth rates not seen since then.
Don’t like it? Move to Somalia. Nothing is less interesting than a rich person in one of the richest countries on earth whining about taxes. I simply refuse to hear it.
“We are creating an income tax system in which the tax burden is falling more and more on a smaller group of people, while an increasing number are paying little or no income tax. I don’t know if that’s a good idea.”
How does it compare to historic U.S. trends in income tax spread, Von?
I agree with Von that all income earners should pay income tax, albeit in a progressive system.
This would give all citizens a stake in citizenry.
Unfortunately, the American culture of hating taxes, demagogued endlessly since day one (you know what I hate: paying for food) has given us the small percentage of folks who pay the large percentage of taxes.
Progressives distribute taxation upward because Newt Gingrich would be on the tube demagoguing the very idea of paying taxes and those with lower incomes would eat it up.
Leaving aside FICA, I’ve always thought a flat income tax was an elegant idea. Except for this: Steve Forbes and the other advocates were counting on the idea of a flat tax as a way of making as many voters as possible angry about taxes and government.
By the way, I’d be just as happy to tell a person making $35,000 to shut up and stop whining about taxes as I would a whiner making $35 million.
von,
Could you check the link for the OECD figures? It doesn’t seem to work.
Also, what’s “AW,” in “The US is a huge outlier, however, in the threshold AW for the top marginal rate?”
Thanks.
State control of the means of production is IMHO the main hallmark of socialism. One of socialism’s goals is income egalitarianism.
Raising the top marginal tax rate is not in itself an indicator of socialism. However, doing so in order to furnish a cash rebate to lower income citizens is in the direction of forced income egalitarianism.
State ownership of important industries and the degree of control that comes with it is in the direction of socialism. (Banking, Autos, Insurance).
Putting ceilings on the compensation of high earners is in the direction of forced income egalitarianism.
//As ever, you put things much more wisely than I do.//
Jesurgislac indicates Thullen is wiser. Wow.
“State ownership of important industries and the degree of control that comes with it is in the direction of socialism (Banking, Autos, Insurance).”
This is probably true and I really don’t know a single person who is in favor of full state control of industries (except for the role of paying for health insurance).
But your statement is a little like saying “entering the hospital to treat cancer and the degree of control that comes with it is in the direction of chemotherapy.”
That’s true too. Also, “not entering the hospital to treat, etc. etc. etc. is in the direction of the graveyard.”
We could have permitted a little bit of regulation over the massive shadow banking system and we may have avoided or have been inoculated against much of this mess.
We weren’t permitted to do that for strict ideological reasons.
So, I’d say ya’ll better get that festering, malignant metastizing tumor looked at as soon as possible.
Sorry, but it’s going to hurt.
I’m open to a tax hike on my greater wisdom.
Distribute the money to the stupid.
Even stupid people should have health insurance.
By the way, I’m not particularly wise, despite Jes’ nice words.
I’m as clueless as they come.
Mr. Yomtov re link
All that is missing is .htm at end.
dave,
That got it.
Thanks.
“State ownership of important industries and the degree of control that comes with it is in the direction of socialism (Banking, Autos, Insurance).”
And yet it’s the very conservative Bush administration that did this. It’s not as if there’s hardly anyone in the Democratic Party who thinks that public ownership of the auto industry, the insurance industry, the banking industry, is a good idea. Only some tiny fringe thinks that, and they’re just about invisible.
Both Dave and John Thullen make several valid points regarding the issues of socialism and healthcare. Gary’s observation that the Bush administration made the first moves (wrong moves btw) to establish state ownership of the industries in question is correct, although I would quarrel with his descriptor of it as very conservative. I would be quicker to agree with a description that it and elected republicans in general have been in the pockets of big business for some time.
The thing now is that the Obama administration is continuing to prop up the financial and auto industries with public money without any clarity as to where these actions will lead us. And the galling thing to those who do not support a federal takeover of health services is to have almost three quarters of a trillion dollars of new spending in the budget submission for healthcare initiatives and have the administration assert that an economic recovery cannot occur without a revamping of the healthcare delivery system. Hogwash!
The shift of responsibility for universal healthcare to the federal level is an issue that should have extensive and very specific debate before any funding is committed. The Democrats almost have the numbers now to force it through, but it might not be the wisest tactic. I know the progressives believe they have the electorate behind them on this issue, but if they are wrong? Well, let’s just say they are all in.
My own contribution rate is actually higher marginally than someone making 500K – as there’s the 14% of social security tax they’re not paying (roll in the employer part, it’s all the same) and 28% + 14% > 35%. 39.6% too…
The big giveaway is the capital gains and dividends tax cut… because most of the really big ‘earners’ contrive to have most of their incomes taken in this way. This very fact probably has had a toxic effect on corporate governance – you engineer things so that you get intermittent bonuses and other tax-engineered windfalls that only appear at some sort of lower rate.
Warren Buffett observed that his own effective federal marginal rate was about double that of his secretary’s.
There’s only so long the Plantation Party can keep playing their game…
OK, what should Glass earn?
First, let’s agree that “earn” is a colloquialism. Von is asking what the CEO of WalMart should be paid. I raise this bit of pedantry because the whole point of free-market capitalism is that employees are paid what they can get, not what they “earn”. WalMart would not have $9 million to pay its CEO every year unless the average WalMart worker earns more, for WalMart, than the $17K the average worker gets paid by WalMart. Without those low-paid workers in the stores, WalMart would earn nothing. The Walton family fortune would be considerably smaller, had WalMart paid its workers, from greeters to CEOs, what they “earn” over the years.
Second, let the Waltons pay Glass any goddam salary they like. That’s my position; maybe Von’s too. The reason they pay a greeter $8/hr is because they can’t get greeters for less, and the greeters can’t get a comparable job elsewhere for more. We can assume they pay CEOs on the same principle. WalMart is the Waltons’ fiefdom; they know how to haggle; let’em pay anything they like to their CEO.
The issue for us is not how much a greeter or a CEO should be paid, but how much to tax each of them.
Note that if we take it into our heads to raise the “all in” taxation of $9-million-a-year incomes to 60%, or even 90%, we do not “distort” the market for CEOs. Glass can demand a raise from the Waltons; the Waltons can invite Glass to find a higher-paying CEO job elsewhere; this obtains no matter what the personal income tax rate is. Any CEO looking for a job will face the same tax rate; any company looking for a CEO will face the same tax rate. Neither Glass nor the Waltons are singled out.
There’s nothing obscene about the Waltons shelling out $9 million a year for somebody to run their business for them. Even if Glass can successfully extract $90 million from the Waltons for his vast skill and boundless effort, it’s not even mildly offensive to me.
What is obscene is the idea that someone who gets paid $9 million a year, or a family that amasses a $90 billion fortune, must not be taxed too much lest they chuck it all and become $8/hr greeters just to spite us.
–TP
it’s not as if there’s hardly anyone in the Democratic Party who thinks that public ownership of the auto industry, the insurance industry, the banking industry, is a good idea.
I’m on the fringe, then. Banking and insurance should be government run. The government already takes the risk, either explicitly or implicitly for those industries. It just doesn’t get any of the profits. Screw that. Socialize them. You could have reasonably argued against it two years ago. Those days are gone.
The reason they pay a greeter $8/hr is because they can’t get greeters for less, and the greeters can’t get a comparable job elsewhere for more. We can assume they pay CEOs on the same principle.
That would be a very bad assumption.
‘What’s an “obscene income”?”
An income where, upon seeing it, one is compelled to utter “oh, f**k!”?
now_what,
Is the “very bad assumption” the one that “they pay CEOs on the same principle”?
If yes, what’s a better assumption?
Mind you, I am perfectly willing to believe that the small fraternity of people who consider each other CEO material, sit on each other’s boards and compensation committees, and basically set each other’s salaries, are ripping off their employers. More than willing to believe it, actually. In a way, glad to hear it:)
–TP
Von,
I don’t think the site you referenced supports your point. If you look at Table 1.1, EU workers pay even higher taxes than workers in the US if you factor in Social Security payments. And with a VAT rate over 30% for certain goods and services, you’re talking about an additional tax that far exceeds any sales tax rate in the US.
When Reagan took office, the average CEO pay was 40 times the lowest wage in their company. I think that’s where the 40x comes from.
What I think is missed from the discussion is the more obvious remedy to all of the overtax whining. Rather than raise the tax on the top bracket, we should raise the salary of the lowest brackets to move those people into the income tax ranks.
Give executives a choice – we can either bring in higher tax receipts with a higher tax on the wealthy or we can do it by raising minimum wage to $16.15/hr (the bottom of the 25% bracket, which would put most of their income in the 15% bracket). They can pick. Have a big summit in an arena somewhere.
I’ve similarly had nothing but prompt, courteous service every time I’ve needed to go into the motor vehicle department in PA. But I know it’s not like that everywhere.
My most recent “DMV-like” experience was when I had to get my birth date corrected on my social security record, and was forced to go in person to a social security office. The one I went to, near my work but in a poorer neighborhood, had all the long and impersonal waiting of the stereotypical DMV. And after a few minutes it was fairly clear why: there weren’t nearly enough customer service staff to handle the volume of people coming in who wanted service, so they were effectively dealing with the problem by only serving those who had the patience and time to wait for an hour or more. (After an hour, I was about to leave and try somewhere else later– the guard told me that the office serving downtown office workers tended to be quicker– but my number was called at last.)
I think the procedures of the SSA could be improved (for instance, it should have been possible to serve my request, and I suspect some other people’s, by mail rather than in person). But the most immediate problem that was readily apparent was that the office was underfunded. (The folks who were there seemed plenty busy to me, and not slacking off.)
Oddly enough, when I look at the people who tend to claim government agencies are “DMV-like” horror stories like I saw at the local SSA, and those that tend to favor underfunding them, they often seem to be the same people….
If the CEO compensation exceeds 40x the lowest wage in the company then Martin’s formula applies.
The DMV horror stories mostly predate computerization of these offices. The NY DMV was a nightmare in the 70s, mostly due to being underfunded due to state and local financial problems, and a purely manual filing and processing system for millions of people.
Just consider how much easier drivers licenses are now, with digital photos and cheap color printer/laminators. All the info is automatically pulled/entered into the DMV computer system.
Unsurprisingly, the Republicans can’t seem to keep up with modern times.
State ownership of important industries and the degree of control that comes with it is in the direction of socialism.
Let me put your mind at ease.
The government of the United States of America will avoid taking ownership of any significant industry in this country as long at it is conceivably possible for them to do so. The only thing that has ever induced them to do otherwise is the threat of the absolute collapse of the economy, and that is the only thing that will induce them to do so in the current circumstance.
Should they somehow be forced, kicking and screaming, into taking actual, meaningful ownership of any financial or industrial company, they will sell it back into the private sector as soon as they reasonably can.
I may be missing something, but I would say the feds are doing everything they can possibly do to avoid taking ownership of either the financial or the automotive industries, and where they have somehow ended up with a significant ownership stake, they have gone out of their way to avoid combining that stake with anything resembling hands-on executive direction.
Citibank’s total market capitalization right now is $5.64. It closed on Friday at $1.03 per share.
We’ve put many multiples of that into Citi so far in cash, and tens of multiples of that in guarantees. By rights, we should own Citibank 10 or 20 times over. I’m being conservative, maybe it’s more like 40 or 50 times over.
In exchange for direct cash payments and guarantees equal to a couple of dozen Citi banks, what meaningful form of ownership can the feds now show? When anyone from the federal government says “jump”, who at Citibank asks “how high?”.
Instead, the feds need to call the executives at Citi to make sure they won’t be too upset by any policy proposals the feds may be planning to roll out.
If you’re worried about the feds pissing your money away like a sailor on shore leave, I feel your pain.
If you’re worried about socialism, don’t lose any sleep over it.
the whole point of free-market capitalism is that employees are paid what they can get, not what they “earn”.
I’m not sure if that’s the ‘whole point’ of free-market capitalism, but it is absolutely one of the inevitable consequences of it.
Labor is provided by a labor market. Buyers and sellers of labor haggle and make their deal.
There may be, and perhaps ought to be, some meaningful relationship between what the providers of labor are paid and the value they create, but there’s nothing in the equation that requires that to be so. In either direction.
My question is: if the normal operation of the ‘labor market’ results in a situation where a significant number of people can’t live on their wage without some kind of external assistance, how is that anything other than a market failure?
“I know the progressives believe they have the electorate behind them on this issue, but if they are wrong?”
Fox News Poll, March 3-4, 2009:
Also:
From TPM:
There’s a lot more at the original poll folks might want to look into.
The shift of responsibility for universal healthcare to the federal level is an issue that should have extensive and very specific debate before any funding is committed.
The earliest proposal for federally provided health care that I’m aware of is Harry Truman’s, in 1945.
How much longer should we bat it around before we do something about it?
Coming late to this thread, but with notables like:
…you just gotta love the fluency with which hilzoy speaks Tongue In Cheek.
How about this? Tax based on rank order of income. However many filers there are, you make that many marginal brackets (perhaps including negative marginal rates at the low end). Set a maximum marginal tax rate of < 100%, and let the marginal rate decay approximately exponentially to the minimum marginal rate (I'm choosing exponential because some expression for the effects of habituation would suggest that returns to income might decline that way, but it isn't really important: for giggles, you could force the marginal rate through zero at median income). Sounds fun.
“My question is: if the normal operation of the ‘labor market’ results in a situation where a significant number of people can’t live on their wage without some kind of external assistance, how is that anything other than a market failure?”
Russell, markets cannot fail, they can only be failed.
Insufficient wages coupled with the appropriate degree of privation among some classes of people, could, without the need for external assistance, result in a properly functioning market. I shall dub this The Suffering For Thee Be Equity For Me Theorem, whose mathematical expression is as follows:
(IW+ADP)/SCP – EA = PFM
I would love to expound on this further, but a lorry awaits to take me to Monocle & Top Hat Depot, where I’ve heard a new selection of graven ivory cigarette holders are due this very morning.
And the galling thing to those who do not support a federal takeover of health services…
the strawman runs out of the room, screaming for his life.
“There may be, and perhaps ought to be, some meaningful relationship between what the providers of labor are paid and the value they create, but there’s nothing in the equation that requires that to be so. In either direction.”
“Value” is entirely subjective, so you’re asking for something which could never exist. Suppose you’ve got five people working on making something, they’re all performing necessary steps; How do you allocate the value of the product among them? Even assuming you had an objective value for the end product? And suppose the public doesn’t want to pay what you’ve decided the product is “worth”? Do you force people to buy it? Or pay the people the value of their labor out of thin air?
Thinking that “value” is some kind of objective measure of an object or activity, rather than just opinions of particular people, is a trap anybody who’s the least bit economically literate should never fall into.
Thinking that “value” is some kind of objective measure of an object or activity, rather than just opinions of particular people, is a trap anybody who’s the least bit economically literate should never fall into.
Nice sentiment but it conflicts with this
Heck, if they WERE doing it to be socially responsible, they’d offer me a discount to encourage me to go along with it, instead of insisting on capturing all the savings themselves.
There, you attacked the notion that there were values that were not captured economically, but now you are claiming that values are somehow socially determined by the public. While I’m sure that there is a middle ground, whiplashing back and forth between two poles is not the optimal way to present it.
“We are creating an income
taxdistribution system in which thetaxincomeburdenis falling more and more on a smaller group of people, while an increasing number arepayingseeing little or no incometaxgrowth. I don’t know if that’s a good idea.”I think that’s a little more reflective of the reality of the past eight years, if not longer.
Or, y’know, creeping socialism will doom us all and send the worldwide economy into a death spiral. Either or.
“We are creating an income
taxdistribution system in which thetaxincomeburdenis falling more and more on a smaller group of people, while an increasing number arepayingseeing little or no incometaxgrowth. I don’t know if that’s a good idea.”I think that’s a little more reflective of the reality of the past eight years, if not longer.
Or, y’know, creeping socialism will doom us all and send the worldwide economy into a death spiral. Either or.
“Value” is entirely subjective
If the question is something like ‘how much of the revenue from each car sold is created by the guy who bolts the doors on vs the guy who installs the rear window glass’, yes, I agree, that would be hard to measure.
That said, pretty much all business owners I know can put a reasonably good number on how adding or subtracting some number of staff will, net/net, effect their bottom line. Hard to see how they could make sane decisions otherwise.
In the context of the question on the table — when is compensation ‘obscene’ — if someone’s being paid tens or hundreds of millions of dollars per year to absolutely shatter the organization they’re running, and take a lot of the overall economy down with it, I’d call that obscene.
In a recent year, 5/6 of revenue at one of the major banks — I think it was either Citi, BoA, or Merrill — went to executive compensation. Five out of six dollars.
I’d call that obscene. It’s not their money.
I’d call that obscene. It’s not their money.
This gets to the heart of it: how we define “their” — or “my” from the point of view of the people complaining about tax increases — isn’t definable in absolutes, it’s contingent. (See for instance the discussion of ‘the commons” in a recent thread. See the question of who owns the air, fresh water, etc.)
In a way that’s hidden by the complexity of our economic system, our laws, and our society in general, people who have that much more money than an equal share, and that much more than anyone could possibly need for a materially comfortable life, have it because they’ve been greedy enough, and skilled and ruthless enough, to grab it.
I see the tax structure as nothing more complicated than the rest of us banding together to grab some of it back.
The fact that we then use a lot of it for the collective good (in the form of roads, teachers, police departments, DMV offices, etc.) is …well, let’s just say interesting.
“Suppose you’ve got five people working on making something, they’re all performing necessary steps; How do you allocate the value of the product among them?”
Simple: From each according to their abilities, to each according to their needs.
But really, that little word “necessary” cries out for further elaboration (who decides what is “necessary”, for instance)…sort of like defining “income” when debating taxation.
BB: “Value” is entirely subjective, so you’re asking for something which could never exist.
So much for truth, beauty, and the American way.
Bernard, I’m sorry: my html-foo isn’t what it used to be. I’ll see about providing a different link.
AW stands for average wage. As used here, it’s a measure of when the top bracket kicks in ….
Which goes directly to Tobie’s point regarding Table 1.1. That table measures total tax burden. Workers in the EU have a higher total tax burden because they pay taxes across the board (e.g., the top marginal rates kick in sooner … sometimes much sooner … than in the US).
And that’s part of my point. Obama’s combination of tax cuts and tax increases is not only shifting the (income) tax burden to the rich, but eliminating the income tax burden on the more and more folks. Nearly have (44%) of income earners under Obama’s plan will pay no income tax or actually receive income via the tax system (and effective negative tax).
Which is to say: the OECD figures support both my (related) points.
How does it compare to historic U.S. trends in income tax spread, Von?
I don’t know how to answer your question, Gary. If you look at the Revenue Act of 1932, you see a highly progressive income tax system albeit one in which everyone at every income paid taxes. (+ a 2%/4% SS payroll tax). Since that time, we’ve greatly simplified the tax brackets while making deductions/credits far more complex. We’ve also eliminated taxes on most low income earners (and some middle-income earners as well). For instance, under Bush, 38% of people pay no income tax and the rules for deductions/credits are enormously complex.
Obama largely continues this trend. Factoring in the stimulus package, Obama significantly increase the complexity of the credit/deduction regime while increasing the number of folks who pay no tax to about 44% of earners. The difference is that Obama shifts the burden more to the upper end of income tax payers, although it’s still below historical norms. (I think it’s this latter bit that you’re getting at.)
von – I’m curious about your focus on income taxes when making the point about tax burden on the lower end. As has been endlessly pointed out, FICA and Medicare taxes start at the first dollar of income and sales taxes, not to mention the effects of business tax cost shifting on prices, start at the first dollar spent and never cap. Why do only income taxes count?
Here is where you can download the e-book with OECD data where all the tables point to an underlying excel sheet.
I’m still trying to figure out what is wrong with having more lower income earners pay less tax in the current economy. Money put in the hands of lower income earners is more likely to be spent than saved because they are currently living at the margins and have no resources to fall back on. The taxing of the lower income brackets in Japan (specifically with a rise in the sales tax) was one of the main factors that ruined the stimulative effects of the massive Japanese intervention.
Bernard:
Here’s the OECD Tax Database. Table I.4 concerns top marginal rates, and is the basis for my comments. Table I.3, however, is probably the most interesting because it compares the tax policies that affect the majority of payers. I find “all in less cash transfers” to be the most useful basis for comparison when you’re focusing on joint filers (with or without children).
I think that you’ll conclude that the average US taxpayer is significantly below the typical EU taxpayer, while the top “all-in” marginal rates are pretty much within the norm (all under Bush).
The only real outlier under Bush is the AW multiplier to trigger the top tax rate (in Table I.4), and I suspect that this explains why folks in the EU tend to pay more in taxes. Many more people pay the top marginal rate in the EU than do in the US.
Nearly [half] (44%) of income earners under Obama’s plan will pay no income tax or actually receive income via the tax system (and effective negative tax).
the technical term for these people is “lucky duckies”
Nearly [half] (44%) of income earners under Obama’s plan will pay no income tax or actually receive income via the tax system (and effective negative tax).
the technical term for these people is “lucky duckies”
And the reason they pay no taxes — well, except for FICA and sales taxes, which Don’T Exist is because if we DID make them pay income taxes, they would have to stop eating or wearing clothes or living under a roof.
Yet it seems the question “Why are 44% of all earners so freakin’ poor that the mere cost of food, clothing, energy and shelter plus the state and FICA taxes they can’t avoid, leave them NO MONEY to pay income taxes?” is not to be asked.
Which of course was the point of someone’s question about income distribution — you can’t get blood from a stone, and you can’t tax the folks who — after paying for the necessities of life — have no money left.
Here is how the ‘soak the rich’ scenario looks to me.
Income above $250K will be taxed at not quite 40% instead of 35%.
Income above $250K *may* be liable to a 2-4% FICA tax.
Lifting the PEP and Pease deduction limits on upper income earners, which have been in place since about 1990, will not happen in 2010 as originally planned. Instead, the partial lifting put in place in 2006 will be reversed.
All of this will result in an increase in the federal tax burden of about 7-9% on income above $250K.
With the exception of the FICA change, this will be accomplished by letting Bush-era tax breaks for upper incomes expire, as was intended when they were written into law.
As an aside, those tax cuts were intended to expire because extending them was estimated to add $1.8 trillion to the national debt over the following 10 years. I’m guessing adding $1.8 trillion onto what is already going to be a truly stunning national debt is as bad an idea now as it was in 2001.
Nobody likes to pay higher taxes. So, yeah, it sucks that some folks taxes may go up. It is just one of the very, very many things that suck right now.
And yeah, wealthier people pay taxes at a higher rate than less wealthy people. Generally speaking. If the progressive nature of our tax regime is what bugs you, I can kind of see your point in principle, but as a practical matter it’s a not-bad way to spread the tax burden across the population.
We’re nowhere near socialism. We’re nowhere near a confiscatory tax regime.
Maybe there is some significant additional aspect to Obama’s tax proposals that I’ve missed. I’ve looked around a bit, and I think I have the gist of it, but I could be missing something. If so, let me know.
But from what I can see, I just really do not see a basis for a complaint.
What Morat20 said.
Also, debra started this thread with a spot-on point: “Words are rallying points, aren’t they?”
Hence, the sudden use of the word “socialism” coming out of every Republican politician who has a microphone in front of him/her.
They may not have a leader right now, save Rush — and it looks like Eric Cantor wants the job — but they certainly have a theme to pound into the American conscience, and they are doing a lot of pounding. Socialism. Socialism. Socialism. Obama the Socialist. Heck, he even adorns those Soviet-style posters.
As usual, the GOP can’t simply attack on the issues — they must distort and deride and distance themselves from the truth. President Obama is simply making hard decisions on hard issues that Bush took pass after pass on while we got on today’s bankrupt path.
The Great Recession — that occured on George Bush’s watch.
The Great Recovery — that will be Barack Obama’s and, frankly, I don’t give a sh!t if it has some socialistic flavor to it if it makes the United States of America a more prosperous place.
Morat20,
I am not in favor of anyone paying more taxes, especially the lower 44% of income earners. I do have a question though. At one time in my life I was stuck well down in this group and yet I can recall that I still had ample discretionary income to indulge a number of what I now view as bad habits and which I have ceased. Are you asserting that this group now can only meet the essentials of life and do not partake of the litany of non-essential but certainly life enhancing electronic devices produced by this evil capitalistic society? I am assuming that in their dire circumstances they would not waste resources like I did in my youth.
I’ll second GoodOleBoy’s comment to Morat20.
The question is not whether higher earners will have to pay more taxes. They will. What’s unprecedented in Obama’s plan is that high earners will pay more taxes while low and mid-earners will either pay no income taxes or get a tax cut. Even FDR’s (very) progressive tax system (the 1932 tas act) had everyone paying a share of the tax.
Good Ole Boy: You mean cigarettes and liquor? We tax those too.
GOB: Are you saying someone living in poverty or, for that matter, just above the poverty line is not allowed to have a bad habit?
And what about all those schmucks living in poverty? What do you propose we do with that segment of our population?
Can we PLEASE stop pretending it’s “unprecedented” for the rich to pay taxes? Pretty please? And please stop pretending that people “don’t pay taxes” when they pay federal and state taxes on everything they buy, Medicare and Medicaid taxes, Social Security taxes, and all the rest, not to mention the “poor tax” that comes in the form of extra deposits, higher fees, etc from phone companies, electric companies, banks, and all these others that use credit checks?
Seriously, this “OHNOES UNPRECEDENTED TAXING!” is beyond ridiculous. The people who are being asked to pay more money now are people who made out like bandits over the past 8-20 years, and in many cases helped put the economy in the crater it’s in.
Who is doing that, besides you?
I suspect that much of the difference in views expressed here results from a different view of what constitutes life essentials. Each of us likely takes this from the formative years of our lives. My children and grandchildren I’m certain define this differently from the way I do. During the recent national campaigns the frequent statements by candidates when making campaign promises about what the government was going to do for people would include the phrase ‘these people are struggling’. I would say to myself, ‘well, yeah, that’s what life is about’. Perhaps one of the distinctions between the generations is that most people in mine struggled from the beginning and many in the later generations experience the struggle as a sudden trauma for which they are unprepared. I have spent my life giving thanks for having been born in America with not much else but the chance to improve. I marvel every time I consider how much success our society has had over my 70+ years in raising the standard concept of what constitutes life’s essentials.
von said “What’s unprecedented in Obama’s plan is that high earners will pay more taxes while low and mid-earners will either pay no income taxes or get a tax cut. Even FDR’s (very) progressive tax system (the 1932 tas act) had everyone paying a share of the tax.”
Everyone still pays a share of the taxes. The Bush tax cuts will be allowed to expire. The “low and mid-earners” who “will pay no income tax” are the same people who have spent years watching their incomes stagnate while whatever profits there went to the tiniest fraction of the top bracket. But hey, the real problem here is semantics and the return of Clinton era taxes on the rich. Feh.
about that 44%…
in 2006, the median personal income was $32K.
therefore those lucky duckies in the 44% are probably making somewhere below $30K/yr. again, this was in 2006, when the economy wasn’t a disaster.
At one time in my life I was stuck well down in this group and yet I can recall that I still had ample discretionary income to indulge a number of what I now view as bad habits and which I have ceased.
hell yeah. i remember enjoying life when i was just out of college, making $30K. best years of my life, in many ways! i had a $400/mo apartment in a crappy neighborhood, and i split expenses with my girlfriend. it was also 1994.
Are you asserting that this group now can only meet the essentials of life and do not partake of the litany of non-essential but certainly life enhancing electronic devices produced by this evil capitalistic society?
Many personal electronic devices are not necessities but are net time or money savers. That means that going without these devices may not increase the amount of money one has. A cell phone is not a necessity, but if you’re trying to get a job and you don’t have a fixed address, having one makes it much more likely that you’ll be able to gain employment. A cheap video game console and TV might seem like a luxury to you, but people need to relax and if it displaces more expensive forms of relaxation and socialization like going to the movies or hanging out in a bar, it is a clear win.
When I lived in poverty into which I was born, I don’t have any recollection of being taught or thinking that someone else beyond my family and myself was going to do something to change that state. The life struggle was my challenge and I was lucky enough to be born in a country and a society in which I had the freedom to ‘do’ things that ultimately enabled my upward movement from the conditions of my birth. When I was a child, even though we had little, my family always pointed out to me how much better off I was than many in the world because I would have a chance to change things.
Yes, the bad habits, beer and cigarettes, were taxed back then, too. And I even had money to spend beyond that, and I don’t ever recall having an expectation that the government was going to mitigate my financial condition and pay some of my bills. I would have to do some digging to check, but I think I even paid income tax when I was well ensconced in that lower 44% of earners. But expectations do get raised.
What’s unprecedented in Obama’s plan is that high earners will pay more taxes while low and mid-earners will either pay no income taxes or get a tax cut.
I’m assuming you’re talking specifically about *income* tax. As others have pointed out, there are a number of other taxes that are either flat or actually regressive.
It is not only not unprecedented, it is quite normal for folks who make below a certain income to end up paying no income tax.
When this happens it is not because they are exempt from income tax. If you make $1.00 a year, you owe ten cents of that to uncle.
Folks who end up paying no income tax do so because whatever deductions or other adjustments they can claim bring their taxable income below $0.00.
This has been true more or less for as long as we’ve had an income tax. Or at least as long as there have been any deductions.
Is the tax code a big ugly pile of spaghetti? Yes it is.
Did Obama cause this? No, he did not.
The whole conversation about this is approaching the comical.
Obama is proposing, basically, a return to the tax structure we had prior to Bush’s tax cuts of 2001, which were already scheduled to expire in a year or so. There *may* also be a small FICA tax imposed on income above a quarter million bucks. “Small” here is 2 to 4 percent.
As far as I can tell, those are the proposals on the table. They are, both in absolute and in historical terms, modest.
Do you disagree?
Yes, he’s not *also* increasing taxes on lower income folks, and in fact would like to reduce them for many folks.
If you’re a lower-income person, looks like it’s your turn this year. Lucky you.
How do y’all account for the fact that the US poverty rate has hovered around 12%-15% since 1965 even though trillions of dollars have been transfered downward as part of the war on poverty? Doesn’t it seem like it’s not working?
Is it possible that there is a certain percentage who will spend some time in poverty no matter what you do for them? For example, every new generation has it’s share of addicts, unwed mothers, mentally ill and disabled. I have my Norman.
I’m not advocating that poverty is good nor that we shouldn’t have programs to help them. I’m just suggesting that eradicating poverty entirely is unlikely. The goal should not be elimination of it IMHO but making sure there is a safety net. And there IS a safety net.
We’d have to do something different to find out.
JanieM says: “I see the tax structure as nothing more complicated than the rest of us banding together to grab some of it back.”
Exactly. Since there are long established property rights that you cannot overturn by action of legislation or recourse to the courts because such laws are among the founding principles you instead are resorting to the tax code to implement your subversive purpose.
I remember back when Republicans were busy demonizing welfare recepients: the conversations about how a single mother could support her kids if she just stopped getting her hair done or drove a used car instead of the imaginary welfare Cadillac. Meanwhile timber industry workers and cattle ranchers continued their parasitism on the taxpayer, supported by Republicans in Congress, with no critisisms about spending too much on off road vehicles or chewing tobacco.
It’s standard procedure to denomize and trivialize people in order to justify screwing them.
It is even worse to demonize and trivialize one group of people in order to protect the privleges of an elite!
Most of my clients are poor and might, in someone’s estimation, waste some of their meager resources on some minor pleasures for their lives. I don’t give a shit because it is not relevant to the issue under discussion here.
The issue is are those with incomes at the level to make them people who matter to Republicans so special and wonderful and superior to everyone else that they should be protected from a minor tax increase during an economic crisis caused in large part by bad decssions made by rich people in business and Congress or regulatory agencies?
I mean, if the people with incomes above 250,000 are so inately superior as to be considered the producers and innovators,The People WHo Should Not Be Taxed Lest They No Longer Produce, how come the economic FUBAR we are facing now was created entirely by members of that class? Poor people wasting money didn’t create this mess. Members of and representatives of a wealthy elite did. Which makes the assumptions about the inherent superiority of that class’s contributions to our economy look pretty shakey to me.
“Simple: From each according to their abilities, to each according to their needs.”
I believe history has shown that this doesn’t work. Why do you cling to it? Is it because your needs outstrip what your abilities can provide? There’s a safety net for you. Advocating for you to receive more than the safety net is a violation of the the principle you espouse in that you are asking for more than your needs.
How do y’all account for the fact that the US poverty rate has hovered around 12%-15% since 1965 even though trillions of dollars have been transfered downward as part of the war on poverty? Doesn’t it seem like it’s not working?
That would depend on the rate previously since the rate in 1959 was about 22%, I would say that it may very well be working From wikipedia:
hmm, the image gets truncated at least in FF.
Image here
Article here
“I’m just suggesting that eradicating poverty entirely is unlikely.”
Actually, eradicating poverty entirely couldn’t be more simple: just give poor people enough money. If you give everyone who can’t earn as much, say, $20,000 a year, no one will be poor.
You may have various objections to this notion, but I’m curious to know why you might think it wouldn’t eradicate poverty.
“There’s a safety net for you. Advocating for you to receive more than the safety net is a violation of the the principle you espouse in that you are asking for more than your needs.”
Spoken by someone who hasn’t fallen on that “net” in the last twenty years, and noticed that it’s as much holes as net.
“Simple: From each according to their abilities, to each according to their needs.”
I believe history has shown that this doesn’t work. Why do you cling to it? Is it because your needs outstrip what your abilities can provide? There’s a safety net for you. Advocating for you to receive more than the safety net is a violation of the the principle you espouse in that you are asking for more than your needs.
I’m not sure I get the quote above in its original context, but the original context, none the less, had nothing to do with whatever it is dave seems to be arguing against with some imaginary “you” over some imaginary position.
Gary,
That was Charles Murray’s proposal, but I think he favored giving the sum to all adults and maybe even mandating how some portions must be spent, like for healthcare. This might work. I would like to see a good discourse that debunks the proposal, if one exists.
Is it possible that there is a certain percentage who will spend some time in poverty no matter what you do for them?
I’d put the odds at somewhere between ‘highly likely’ and ‘inevitable’.
I’m not aware that ‘eliminating all poverty’ is the goal of Obama’s tax proposals.
The point of hilzoy’s post is that claims that Obama’s tax proposals amount to ‘socialism’, or even a dramatic departure from typical adjustments to the tax schedule, are kind of risible.
I agree with her.
243: you chart reinforces my point that since the war on poverty was established formally by LBJ in 1965 there has been no significant change. Talking about poverty in 1959 is no more relevant to that point than talking about how everyone in the stone age lived in poverty.
Would it be stupid to look at historical murder rates to decide whether or not murder should continue to be a crime? Just asking.
//You may have various objections to this notion, but I’m curious to know why you might think it wouldn’t eradicate poverty.//
Because Norman, and people like him, would blow their subsidy on drugs the minute they get it. They would have nothing left for food, housing, clothing, etc.
I’m not saying every poor person is like Norman but there are many. For these people, putting money in their hands is not the cure. They need a mommy to actually follow them around and make sure they don’t do stupid things. She needs to make sure they eat properly, don’t hang out with the wrong people, go to bed on time, just basic stuff that most people learned when they were children. Providing such a mother for each of them would cost more than $20k plus various lifestyle advocates would sue on behalf of the Normans saying their lifestyles are an acceptable alternative. Either way, poverty would remain to some extent.
you chart reinforces my point that since the war on poverty was established formally by LBJ in 1965 there has been no significant change.
Dave, you will notice I said that it “may” be working. One problem is that the chart doesn’t show enough pre-1965 data to show what the trends were then. It could be that 1959 was a one time anomaly and that prior to that the poverty level had hung around the same level as it now, or that the it was greater, or had greater swings. I don’t know, however we do know that post war on poverty we haven’t seen it climb to its previous height(s).
“Simple: From each according to their abilities, to each according to their needs.”
I believe history has shown that this doesn’t work.
Wrong. In theory, the USSR adopted this as ‘from each according to his ability, to each according to his work’. ‘To each…needs’ remains Marx’s powerful ethical ideal.
“Simple: From each according to their abilities, to each according to their needs.”
Is there any possible way to square a notion like this with the concepts embodied in the United States’ founding principles? I think not.
Hairshirt at 2:35p
//I’m not sure I get the quote above in its original context, but the original context, none the less, had nothing to do with whatever it is dave seems to be arguing against with some imaginary “you” over some imaginary position.//
My 2:14p comment was responding to bobbyp at March 09, 2009 at 09:21 AM. That was the context. He was the imaginary ‘you’.
If you’re going to jump into the middle of the conversation then please be aware that you may not be aware of the context.
‘To each…needs’ remains Marx’s powerful ethical ideal.
it’s a Biblical ideal, even.
“This might work.”
The negative income tax.
Well-known communist Milton Friedman.
“Because Norman, and people like him, would blow their subsidy on drugs the minute they get it. They would have nothing left for food, housing, clothing, etc.”
That’s another problem, but it wouldn’t be a problem of poverty.
“They need a mommy to actually follow them around and make sure they don’t do stupid things.”
That’s true. People who are very poor are poor for reasons, and not, in most cases, reasons of choice.
They’re poor variously because of mental illness, emotional illness, physical illness, dependencies of one sort or another, dependencies of others upon them, lack of skills, lack of knowledge, lack of knowledge of appropriate behavior, lack of self-control, lack of intelligence, and so on and so forth.
And so many people do need help beyond simply being handed a stack of bills.
So I wouldn’t argue that a negative income tax is a cure-all. There still need to be mental health services available, physical health services available, child care, and anything else necessary to help people gain the tools they need to survive and get ahead, or to enable people to at least not suffer.
But making sure they have enough minimal money not to be poor would be a huge start.
And it would wipe out poverty: just not everyone’s problems. But I certainly agree that wiping out everyone’s problems isn’t on the horizon.
I’m happy to settle, though, for wiping out povery, and making available the tools for more or less everyone to survive adequately. (And, yes, that includes allowing for a certain amount of relaxation/stress-relief/entertainment, which is a necessity for mental and emotional health.)
russell, 2:40p
//I’m not aware that ‘eliminating all poverty’ is the goal of Obama’s tax proposals.//
I agree. That has not been Obama’s stated goal. My comments about the success of the war on poverty were a response to one or two comments up thread which loosely argue that the rich who favor lower taxes must want poverty because higher taxes fund transfers to poorer people which ends poverty.
How is that for a poorly written run on sentence?
I do get that part, dave. I didn’t really understand how bobbyp was applying “Simple: From each according to their abilities, to each according to their needs.” to the determination of the value of, say, an assembly line worker’s output. That’s the context I didn’t get. I just think you’re taking that quote and putting into a much broader and different context than in bobbyp’s comment. He’s an imaginary “you” because I don’t see where he made an argument remotely resembling the one you seemed to be addressing. And it’s a blog. Jumping in on a conversation is what it’s about.
“Simple: From each according to their abilities, to each according to their needs.”
Is there any possible way to square a notion like this with the concepts embodied in the United States’ founding principles? I think not.
This sort of abstraction of the discussion at hand annoys me because it has nothing to do with the specific numbers 35 and 39.6. Are we arguing over progressive taxation in general, or addressing the point that the new marginal rate is nothing new or historically anomalous or outrageous?
I’m not actually endorsing the notion, but I’m not seeing how it’s incompatible with the idea of unalienable rights to life, liberty, and the pursuit of happiness. In fact, it seems to fit pretty well with it.
I don’t see how it makes sense to muddle the “founding principles” with ideas about capitalism and communism that weren’t developed until after the founding occurred.
Cleek
//It’s a biblical ideal, even//
First, something that occurred in the bible is not necessarily a biblical ideal. Second, the early christian church as portrayed in this passage of Acts had a characteristic that made this practice work for them. It is a characteristic that CANNOT work in a more heterogenous population. It was this:
“the multitude of them that believed were of one heart and of one soul: neither said any of them that ought of the things which he possessed was his own; but they had all things common.”
One heart and one soul cannot be legislated. It is a voluntary thing.
The only place in the Bible I am aware of where an ideal civil economy is described is in the book of Joshua where land was partitioned more or less equally among families and a system was instituted whereby land could not be sold permanently but only leased for the period up to the next jubilee. This basically enabled one generation to do something stupid but all was put back to more or less even every 50 years.
hairshirt
//He’s an imaginary “you” because I don’t see where he made an argument remotely resembling the one you seemed to be addressing.//
I see. Fair enough.
First, something that occurred in the bible is not necessarily a biblical ideal.
it is Biblical in the sense that the source of the phrase is the Bible, and the idea which the phrase embodies is from the Bible. i’m obviously not implying that Jesus was preaching communism.
hairshirthedonist at 2:35:
And it’s a blog. Jumping in on a conversation is what it’s about.
hairshirthedonist at 2:39:
This sort of abstraction of the discussion at hand annoys me because it has nothing to do with the specific numbers 35 and 39.6. Are we arguing over progressive taxation in general, or addressing the point that the new marginal rate is nothing new or historically anomalous or outrageous?
It’s a blog. Expanding, contracting, deflecting, ignoring, and in general addressing the original topic as creatively and/or annoyingly as possible is what it’s about. 😉
By the way, although I’m in favor of a negative income tax (which would replace existing welfare programs – Gary Farber provides the links), the negative income tax is not relevant to the current discussion.
Drat! JanieM wins.
“243: you chart reinforces my point that since the war on poverty was established formally by LBJ in 1965 there has been no significant change.”
I don’t know what chart you’re reading, but the posted chart says this: the percent of Americans living in poverty in 1965 was approximately 17%.
By 1970, after Johnson passed a chunk of his “War On Poverty” bills, the percentage of Americans living in poverty had declined to approximately 12%.
Over six million fewer Americans were living in poverty, and that’s including the absolute rise in population.
How is this insignifcant?
Under Nixon and Ford’s “benign neglect” of poverty programs, the poverty rate stagnated.
In a stunning surprise, after Ronald Reagan was elected, the poverty rate rose again, from that approximately 12% to a shade over 15%, a jump of some 25 million Americans, to over 35 million Americans. There was a small decline then under his presidency, down to about 32 million.
Then a sharp rise in numbers under G. H. W. Bush, and then after Bill Clinton was elected, a drop from around 39 million to around 32 million.
How is all this insignificant?
“…36.5 million people (approx 1 in 8 Americans) were below the official poverty thresholds in 2006, compared to 31.1 million in 2000[14], and that there was an increase of 4.9 million poor from 2000 to 2006 while the total population grew by 17.5 million.”
That’s a lot of people. But maybe they all are just lazy, and the undeserving poor.
“Is there any possible way to square a notion like this with the concepts embodied in the United States’ founding principles? I think not.”
I’m curious, as a side issue, which specific founding principles, found in which specific documents, you have in mind.
Goodness. Thank you, Cleek.
Gary,
Top of head, but I think it is squareable with the following:
Declaration of Independence
1. Life
2. Liberty
3. Pursuit of happiness
Preamble to the Constitution
1. More perfect union
2. Establish Justice
3. Ensure domestic tranquility
4. Promote the general welfare
5. Secure the blessings of liberty, to ourselves and our posterity.
The only place in the Bible I am aware of where an ideal civil economy is described is in the book of Joshua where land was partitioned more or less equally among families…
I think the relevant civil law is spread across a couple of books, but this is essentially correct. The only place where specific, detailed rules for civil economy are laid out are those specified for the nation of Israel in its early days.
The topic of how the poor should be treated, however, comes up frequently in the Bible. By “frequently” I mean “everywhere”.
Nor is there much private vs public distinction on the topic. Individuals, societies, and governments are all held to account for how they treat the poor and powerless.
If what the Bible says is something you’re inclined to be concerned about, it’s something that really ought to jump right out at you.
Other than the civic obligations laid out for the nation of Israel in the Pentateuch, the only discussion that comes to mind on taxes per se is “render unto Caesar what is Caesar’s”.
I still think the OECD Data is far trickier than you think, von. One thing it doesn’t take account of is income distribution. According to the Wikipedia entry on the Gini Coefficient, which is the formula used to measure income inequality, the US is in the same category as Mexico when it comes to income distribution. The gap between rich and poor is far greater here than in Canada, Western Europe, Japan, etc. So, given that there’s more income inequality here, it also stands to reason that the 2% of the population earning the majority of the $$ in the US (maybe as much as 60%)would also have a larger share of the tax burden. Countries with more income equality don’t have to vary rates so much.
Also check out the comparison of tax rates on dividends for individuals at the OECD. Wow! US recipients of dividend checks make off like bandits compared to divident recipients in the rest of the developed world. I imagine the difference is due to the creation of the category “qualified dividends” taxed at a flat rate of 15% that doesn’t exist elsewhere.
None of the data I’ve seen suggests to me that the rich are overtaxed in the US. Quite the contrary.
“Do unto others what you would have them do unto you” is not exactly a Biblical dictum, since it apparently predates Moses, let alone Jesus. But it does constitute a bedrock of Judeo-Christian preachment, if not always Judeo-Christian practice.
So whenever anybody speaks approvingly of Biblical values or Judeo-Christian ethics in the context of present-day political economy, I can’t help wondering how the Golden Rule figures into the argument. Does the Golden Rule support, or oppose, an estate tax, for instance?
The notion that the god of Abraham has anything to say about the difference between 35% and 39.6% on the income tax is of course laughable on its face.
–TP
One other thing that might be worth considering, on top of many of the points addressed above, is wage stagnation in the lower, and lower middle classes… Ten or twelve years ago, typical pay for grunt work construction in these parts was 10 dollars an hour. Today, it is the same, even less in some instances, assuming you can find any project to latch on to.
Skilled laborers had a good run for a while, but the bubble burst, and now they too scrap for the 10 dollars an hour and a steady paycheck. Point is, I’d bet that wages haven’t gone up at all for a decent slice of working adults, despite all the economic growth and productivity increases hyped by talking heads on CNBC these many years. I know anecdotes don’t qualify as data points, but you can almost taste the hurt around here, having to pay twice as much for nearly everything, all on a late 90’s paycheck.
$20,000 per person times 300,000,000 is 6 trillion dollars. We don’t have that kind of cash.
Obama’s tax plans, worst case, are for a 22.7% increase in marginal tax rate, not 7-9%. Bush’s tax cut, by comparision, was from 39.6% to 35%, or 9%. The marginal rate under Bush was actually 37.9% (35 + 2.9 medicare) and the top rate under Obama, if he gets his 4% bump in FICA on people earning over 250K, will be 46.5% (35 + 4.6 + 2.9 + 4 = 46.5%).
Bush’s tax cuts were denounced as ‘radical’ and ‘extreme’, yet the consensus here is that 2.5 times those cuts in increases is no big deal, and certainly outvoting 5% of the taxpaying population for this increase is not ‘soaking’ those people–the evidence for this being that other people around the world are doing it too.
If Obama gets his way on taxes, we won’t have to argue about whether a 46% tax rate will influence behavior since the issue will no longer be theoretical, but regardless, I have a question for Hilzoy and the other tax-raisers: is there a limit you would place on the cumulative marginal rate you would charge on incomes between 250K and 1.5mm? If so, what is that limit? At what point would you say, enough, tax rates will not go any higher?
“$20,000 per person times 300,000,000 is 6 trillion dollars.”
Forgive me for being unclear: the suggestion would be a negative income tax that makes sure those who don’t earn that much have the missing amount given to them. Thus, someone who earns $17,000 a year would qualify for $3,000. Not $20,000. (And that was just pulling a number out of a hat. Maybe it should be $15,000; maybe another number; I’m not proposing an actual specific number.)
Eliminating poverty would in no way require giving $20,000, or $15,000, or whatever, a year to people who already earn that much, of course.
“Bush’s tax cuts were denounced as ‘radical’ and ‘extreme’, yet the consensus here is that 2.5 times those cuts in increases is no big deal, and certainly outvoting 5% of the taxpaying population for this increase is not ‘soaking’ those people”
Again, how would this make us worse off than through most of the entire history of the income tax, when upper rates were far higher? Why was the Eisenhower administration such a tragedy of socialism?
“Because Norman, and people like him, would blow their subsidy on drugs the minute they get it.”
d’d’d’dave: Why is it that you insist if one is impoverished they must also be a drug addict?
By your reckoning, if I lost my home and job tomorrow, I’d be well on my way to drug addiction.
On the other hand, if I had hit the last big Powerball, got something like a $50 million payout, I would be rich and, possibly, become so bored with my new-found lifestyle that, what the hell, maybe I’d try some of the white stuff. Hell, I could afford it. And I wouldn’t be poor, but damn, all of the sudden I’m addicted to cocaine.
Take it easy on the poor, d’d’d’dave, some of them might even be virtuous.
That’s not what triple-d said. He referred to “people like [Norman].” He didn’t say all impoverished people are like Norman.
Obama’s tax plans, worst case, are for a 22.7% increase in marginal tax rate
Hey mckinney I’ve put cites up for where I come up with 7-9%.
Where’s your number coming from?
“Because Norman, and people like him, would blow their subsidy on drugs the minute they get it. They would have nothing left for food, housing, clothing, etc.
“I’m not saying every poor person is like Norman but there are many.”
True, Gary. But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me.
Russell: I believe you are talking about additional percentage points and McKinney is talking about a ratio between percentage points.
46.5% divided by 37.9% (his numbers) = 1.227.
I don’t think I ever saw an answer to this question when I asked it last week.
Why do these discussions keep referring to “$250,000” and “top bracket” in the same breath?
$250,000 is not in the top bracket. It isn’t even close to the top bracket. In 2008 the top bracket started at $357,700 for 3 of the 4 tax filing statuses (MFS bracket limits are half the limits for the other statuses). In 2009 it is $372,950.
This information can be found without any trouble at all.
So, is Obama proposing to lower the brackets so that $250,000 is in the top tier? Or is it just the proposal for FICA to kick in that has a connection to $250,000?
Just wondering.
OK I get it.
A jump from 35% -> 46.5% is a increase of 22.7% in the rate. Except I make that out to be a 24.7% increase. Except it’s actually from 37.9% if you include Medicare, so it’s 18.4%.
In any case, we’re back in ‘percentage of a percentage’ territory, where a tax increase from, frex, 1% to 2% is a 100% increase, rather than a 1% increase.
Personally, when I talk about the *difference* between two rates, I do *subtraction*.
46.5 – 37.9 is 8.6.
But yeah, worst case looks something like 46.5% on income over a quarter of a million bucks. Add in state, property, etc etc etc and your wealthy person is paying a lot of money in taxes, assuming they don’t have some way of moving the numbers around.
Yeah, it sucks. But their worst day is about a million times better than the folks losing their jobs, homes, savings, health insurance, and whatever else they have to lose.
So, you know, buck up.
The reason Bush’s tax cuts were criticized was because they favored wealthy people over less wealthy people. That strikes a lot of folks as being f’ing unfair on its face.
The reason they were created with expiration dates was because they were unsustainable.
If you want to know how the economy would fare if they were extended indefinitely, look at the economy now. They are in place now.
Since the top marginal rate in this country has been as high as 90% without the republic falling to its knees, my guess is that it could, in fact, go higher than 39.6%, or 46.5% fully loaded if you want to look at it that way.
Whether it should or not is a topic for a different day, and different circumstances. My guess is that we’ll never see tax rates at any income level that high again. Just my guess.
But what’s on the table is what we intend to do now, today, in the circumstances that apply now, and today.
certainly outvoting 5% of the taxpaying population for this increase is not ‘soaking’ those people
Here’s my modest proposal mckinney.
Let’s put together a basic household bundle of goods and services. Rent or mortgage, heat, food, transportation, clothes. Base it on basic stuff, nothing fancy. Come up with a number, regionally adjusted, for what it costs to keep, say, four people going at a reasonable, basic level of comfort, health and safety.
And when I say ‘comfort’, I mean they’re not hungry, cold, or in physical danger. That’s all.
Now let’s levy a flat tax at some number on all household income above that cost. Look at the bottom line of the US budget, add up the total household income of all households *above that basic level of subsistence*. Add enough money back in to the budget if we need to to bring folks living below that level, up to that level.
Divide the budget bottom line by that aggregate income level, and that’s your flat tax rate. Apply that rate to all household income *above the subsistence cost*, across the board, to all households without exception.
If the cost of the household bundle this year is $20K, and you make $20K, you pay nothing.
If you make $10K, you get $10K back.
If you make $100K, you pay the rate * $80K.
If you make $1M, you pay the rate * $980K.
Are you up for that?
If not, why not?
“But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me.”
Whatever it sounds like to you, that’s not what he wrote.
“My guess is that we’ll never see tax rates at any income level that high again.”
When Kang and Kodos invade, we may need that much money for defense.
Also, once Skynet has wiped out most of the human race, the tax burden will fall far more heavily on everyone.
btfb, what I just wrote to you reads more harshly than I intended it; sorry about that. I’m a stickler for accurate reading, but I didn’t mean to be offensive.
Bedtime
“Because Norman, and people like him, would blow their subsidy on drugs the minute they get it.”
“d’d’d’dave: Why is it that you insist if one is impoverished they must also be a drug addict?”
I didn’t talk about everyone who is impoverished. I talked about Norman (a specific person) and people like him. If an impoverished person is not like him than my statement doesn’t apply to them.
I was responding to the concept of eliminating poverty. My point was that no matter what you do some percentage (however small) will still be in poverty because there are Normans in the world. If you go back and read what i’ve written on this thread I think you’ll see that.
//True, Gary. But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me. //
Those sounds are coming from within your own head.
“If an impoverished person is not like him than my statement doesn’t apply to them.”
To reiterate: this is, in fact, what d’d’d’dave wrote. I’m fine with jumping on d’d’d’dave for things he wrote, but he shouldn’t be jumped on for things he did not, in fact, say or imply.
“My point was that no matter what you do some percentage (however small) will still be in poverty because there are Normans in the world.”
Setting aside arguments over what “poverty” means exactly, and whether someone is impoverished if they have a decent income (whatever the source), and expend it ill-advisedly, I’m left asking: so what? What’s this assertion got to do with the fact that we can provide for poor people, and eliminate, by any definition, poverty for all but your tiny fraction of people, without impoverishing the rest of the citizenry?
Russell, 8:59p
I’m up for that if the basket of items could be hardcoded in some way.
The problem is that the next day there would be a movement to add things to the basket of goods. Someone would say the people who get just the basket are discriminated against. Someone else would say income inequality still happens so the system is awful. Studies would appear that say everyone needs two weeks of paid travel to a tropical climate. Someone would point to Norman and wonder why he is ragged and undernourished despite having a basket…etc.
“Those sounds are coming from within your own head.”
On the other hand, given your first comment on this thread, there’s a whole pot and kettle thing to contemplate.
Gary, 9:02p. Thank you.
Gary, 9:30p. It was a mostly a joke. I find it interesting when a person thinks one taking is a crime but another taking is not.
“I find it interesting when a person thinks one taking is a crime but another taking is not.”
How is it different from thinking one killing (say, of an enemy on the battlefield in war) — is different from another killing (say, a randomly gunning down three people in on a street)?
Things that are different are, indeed, different.
Either government can legitimately and morally tax people, or it can’t. Is it your position that it can’t? Last I looked, I understood otherwise, but perhaps I misunderstood. If, on the other hand, government can legitimately tax, then we’re just debating degrees, not moral blacks and whites, and it should be obviously that unlike kinds of takings can be unlike.
Someone would say the people who get just the basket are discriminated against.
And what we have now are folks saying that we can’t raise the top marginal tax rate because, if we do, we’ll be punishing the most successful among us for their success.
Really, I’m not trying to break your chops, but to me it just sounds like SSDD.
Regarding Norman, there will always be the Normans of the world. We should give them medical care, something decent to eat, and a place to live, because otherwise they will just live in the street, and that sucks.
Chances are some of them will actually get better, and then the world will be that much more a better place.
Why should we do that? Because we can. Most folks would do it for a dog, but for some reason doing it for another human being is just beyond them. And that’s beyond me.
As ever, agreeing with Russell, let me add that Normans are Normans for reasons: because they have problems of one sort or another.
They have psychological problems, or emotional problems, or problems from horrible upbringing, or brain injury, or having fallen into drug addiction, or a history of trauma, or some reason or another.
Now, in some cases, people become twisted enough that they become sociopathic, and are dangerous to others. Those folks we may indeed have to lock up.
But those who are merely effed up, for one reason or another, are pretty darn rarely effed up because they woke up one day, and said “I want to lead an effed up life.” Living an effed up life, as a rule, makes one miserable. And either unloved, or in very unhealthy relationships.
No healthy person simply enjoys deliberately taking advantage of everyone around them.
Generally speaking, if people have problems, and they can be helped within any degree of reason, it’s a good thing for society to give them that help, and help them get out of self-destructive ways, because for the most part, in the end, we wind up having to, no matter what, whether it’s imprisoning them, institutionalizing them, or just burying their bodies, and cleaning up the damage they’ve done.
Setting aside common decency and and moral arguments, it’s just cheaper in the long run.
I find it interesting when a person thinks one taking is a crime but another taking is not.
Look, I’m going to follow up on this in good faith in the hope that there’s some point in doing so. I’m skeptical, but what the hell.
On one hand: the President of the US has proposed raising the effective tax rate, net/net, on income above a quarter million bucks (or, per JanieM, maybe a lot more than a quarter million bucks) by something under ten percent. It’s unclear what, if any, of that will actually happen, because it has to be approved by Congress, which is made up of people who we actually elect.
On the other hand the government of Israel is going to immediately come and raze some folks’ homes to the very ground. Because they didn’t have a permit when they built it. Decades before the nation itself even existed.
For the love of god, please tell me you see a difference between the two.
Seriously. I’m not joking. I’m asking you to tell me you see a difference between the two of these things.
Oh, and “Norman, and people like him, would blow their subsidy on drugs the minute they get it.”
People do mood-changing drugs because they’re self-medicating. Because they don’t know how to feel good, otherwise. And because once they’ve started a habit, it becomes harder and harder to break it. (Ask anyone who has tried to quit smoking.)
If people are taking drugs to the point where it badly impairs their life, they’re by definition screwed up. Now, I’ll certainly agree that by no means can everyone be helped, and by no means can every drug addict be led to get out of their addiction. As they say, you have to want to change.
And before that happens, severe drug addicts can screw up the lives of anyone near them who will let them. I have no illusions about that, and amn’t claiming otherwise.
Some people are just going to kill themselves, or lived ruined lives, no matter what.
But let’s not put drug addiction in a category like “lazy,” say, or automatically consider them simply willfully out to lead screwed up lives. Being an impaired and effed up drug addict is not, as a rule, a happy life, or a life that people who feel they have choices choose.
“On the other hand the government of Israel is going to immediately come and raze some folks’ homes to the very ground.”
Extremely trivially, and just nitpicking in this case, no, it was postponed (basically, until the media’s attention goes elsewhere, or some kind of pressure, probably foreign, makes the city stop permanently).
From the WSJ story:
None of the data I’ve seen suggests to me that the rich are overtaxed in the US. Quite the contrary.
Tobie, we’re arguing a bit past each other. Yes, I generally favor lower taxes (on the rich as well as the poor). But the specific argument I’m making here isn’t that the rich pay less tax in the US as compared to the EU average. Everyone pays less tax in the US as compared to the EU average. The significant difference is that a large number of folks in the US pay no taxes, and the US relies on the rich for more tax revenue than the EU average. I don’t think that it’s sustainable.
This isn’t a problem that Obama created; it’s been ongoing since the 1970s. But it is a problem that Obama is exacerbating. He’ll be forced to correct course sooner, and harder, than he’d like. The next set of tax increases — and they are coming — will hit the middle class.
russell
//Seriously. I’m not joking. I’m asking you to tell me you see a difference between the two of these things.//
I see a difference of degree. The israel thing is hugely unjust. The other thing is mildly unjust. There have been many many comments on this blog that have expressed that the second one (taking from a minority for the many via taxation) is absolutely just.
Do you see qualitative difference or a difference of degrees?
Gary,
Is there a point where you would draw a line and say citizen A gets no more help? If so where is it? Does the line change depending on your perception of how many resources are available to use in the helping?
The significant difference is that a large number of folks in the US pay no taxes
That’s not true and you know it.
The next set of tax increases — and they are coming — will hit the middle class.
Why? Is it because raising taxes on “the rich” any more is logically impossible?
Come to think of it, I suppose it would be possible to raise taxes at the top so much that “the rich” would be reduced to “middle-class”, after taxes. Then “the next set of tax increases” would have to hit the middle class, by definition. But we’re a long ways from that.
–TP
Too many questions to answer with too much work ahead of me, but just a few quickies:
1. I am still waiting for someone to tell me the top marginal rate past which even progressives won’t go.
2. Comparing rates of 40 years ago with current rates is not apples to apples. The tax code then was much more ‘deduction friendly’, for that was worth.
3. When tax rates dropped to 28% under Reagan, so too were many deductions rolled back or eliminated–that was the supposed trade off.
4. Putting together a basic living package and guaranteeing it to all is neither practical nor desirable. GF believes, in good faith, that most people will not take advantage of this. With respect, I disagree. A sad percentage of humanity is, for reasons I can’t fathom, willing to get by at whatever subsistence level they can wrangle out of the system–call them the Jerry Springer set–and I have no desire to underwrite that program. And besides, as Triple D points out, whatever base you establish will never be enough. Further, it costs too much. Finally, as a matter of personal preference, people ought to get by under their own horsepower. I know–and have represented–many ‘working poor’ (a term I don’t really like, because it sounds condescending) and the majority of them don’t have plans to remain that way for long and they fully intend for their children to do better. Being in Houston, most of these folks have arrived fairly recently from Mexico. Most if not all expect to pull their weight and aren’t looking for anything besides work. A sizable percentage own their own businesses and have employees.
5. I contrast the work ethic of recent immigrants with people I’ve known since high school–lazy, disinterested, apathetic at one extreme and just unmotivated and unambitious at the other–who anyone could tell would never go any distance in life. Or people with great potential who quit college, or never went, simply because it was easier to go out and take some lame-ass job. Now, well into life, some are doing ok, others not so much. Meanwhile, others practiced deferred gratification, got our kids through school, paid off tons of debt and now what? It’s time to redistribute our income and because we are outnumbered, we are necessarily outvoted. Seems to me the fairness argument cuts both ways.
Do you see qualitative difference or a difference of degrees?
Qualitative, and not just one but a handful of qualitative differences.
Is there a point where you would draw a line and say citizen A gets no more help? If so where is it?
Not addressed to me, but my reply is “when they’re dead”.
The significant difference is that a large number of folks in the US pay no taxes
That’s not true and you know it.
Likely so, but since it’s been pointed out to him a few times so far, my guess is that he’ll keep saying it.
I am still waiting for someone to tell me the top marginal rate past which even progressives won’t go.
It’s been 90%. That seems too high to me.
Putting together a basic living package and guaranteeing it to all is neither practical nor desirable.
I’ll take that as a ‘no’. A flat rate above some basic level of subsistence will not do it for you.
Thanks, because like your question about ‘what is the rate above which progressives will not go’, I’m always curious to know what possible tax scheme would actually be satisfactory to conservatives.
I suspect the answer is ‘none’, but I guess I’ll keep looking.
It’s time to redistribute our income and because we are outnumbered, we are necessarily outvoted. Seems to me the fairness argument cuts both ways.
Yeah, it’s tough on a wealthy guy.
Holding the weight of the world on your shoulders, and what thanks do you get? Every time you turn around, they just want more, more, more.
Galt’s Gulch, dude.
I don’t mean to be disrespectful, but IMVHO you, triple d, and all the other guys like yourselves need to get some perspective.
Why? Is it because raising taxes on “the rich” any more is logically impossible?
Come to think of it, I suppose it would be possible to raise taxes at the top so much that “the rich” would be reduced to “middle-class”, after taxes. Then “the next set of tax increases” would have to hit the middle class, by definition. But we’re a long ways from that.
It’s not logically impossible; it’s just unsustainable. If trends continue, we’ll end up with more than half of folks paying no income tax. That was sustainable when the income tax was small and a minute part of the federal budget. It’s not sustainable when the income tax is large and growing. At some point, the top 10, 20, 30% — who vote in larger numbers and has disproprotionate political power as compared to the rest of the population — will insist that further tax increases be shared.
That’s one reason why, for instance, the FDR’s 1932 income taxes had virtually everyone paying income tax. Historically, high earners are willing to tolerate paying more on the top end if they perceive the system as fundamentally fair.
A system in which the government is primarily funded by a minority while the majority enjoys receipts is not perceived as fundamentally fair. Eventually, more political power will flow to those that pay the tax. Over the long term, this is not a stable system. I don’t know of a democracy that has been able to sustain it. (Those democracies that have tried — Venezuela springs to mind — tend not to stay democracies.)
Oh, I’d guess there’s more to it than that. For one thing, computers weren’t commonly in use for tracking income and funds transfers. Sure, the IRS has used computers since 1961, and Bank of America a bit longer, but these were computers used to compute based on local data. There wasn’t much internode communication. There certainly wasn’t a Bank Secrecy Act until 1970, so large cash transfers were quite a lot easier to hide.
It’d be nice to see some discussion of the prevalency of cheating before and after the advent of computerized transactions, but I’m not sure how anyone would know.
Sure: everyone with an income pays FICA. Everyone who buys anything pays sales tax where it’s levied. Everyone pays property tax in one way or another, and everyone pays some chunk of corporate income tax on the goods they purchase. Also, everyone pays fuel tax in one form or another, because it’s embedded in the price of everything that’s transported.
But no individual with an income less than about $9500 pays federal income tax, nor do married couples having income less than about $19k. I think that’s probably what von is speaking to. It’s possible that the line where federal tax becomes nonzero can go a bit higher, but that depends on more specifics. Possibly I’ve calculated just a little low, too, because I didn’t compute the hit to FICA properly.
Do you know of a democracy that’s been able to sustain the levels of inequality we’re seeing now? I understand your fear of a majority voting for higher taxes on a minority, but right now we have a tiny minority making sums of money unimaginable to most of the population and wielding their disproportionate power to maintain things like endless flows of taxpayer money to prop up zombie banks and minimize their own losses at the expense of everyone else. And it’s not the poor who profit from wars, privatization of government functions, corporate welfare, and plenty of other government spending.
A system in which the government is primarily funded by a minority while the majority enjoys receipts is not perceived as fundamentally fair.
When I have some time to do some digging, I need to get some numbers on total federal tax burden by income class.
For the short term, I’ll point out that, by dollar amount expended, the largest form in which ‘receipts’ are distributed are Social Security and Medicare. Those two programs alone make up about 35% of the federal budget.
Medicare is funded by an absolutely flat tax on income, excluding investment income such as dividends and interest.
Social Security is funded by an absolutely regressive tax, levied on wage income only up to $102,000.00.
How far do you want to take this ‘fairness’ thing? If you want to take it to the mat, I’ll be happy to go there with you. Just let me know.
Quibble: cap is now at $106,800.
Quibble: cap is now at $106,800.
Noted.
Also previously unknown to me:
Self-employed people are liable for the full 15.3% combined SS and Medicare hit, however the income basis for that tax for self-employed people is 92.35% of net earnings.
That’s a wiki cite, if the information is incorrect please let me know.
The difference — 7.65% — happens to be equal to what their employer would pay if they were not self-employed.
So, folks who run their own businesses, or are partners in businesses, are paying at the same effective rate as employed people.
So those of you who worried that you might be liable for an unfair portion of even those taxes by virtue of being business owners need worry no more.
Oh, that sounds wrong. It sounds like it’s a 7.65% discount on a 7.65% tax. But it’s Wikipedia, and I’m a guy who has never once been self-employed.
Russell — I may be misunderstanding your point, but I think this only “works” — and even then only in terms of percentages, not in terms of net income — if you count the employer’s amount of SS + Medicare as part of “salary.”
I.e. in a simplified calculation:
If you are employed and you make $100,000, you pay $7,650 in SS and Medicare, i.e. the 7.65% we all know and love.
If you are self-employed and you make $100,000, you pay 15.3% on $92,350, or $14,130, or 14.13% of the $100,000. (True: not the “full” 15.3%, but a lot more than 7.65%.)
If you’re counting the employer’s SS + Medicare contribution for an employee as part of the employee’s “salary,” you have $107,650, of which $15,300 is paid to SS + Medicare, for an effective rate (on the $107,650) of 14.2%, which is actually a bit higher than the percentage for the self-employed.
But the employee still nets $6,480 more than the self-employed worker: $92,350 as compared to $85,870.
Just to make sure we don’t run out of additional plot twists: half the total self-employment tax is deductible in calculating Adjusted Gross Income. I.e., like an employee, you don’t pay income tax on the (self-)employer portion of your SS + Medicare.
In general I am saying “What Russell said” to every word you write here, so I hate to quibble…. If I’ve got something screwed up in my assumptions or my math, I’d be glad to be corrected. Well, a little abashed, but glad at the same time.
Not that this is a conclusive argument, but that sounds too coincidental – the same percentage discount on the same percentage tax.
hairshirthedonist: I don’t think it’s accidental at all. The point is that you shouldn’t have to pay (employee’s portion of) SS + Medicare on (that portion of your income that’s the employer’s portion of) SS + Medicare. That would be double-taxing for real.
Is there any possible way to square a notion like this with the concepts embodied in the United States’ founding principles? I think not.
The United States was founded by slaveowners on the concept that an unfree person was worth 2/3rds of a free person. Quite so.
(besides: it’s all too Christian, and the US is above all a secular nation)
“accidental” s/b “coincidental”
Do you know of a democracy that’s been able to sustain the levels of inequality we’re seeing now?
We have seen comparable levels of inequality in the US in the past, but they weren’t resolved by taxation the last time around and there’s no evidence that they could be resolved by taxation this kind around.
Identifying a problem doesn’t mean that you’ve identified the solution.
Slarti and JaneyM, you are both right. Self employed folks will pay more.
My apologies.
The point of reducing the income you’re taxed on by 7.65% is so that you won’t pay SET on what the employer’s portion would be.
You can also apparently deduct half of your SET liability from your remaining income, so that you don’t pay income tax on what the employer’s FICA payment would have been.
It’s pretty confusing.
But net/net, folks who work for themselves pay more into SS and Medicare than folks who work for someone else do.
Sorry about that.
Weren’t they solved by a massive world war, a massive worldwide recession, and another massive world war, plus lots of government investment in infrastructure, education, and science, along with high unionization and prosperity brought about by being the only industrialized nation not bombed to crap last time?
I think we might want to try something a little less drastic this time.
Weren’t they solved by a massive world war, a massive worldwide recession, and another massive world war, plus lots of government investment in infrastructure, education, and science, along with high unionization and prosperity brought about by being the only industrialized nation not bombed to crap last time?
I think we might want to try something a little less drastic this time.
But the employee still nets $6,480 more than the self-employed worker: $92,350 as compared to $85,870.
But the only reason the employee nets more is that the employer is putting out $7650 more than the self-employed person made. I think it’s cleaner if you include the employer portion of SS/Medicare in the compensation of the employee from the beginning when comparing employee compensation to self-employed compensation.
So, let’s say they both make $107,650, ignoring the $106K cap to keep it simple, since the number we’re picking is arbitrary.
The self-employed pays 15.3% of $100K, equal to $15,300 and is income taxed only on the $100K AGI.
The employee pays $7,650 on the $100K salary and the employer pays an additional $7,650. The employee is also income taxed on $100K.
(I think.)
Russell, in addition to what JamieM points out, there’s a cash-flow issue because many (all?) self-employed folks have to make quarterly estimated tax payments, which are generally pegged to 110% of the prior year’s income. Given that the self-employed tend to have more variable income than the employed, this creates complexities above and beyond those experienced by the employed.
As soon as I hit post I found my error, assuming the Wiki interpretation is correct. I just took $7,650 off the top for the self-employed rather than taking 7.65% off the top of $107,650. (But wouldn’t mine be the more equitable way of doing it?)
But wouldn’t mine be the more equitable way of doing it?
Well, at least for this particular income set? (Percentages of percentages again.)
there’s a cash-flow issue because many (all?) self-employed folks have to make quarterly estimated tax payments, which are generally pegged to 110% of the prior year’s income.
I used to work for myself, and my wife works for herself now and has for most of her career.
I understand that tax issues are a PITA for self-employed people.
My points throughout the thread with regard to your comments about ‘fairness’ and people who ‘pay no taxes’ are that (1) everyone who works pays taxes, and (2) the percentage of income tax, per se, paid by a particular income cohort is a really poor representation of the overall fairness of the federal tax system.
What you will want to look at is total, all-in federal tax burden, relative to income.
When you do that, I believe you will find that the overall tax regime we have is very broadly based, and is no more than mildly progressive.
If I can dig up the numbers, I’ll put them up here. If Slarti and JaneyM don’t mind vetting them, I’ll appreciate it.
Hey, I’m not a tax accountant. I’m just a guy who has done his own taxes way too many times, and who also obsessively double-checks TurboTax.
Oddly, to me at least, there are a great many people commenting on the issue of Federal income tax who don’t understand the concept of “piecewise-continuous”.
The income adjustment that “should” be made (in my estimation) to make this self-employed/employed thing work out is dividing the self-employed income by 1.0765 rather than multiplying it by .9235. The difference ends up being pretty minimal, but still…
hairshirt — von and others have implied that there is a longstanding debate about this question, and I am totally ignorant about the debate and pretty much everything else that would require having taken an econ class at some point in my life.
Regardless of that, I do think it’s enlightening to do something like what you’re suggesting, and we can do the math.
The way I would do it is to ask how much gross income the self-employed person would have to generate to net the same amount the employed person nets.
At this point I’m in kind of a hurry but let me take a stab at it.
On a nominal $100,000 gross, the employee nets $92,350. The employer actually has to pay out a total of $107,650 for this to happen ($100,000 to the employee, $7,650 to the gov’t.)
To net $92,350, the self-employeed person needs to be paying the employee portion of the tax on $100,000. The $100,000 in turn has to be 92.35% of some other number, which can be arrived at by dividing:
100,000/0.9235 = $108,284.
To turn it around now that got the answer:
Self-employed person…
…generates $108,284
…pays 7.65% x 108.284 = 8,284 as the employer
…leaving $100,000 on which to pay 7.65% as the employee
…leaving $92,350 net, which was our goal (to match the net of an employee employed by someone other than self-).
So even doing it this way, the self-employeed person has to generate a little more income than an employer does in order for the self-employee to net the same amount as the regular employee.
*****
Von is right about cash flow. My income is reasonably stable for a self-employed person, but it does fluctuate, and planning for that in relation to quarterly tax payments can be … interesting.
No idea how that double posted. Sorry.
No idea how that double posted. Sorry.
Some cross-posting going on here. I wrote my 1:49 without seeing the several comments that precede it in the display.
Russell wrote:
I have been thinking all along that what I would really like to see are comparative curves of income vs total tax burden — comparative within the US across eras, and comparative between the US and elsewhere. Plus some attempt to mark a poverty-level point on the income axis. (Not that the debate will ever stop about how to gauge “poverty.”) (And ideally, “total tax burden” would include state and local, not just Federal.)
But I don’t have time to follow the links people are already providing, and I really don’t have time to go chasing down those curves.
So Russell — whether that’s what you’re proposing to look for, or something not quite that comprehensive, I will certainly have a look. Whether my ability to do algebra and remember bits about the tax code as it applies to me will be useful, who knows. Slarti will have to jump in where a familiarity with “piecewise continuous” comes into play. 😉
In any case, I’m in agreement with you about “fairness.” And then some….
russell
“How far do you want to take this ‘fairness’ thing? If you want to take it to the mat, I’ll be happy to go there with you. Just let me know.”
If you’re going all the way to the mat you need to consider who gets the benefit of the spending as well as who the revenues come from.
No matter how far you go, in the end someone will stand up and say “That guy over there has more money left over so it’s not fair”. There is more than one opinion as to what ‘fair’ is.
*snorkle*
Whatever you did when you double-posted and then double-apologized: don’t do that.
I have been thinking all along that what I would really like to see are comparative curves of income vs total tax burden — comparative within the US across eras, and comparative between the US and elsewhere.
While not everything you want, some useful data can be found here
243 — thanks for the link. I’ll see how much time and patience I can apply to it.
While not everything folks have asked for, and not everything we’d probably want to see, here is some information from the CBO that I think might be useful.
What this shows is an all-in federal income tax burden, where “all in” means payroll, income, corporate income, and excise taxes, distributed across income cohorts. Then it shows percentage of total national income distributed across the same cohorts.
For simplicity, the tables I’m looking at are ‘Share of total tax liabilities’ and ‘Share of income’. The numbers here are for the period from 1979 to 2001. The rates are probably slightly less progressive now due to the 2001 tax cuts, but probably not extremely so.
Long story short:
Percentages of total income received by each quintile in 2001, lowest to highest, was 4.2, 9.2, 14.2, 20.7, and 52.4.
Percentages of total tax liability by each in 2001, lowest to highest, was 1.1, 5.0, 10.0, 18.5, and 65.3.
Differences between the two are 3.1, 4.2, 4.2, 2.2, and -12.9.
The wealthiest 20% are paying about 13% more of the total tax burden than they receive in income.
One curious thing to note is that this goes *down* as you go further up the ladder. The top 1% receive 14.8% of the income, and pay 22.7% of taxes, for a difference of -7.9%.
Dave’s comment about spending is noted. His comment about ‘somebody will always complain’, likewise noted with the caveat that that cuts two ways.
Personally, I call this a mildly progressive taxation regime. YMMV.
Russell…Not ignoring you….just trying to get some work done. I’m going to look at the source tables this evening.
“Is there a point where you would draw a line and say citizen A gets no more help? If so where is it?”
Depends what you mean by “help.”
Is there a point at which I’d limit direct cash payments to people? Certainly, and of course.
Is there a point at which I’d deny free medical treatment to people? In the sense that not everyone is suitable for a heart transplant, or other immensely expensive treatment, yes, but in the sense of denying them most types of medical care: no.
Is there a point at which I wouldn’t make basic food available to the needy? No.
Is there a point at which I’d deny shelter to someone? There’s probably some space between making basic shelter available for the non-crazy, and “shelter” in the form of prison for those people who are dangerous, but I’m not prepared to come up with specific rules on the spur of the moment.
We can keep going on the specifics. I wouldn’t just keep handing out infinite cash, though, if that’s what you’re asking.
von is “still waiting for someone to tell me the top marginal rate past which even progressives won’t go.”
Let me end Von’s suspense. Speaking for myself, the answer is 95%.
Notice I did not mention, because von did not ask, the income bracket on which my 95% rate would apply.
Brackets matter. Anybody who talks of rates without talking about the corresponding brackets is giving life to George Carlin’s ancient joke:
“And now a partial score: Stanford 42.”
–TP
Janie –
No worries.
We can keep going on the specifics. I wouldn’t just keep handing out infinite cash, though, if that’s what you’re asking.
What’s the matter, Gary? You can’t handle vague, abstract, open-ended questions? Haven’t you prepared your Executive Summary of Gary Farber’s All-Encompasing Policy for Everything Under the Sun? (What was all that business about 35 versus 39.6, again?)
“I am still waiting for someone to tell me the top marginal rate past which even progressives won’t go.”
It’s a ridiculous question, since people only have individual opinions. Nobody here is appointed to speak for “progressives.”
Me, I’ll leave it to professional economists.
“GF believes, in good faith, that most people will not take advantage of this.”
No, I believe that it doesn’t matter much if people “take advantage” of easily available basic minimal subsistance help. Few people with other options want minimal subsistance help. I’m not judgmental about who are “deserving” and who are the “undeserving poor.”
See, here’s the contradiction in your comment, and stance, McKinneyinTexas. You say both these things:
And:
The latter means that most people aren’t the former.
And that some people are screwed up, well, I previously discussed that, and we’re apparently going to disagree, as I see it as a matter of people with problems, and you see apparently see it as a matter of failed morality.
Brackets matter.
at the OECD site there is a spreadsheet
Top marginal personal income tax rates for employee (Excel file) which shows our top rate as being 42.7%, which is roughly in the lower third (tied @ 11th place) of the 30 countries shown. These range from Mexico @ 22.6% to Hungary @ 71%.
The threshold where it kicks in is the highest of the thirty countries at 8.7 times the average wage, which at $41,143 works out to $358,449. Of the thirty, only eight have the top bracket over 100K, and 7 have the top bracket set at less than the US average wage.
Self-employed person…
…generates $108,284
…pays 7.65% x 108.284 = 8,284 as the employer
…leaving $100,000 on which to pay 7.65% as the employee
…leaving $92,350 net, which was our goal (to match the net of an employee employed by someone other than self-).
My understanding is that the self-employed would pay %15.3 of 92.35% of $108,284 – a total of $15,300, not $8284 plus $7650, which is $15,934. $108,284 minus $15,300 is $92,984, which is greater than $92,350.
Russell, it seems to this bit of those CBO numbers might be controversial:
Isn’t the usual conservative argument that taxes on corporations end up being passed along in higher prices and thus hurting the poor?
hairshirt, you are right, I goofed. I forgot that for a self-employed situation I shouldn’t split the calculations into 2 phases. It felt odd to me…I’m glad you pointed out why.
I think the right gross amount is $107,545.73.
92.35% of that is $99,318.48.
15.3% of that is $15,195.73.
$107,545.73 – $15,195.73 = $92,350.
So the self-employed person actually has to generate a little less rather than a little more than the employer of an employee, to end up with the same net as the employee.
If you feel like it….check the #’s again.
🙂
d’d’d’dave: My bad that I misconstrued what you wrote. Keep in mind that, back when there was a fairly strong debate over whether you were a troll or not, I was one of the commenters who came to your defense. Point being: I wasn’t taking apart your words just for the sake of trying to pick on you — I simply read them the way I read them, rightly or wrongly.
Russell — I see where you got the #’s and I agree that they suggest an only mildly progressive Federal tax structure.
I want to point to a few other interesting things in the report, supplemented by another report that updates the #’s to 2005. Unfortunately, the later report breaks down the top quintile into 7 (!!) sublevels. It’s easy enough to deal with the charts that show percents by just adding the 7 to recreate the 5th quintile. But for the charts that show income it would be necessary to weight the incomes of the 7 sublevels by the percentages……and I just don’t have the time. Also, since income amounts are corrected for inflation, the 1979-2001 report shows 2001 dollars and the 1979-2005 report shows 2005 dollars…another complicating factor when trying to just tack the 2002-2005 numbers onto the earlier ones.
One thing to note in passing, given that we’ve talked about it here, is: “CBO assumed, as do most economists, that employers’ shares of payroll taxes fall on employees and therefore that the amount of those taxes should be included in employees’ income and the taxes counted as part of employees’ tax burden.” (This is for hairshirthedonist especially.)
Here are the ratios you get when you divide first the 2001, then the 2005 after-tax income by the 1979 after-tax income for the 5 quintiles:
’79 to ’01
1st quintile 1.085
2nd quintile 1.15
3rd quintile 1.17
4th quintile 1.245
5th quintile 1.55
’79 to ‘05
1st quintile 1.6
2nd quintile 1.16
3rd quintile 1.21
4th quintile 1.3
5th quintile (don’t have time to work it out)
The lower levels stagnate while the rich get richer, both in absolute terms (I’ll get to that in a minute) and relatively. Note that the lowest quintile actually declined from ’01 to ’05.
For me this puts an interesting light on Von’s worry that something bad will happen if we don’t get the lower quintiles paying at least something. If they had anything, it might be reasonable to ask them for something (all aside from the fact that, as numerous people have pointed out, they are far from paying no taxes). I would suggest that we will have something differently bad to worry about if we don’t figure out how to slow down, stop, or even reverse the trend of the past 2 or 3 decades of the gap between top and bottom getting wider all the time.
To wit:
The 2005 charts divide the top quintile into 7 sublevels. The highest level of all is “Top 0.01 percentile.” In 1979 there were roughly 9000 households in that group, by 2005 there were about 11000.
In 1979, the after-tax income of the lowest quintile was $14,400; of the top 1% of 1% it was $4,188,300. The top 1% of 1% were taking home (after taxes) 291 times the bottom quintile.
In 2005, the after-tax income of the lowest quintile was $15,300; of the top 1% of 1% it was $24,286,300, or 1587 times the bottom quintile.
Heaven forbid we should ask these top people to kick a little more into the common pot…..
We have seen comparable levels of inequality in the US in the past, but they weren’t resolved by taxation the last time around and there’s no evidence that they could be resolved by taxation this kind around.
Two more statements that are false.
In 1932 the top tax rate was raised from 25% to 63%. You can guess what happened to inequality going forward.
Second, compared to many European countries the US does not differ much on pre-tax income inequality. It differs on post-tax income inequality.
The decrease in income inequality after the 20s was a result of tax policy, the increase in recent years in inequality to levels that exceed those of the 20s is a result of tax policy.
If the top rates are increased to the levels of the 1960s, inequality will decrease again.
This is simple stuff, unless you spend too much time reading policy briefs from the Cato Institute or something.
JamieM, you should note that the spreadsheet you are using appears to be showing household & not individual incomes. Granted some households are households of one…
Everyone pays less tax in the US as compared to the EU average. The significant difference is that a large number of folks in the US pay no taxes, and the US relies on the rich for more tax revenue than the EU average. I don’t think that it’s sustainable.
Ok, as too many others have pointed out and you continue to ignore, nobody in the US pays no taxes, but let’s move on…
You look at that data and see a society that increasingly relies on the wealthy minority as its tax base. Do you give any thought to why that is?
I look at that data and see a society that is in the process of destroying its middle class tax base.
I agree with you that it is unsustainable.
Only a few have pointed out that this is why the wealthy are increasingly the only ones paying federal taxes: fewer of us have taxable income!
You want to make the tax base more equal across the board, raise incomes for the bottom 80% proportional to the raise in income for the top 20%. That’ll flatten your tax base in a hurry.
It’s the inequality that’s the problem here, not the progressivity of the tax system relative to the EU or to US history.
243 — Do you mean I should have noticed it (I did), or I should have mentioned it here?
Either way, what difference does it make? I’m not being snarky, I just mean: do you think average household size differs between the quintiles?
As far as (what I consider to be) the inequities go, it’s all the worse if the incomes showing up at the low end are what multiple people have to live on, instead of just one person. On the other end of the spectrum, I suspect that a household as large as you could find could just about get by on $24 million.
JanieM, I thought you should have mentioned it, and yes I think it likely that household size with the definition given “(A household consists of the people who share a housing unit, regardless of their relationships.)” might well vary as to income. It seems likely that lower income people would have room-mates or adult children living at home thus increasing the size of their household. That said I’m not criticizing your broader points, and I truly appreciate the link to the spreadsheet.
Thanks 243.
Nate Silver has interesting graphs of where the top tax bracket has started over time.
The real face of actual poor people. Oh, it’s a great life living off the wealthy! Who wouldn’t want to live such a lazy and free existence?
KCinDC — thanks for the Nate Silver link. That is great stuff.
That’d be even more interesting if it were adjusted for inflation. That $75 million starting point for the upper bracket in 1941 or so is equivalent to about $1B, now.
It’s also useful to note the number of brackets. In 1940, there were 30 income brackets. This was eventually pared down to 19 by the time Reagan was in office, and in 1987 it was reduced to five. In Bush the elder’s time it was brought down to three, the Clinton administration saw it brought back up to five, and then Bush the younger’s administration had it go up to six.
Janie M: If you feel like it….check the #’s again.
🙂
I think you’ve got it. The problem is, as I put out there before, that the way to make the SS/Medicare treatment of self-employed income equivalent to employment income is to divide that income by 1.0765 (rather than multiplying it by .9235)and pay 15.3% of that in SS/Medicare. This would make self-employment income exactly equivalent to employee income in terms of SS/Medicare taxes considering the 7.65% employer contribution to SS/Medicare.
Oops. That should have been $5M in 1940, which is about $73M in current dollars. The next bracket down from the upper bracket (which sees a rate of 79%) starts at $2M (~$30M in current dollars) and is taxed at 78%. Not much real difference between the upper bracket and the next one down, then. You have to go about 18 brackets down from the top one, in the 1940 scheme, to see the tax rate our upper bracket is currently paying.
That’d be even more interesting if it were adjusted for inflation.
Perhaps you missed the note under each graph that says, ‘inflation adjusted dollars.’
I proposed this on another thread, but I would like to see tax brackets eliminated in favor of a formula based on the inverse tangent. It would look like:
%income tax = K1*invtan[K2*(taxable income + K3)] + K4
If K1 and K2 were each equal to 1 and K3 and K4 were each equal to 0, the graph would be asymptotic at %income tax = -1 and 1 with a value of 0 at taxable income equal 0.
K1 streches the graph vertically at values greater than 1. The value of this constant can be used to adjust the spread of tax rates from the bottom to the top.
K2 stretches the graph horizontally for values less than 1 and compresses it horizontally for values greater than 1. The value of this constant can be used to adjust how quickly the graph rises over income levels.
K3 slides the graph back and forth horizontally. For a given K2, this number will determine where your inlection point resides with respect to taxable income and, given all the other constants, where, say, your zero tax rate, if there is one, would lie relative to taxable income.
K4 slides the graph up and down. This number will determine where your inflection point resides relative to tax rate.
This formula allows for negative income tax, if desired, and will only apply for values of taxable income greater than zero. I’m not HTML proficient enough to provide a graph of the inverse tangent, but a google search will yield one readily. When you see the shape of the curve, you will, I hope, understand why I felt this function was appealing for determining income tax rates.
hairshirthedonist — That’s interesting. I missed it in a previous thread. (Some weeks, especially when traveling, I go for whole hours at a time without looking at ObWi…. 😉
There was a discussion in November about posting pictures in comments.
Here’s some html for doing it:
< img src="angry.gif" alt="Angry face" />
If you use it, get rid of the space between the first bracket and “img”.
“Angry face” is a caption (I think).
In place of “angry.gif”, put the location on the web of the image you want to show in a comment. It took me a while to figure out that this isn’t the URL of the website where the picture is. You can find the right address to put there by right-clicking on an image, selecting Properties, and copying the address from the properties page into your html.
To post a picture of your own, you have to put it someplace where it can be picked up. I posted one that I had stored in a Picasa album.
Meanwhile, here’s a picture. I don’t want to pull in the image because I’m not sure what the copyright rules are….
Perhaps I did. Now I know where that $75M came from.
O, the embarrassment. I die.
It’s also useful to note the number of brackets. In 1940, there were 30 income brackets. This was eventually pared down to 19 by the time Reagan was in office, and in 1987 it was reduced to five.
Quite right.
Essentially, what Reagan did in the 80’s was just lop the top brackets off of the tax schedule. Then, raise the cutoffs for the remaining rates, lather rinse and repeat.
If you were making $50K for the period 1980-1987, you saw your top marginal rate drop from 49% to 28%. Pretty nice.
If you were making $1M you saw them drop from 70% to 39.6%. Even nicer.
Top cutoff in 1980 was $215,400. Top in 1987 was $90,000.
The upper brackets just went away. Poor folks got squat, middle to upper middle class folks got a nice break, rich folks got an even nicer one.
1988 and 1989 were kind of perverse because the top rate was, somewhat astoundingly, actually LOWER than the next-to-top. Go figure.
Historical US federal tax rates.
Meanwhile, here’s a picture. I don’t want to pull in the image because I’m not sure what the copyright rules are….
Thanks, Janie. I goofed on the range of y asymptote values for a straight inverse tangent graph: -pie/2 and +pie/2, not -1 and 1. No biggie, though. It just changes how you use the K’s a bit. Same concept.
And 1990, too. I never noticed that before. Certainly I wasn’t in a position to enjoy it.
I wouldn’t advocate adding another dozen and a half (or more) tax brackets, though.
If I owe you a pie, and give you half a pie, this is my outstanding balance?
I wouldn’t advocate adding another dozen and a half (or more) tax brackets, though.
Nor I. I’d actually like to see the tax code become quite a bit simpler than it is now, not more complex.
My only point here, albeit made to the point of tedium, is that folks making more than a quarter million bucks a year don’t have all that much to complain about, all things considered.
With or without Obama’s tax changes, our federal tax regime is gonna be, at worst, mildly regressive.
[Did I post this one already? I don’t remember.]
pie chart
-pie/2
If I owe you a pie, and give you half a pie, this is my outstanding balance?
Yes, but I would accept $1.57.
[eek. Forgot the closing tag. My mind is going. I can feel it.]
Nor I. I’d actually like to see the tax code become quite a bit simpler than it is now, not more complex.
I don’t get this at all. The complexity of the tax code comes from calculating your adjust gross income which involves mashing deductions and credits and tracking down all those stupid pieces of paper. Once you have an AGI though, plugging it into a computer (or even looking it up in a table) doesn’t get any harder no matter how many tax brackets there are. Right?
Once you have an AGI though, plugging it into a computer (or even looking it up in a table) doesn’t get any harder no matter how many tax brackets there are. Right?
Yep
I like this one better.
Slarti: I wouldn’t advocate adding another dozen and a half (or more) tax brackets, though.
Russell: Nor I. I’d actually like to see the tax code become quite a bit simpler than it is now, not more complex.
Beating my own dead horse, I say tax complexity has nothing to with tax rates.
Hairshirt’s formula yields an infinite number of brackets, or a single bracket, depending on your point of view. But it is not complicated — once you calculate the input variable called “income”. The hair-pulling and brow-furrowing comes in when you try to do the additions and subtractions to figure your AGI. Plugging that number into an inverse trig function is a trivial last step.
Reducing (or raising!) tax rates on incomes that are 10, 100, even 1000 times the median income is completely orthogonal to the simplification question.
–TP
The complexity of the tax code comes from calculating your adjust gross income
Beating my own dead horse, I say tax complexity has nothing to with tax rates.
Yeah, you guys are both right. My bad.
I guess I wish the tax code were simpler, *and* I don’t necessarily see lots of value in adding lots of additional rates to the table.
Beating my own dead horse, I say tax complexity has nothing to with tax rates
I’m not saying otherwise. I’m just noting that the upper bracket rate, although not completely devoid of information, doesn’t really tell the entire story.
Which, admittedly, is dead obvious.
Another pi chart for the easily amused.
I guess I wish the tax code were simpler, *and* I don’t necessarily see lots of value in adding lots of additional rates to the table.
For me, having a small number of brackets seems unfair. It causes big step changes in the tax rate of a marginal dollar. Something like hairshirthedonist’s arctan curve makes a lot more sense: there are no discontinuities and looking at the curve it is easier for me to visualize the effect this has on effective taxation as a function of gross income just by looking at the area under the curve. Now, a table filled with brackets can be thought of as an approximation of a smooth curve, but if we’re only going to have a handful of brackets, then it is going to be a really crappy approximation.
If nothing else, a smooth curve taxation scheme might have prevented all the galts’ whinging about how they were going to cut their income to keep below $250K. Then again, smooth curves can’t cure stupid, so probably not.
Granted, this is all very subjective and it is not a particularly big deal. It just seems fairer to say that each dollar gets taxed at almost exactly the same rate as the dollar that come before it.
Something like hairshirthedonist’s arctan curve makes a lot more sense: there are no discontinuities and looking at the curve it is easier for me to visualize the effect this has on effective taxation as a function of gross income just by looking at the area under the curve
Actually a single formula that covers all income levels seems ideal to me, mostly because of this:
It just seems fairer to say that each dollar gets taxed at almost exactly the same rate as the dollar that come before it.
This thread’s probably dead, after a long, long life. But I have to say that my pi/pie error is very bothersome on further reflection, not that I mind the ribbing in the form of funny pie charts, all of which amused me. It’s that being and engineer, perhaps more so being an electrical engineer, I ate far more pi in school than I did pie. Not just that, but I was in an effing fraternity, you know – a Greek Letter Organization. WTF?? How do these brain farts happen? PIE!!! PIE!!! I mean, really … fnck.
hairshirthedonist — since the thread is almost done anyhow, I’ll follow your lead OT for a moment and observe that I make enormously more typing errors in emails and blog comments than I ever made at a typewriter, and weirdly enough, more than I make if I’m typing inside a Word document. Or at least, when I’m typing in Word, I’m almost always aware of the errors even as I’m making them, and I correct them on the fly.
I don’t have an explanation that seems complete. One element seems to be multi-tasking; there are always several things open on my screen, and that’s only a fraction of what’s floating around in a brain that gets more cluttered with every passing year (and the years are mounting). Another may be the speed of the keyboard. My fingers still can’t go as fast as my brain but these keyboards have closed the gap a lot compared to the old days.
I find myself making exactly that kind of pi/pie error a lot. It’s as if my brain still knows how to spell but sometimes my fingers don’t….
Also, reading and commenting on ObWi is kind of a guilty pleasure. I almost never do it without feeling like I should be working (or something) instead, so I’m always hurrying. (I mostly work at home and have immense flexibility about my hours — a mixed blessing.)
Meanwhile, back on topic, the inverse tangent function for taxes is a fascinating idea. I too like that evens out the differences from one marginal dollar to the next.
I have been tempted to extend this thread with some further indulgence in abstract thoughts about fairness and what “mine” means in the context of individual and community, but I’ll save it for another time.
As an engineer, you should learn to sweat the important stuff first. It’s taken me a number of years to even begin getting that right, as it wasn’t anywhere near the top of my list of things to do.
Dweebs are allowed to make mistakes, from time to time. EE ’83.
8p
Hilzoy is Dead Wrong
Reagan did not soak the rich. That is an absurd misreading of basic facts. Fundamentally tax rates were significantly higher prior to Reagan’s term under asinine laws pushed by the Democratic Congress. Marginal tax rates were lowered dramatically during Reagan’s term and we had a corresponding boom in prosperity as the albatross of high marginal taxation encouraged entrepreneurs like me to invest and create new businesses.
Our new Socialist in chief along with his dimwitted co-conspirators Pelosi and Reid are very much encouraging class warfare, redistribution away from those who create value like me to those who want to sit on their butts and demand handouts. No thank you I refuse to kill myself working so a thankless group of fools can claim the right to all kinds of welfare the Democrats are eager to hand out as “rights.”
Well instead of fighting this battle with dimwitted Democrats and misguided Republicans I’m just going to opt out – by abandoning US citizenship and buying my way into a more reasonable tax and moral code in a country like Singapore. In our modern world with the mobility of capital and labor you’ll find fewer and fewer Americans tolerant of this kind of Socialist redistribution. Instead, the most productive will seek true bastions of free market capitalism, which are sadly further and further away from the country I once used to love (under Reagan’s vision for America). Enjoy your Socialist paradise full of self-loathing parasites suckling off a bloated yet decrepit government tit… I will not be around to pay off your absurd deficits, nor will I allow my own children to fall victim to the wealth destruction your misguided policies will impose on generations to come…