by Eric Martin
Annie Lowery, arguing for additional tax brackets at the top, is making sense:
For the past 20 years, the top income tax bracket has started around $370,000, and top marginal tax rate has stayed between 35 and 39.6 percent. But since the mid-1990s, the richest have gotten richer, earning a higher and higher share of all income while paying the same income tax rate as more moderate-income workers.
Kevin Drum's numbers are a decent jump point to start the conversation:
Indeed they have…How about if we reduce the top rate on the well-off (say, those making between $200,000 and $370,000), raise it on the rich (between $370,000 and $1 million), and raise it a bunch on the super rich (over $1 million). If you really want to get ambitious, you could even add yet another bracket that kicks in around, say, $5 million.
Why not? As Annie points out, we used to have more brackets. There's no law that says everyone over $370,000 should pay the exact same rate, and the supply-side theory that the super rich will lose all their ambition if their tax rates go up is based on essentially no evidence at all. What's more, the rich and the super rich (not the merely well off) are the ones who have really done well over the past couple of decades, so higher brackets for them make sense.
This would not only be politically popular, but would help to shore up the tax revenue shortfall while preserving the basic, progressive structure that everyone from Adam Smith to Teddy Roosevelt endorsed.
It seems like common sense to me.
Then again, such a proposal would also likely save me some money on my taxes, so there may be self-interest clouding my view.
So, you’re telling me that if I make $370K a year (in my dreams), I’d pay the same amount in taxes as Bill Gates, multi-billionaire? That ain’t right.
But our corporate masters will never allow this to happen precisely because they are the ones that will have to pay more in taxes.
I still don’t get why we have tax brackets instead of a smooth curve defining marginal tax rates as a function of adjusted gross income. 99% of the work of doing one’s taxes is spent calculating the AGR. Most people then punch the AGR into a computer program anyway, so using a slightly more sophisticated program that could integrate a curve seems pretty simple. A smooth curve would be equivalent to an infinite number of brackets.
This would not only be politically popular, but would help to shore up the tax revenue shortfall while preserving the basic, progressive structure that everyone from Adam Smith to Teddy Roosevelt endorsed.
It’s kind of hard to argue specifics against this because no one is putting out any numbers. Drum specifically disallows the impact of diminishing returns, which is debatable. Further, he is informed by the view that the gov’t should control roughly half the GDP–a bizarre view for most Americans but maybe this seems about right for Progressives–I just don’t know. But that aside Eric, why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?
Turb: I believe that the smooth curve/infinite brackets idea is also something Sebastian has proposed here, but he has it topping out at about the current top rate.
Eric: To add to McKinney’s question, why do you hate puppies, rainbows, love and The Beatles?
“why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?”
I don’t know about a majority of Americans (many of whom believe all sorts of odd things), but I can take a stab at an answer for those who would support the idea of more brackets:
Because those people who have lots of money live in a society that (by virtue of its awesomeness) allowed them to acquire that money. This is a GREAT country for rich people. They have been on a several decades long winning streak, while the rest of the population has roughly broken even.
Also, older folks who remember or younger folks who can read about the past, when high marginal income tax rates were normal and things seemed to work out just fine.
One need not even be a “progressive” to think that the rising wealth disparity is a bad thing. Manzi, IIRC, worries about “social cohesion.”
One could support a revenue-neutral version of this idea. It doesn’t have to be about raising more money for the government.
But that aside Eric, why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?
I think a majority of Americans recognize that, to have the country that we all want (with a functioning, healthy infrastructure, sound public schools, a social safety net, world’s most powerful military, etc) that we need a lot of tax revenue.
In order to generate that revenue, the American people – like Adam Smith (that dirty Commie!/father of modern capitalism) – recognize that the wealthiest are in a position to pay more by virtue of their massive wealth, and the limited utility of a few extra thousand when you have a pile of hundreds of millions.
This, as opposed to those with only a few thousand who would feel the loss of a thousand quite directly and painfully.
That, and I think the American people recognize that the wealthiest among us take advantage – and use – more of the infrastructure and benefits afforded by a healthy society with the aforementioned standard of living.
I think that’s why.
Why, do you have a different theory?
To be blunt: should revenue go down, if the federal income tax rate on the top earners (which I do not believe) then this would be a price I’d be willing to pay (yes, yes, I am not a USAnian nor do I intend to become one) for the benefit of reducing inequality.
—
If reinvested money is favored fiscally, should then a higher tax rate not encourage higher rates of investment?
Relevant: Via digby, Tim Noah at Slate is doing a series on US income inequality. From his introduction:
why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?
who cares. if the obscenely rich don’t like it, they can get the fnck out of our country.
As I mention every time this comes up. The median income in the us is just over $51,000. Someone making $250,000 is making five times what the average American makes. And I can maybe see how someone could be five times as productive or useful as the average American. $1,000,000 is 20 times the median income. I have a harder time trying to figure out how someone would be worth 20 times what the rest of us are. $5,000,000 is 100 times the median income, and I really can’t see how we can justify that person “earning” 100 times more than the rest of the country, being 100 times more productive or efficient. Beyond that, things get more ridiculous. So, I would ask how McKinneyTexas would justify that, rather than ask how we can justify higher taxes on somebody who makes 20, or 100, or many more times the income of the median worker.
Also, I’ll point out again that if it really DID disincentivize (that’s an ugly word) people from trying to find new ways to package securities etc to make that extra $5 million bonus on top of the $10 million they’re already being paid, that would not entirely be a bad thing. It probably would have helped avoid the financial bubble and crisis, for one.
why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?
Why do you think a majority of Americans favors paying our bills, and collecting the money to do that based on ability to pay?
Why, do you have a different theory?
Why, yes I do. Shocking, I know. My theory, quaint as it may be, is that a majority of Americans are pretty much ok with the fact that others, even if only a few, are off the charts rich. They don’t see life as the business of dividing the pie. They expect to pull their own weight and don’t look to others to help. If you were to order their priorities in very general terms and what they expect from government, it would be defense first, basic gov’t apparatus (courts, roads, clean water) second and social security third. If push came to shove, they’d cut defense some and everything else a lot. They understand intuitively that borrowing is bad and to continue doing so at ever higher rates is worse. Much worse. They aren’t wonky because they stay busy doing other things. They don’t think of the wealthy as over-consuming infrastructure. They see that as more a function of the elderly and the poor. They have a sense, even if somewhat vague, that the gov’t taking money out of the economy doesn’t cause the economy to grow. They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn’t quite the priority for them that it is for others. They also sense that no matter how much money the gov’t takes in, it will never be enough. And, given the above, better to stop the train now, begin the process of cutting back and living within means than to keep borrowing, taxing and stimulating.
if the obscenely rich don’t like it, they can get the fnck out of our country.
Some of them are. And taking their money with them. Should we confiscate it? Arrest them?
Why do you think a majority of Americans favors paying our bills, and collecting the money to do that based on ability to pay?
I think they believe in paying their bills, but in cutting costs rather than going after the rich.
“They expect to pull their own weight…”
Not the richest ones, apparently.
I have a harder time trying to figure out how someone would be worth 20 times what the rest of us are. $5,000,000 is 100 times the median income, and I really can’t see how we can justify that person “earning” 100 times more than the rest of the country, being 100 times more productive or efficient. Beyond that, things get more ridiculous. So, I would ask how McKinneyTexas would justify that, rather than ask how we can justify higher taxes on somebody who makes 20, or 100, or many more times the income of the median worker.
If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts.
My theory, quaint as it may be, is that a majority of Americans are pretty much ok with the fact that others, even if only a few, are off the charts rich.
How would they feel if they knew that those few off-the-charts rich had collected 80 cents of every single dollar produced by their increases in productivity for the last 30 years?
“Some of them are. And taking their money with them.”
Patriots, one and all!
Though that is a legit concern. There is a point, somewhere (hard to say exactly) where progressive taxation becomes self-defeating.
They don’t think of the wealthy as over-consuming infrastructure. They see that as more a function of the elderly and the poor.
They are, not to put too fine a point on it, wrong.
They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn’t quite the priority for them that it is for others.
But being mad at gays and Muslims sure pays off, right?
Some of them are. And taking their money with them. Should we confiscate it? Arrest them?
Yeah, because raising marginal rates to those that prevailed during the 1970s or 1990s is just like arresting and confiscating!!!!!
If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts.
And if someone runs a hedge fund? Or is an heiress like Paris Hilton?
If you were to order their priorities in very general terms and what they expect from government, it would be defense first, basic gov’t apparatus (courts, roads, clean water) second and social security third. If push came to shove, they’d cut defense some and everything else a lot.
Your theory is not based on reams of polling data. Mine is.
Regardless, to do the things you listed requires more revenue.
Although “social security” is fully funded by a separate tax.
They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn’t quite the priority for them that it is for others.
Mad? At myself? So I’m a self-hating top bracket guy?
Ha. Thanks for the laugh McTex.
I think they believe in paying their bills, but in cutting costs rather than going after the rich.
They believe in cutting costs in the abstract. Deciding which costs to cut, and how much, is where the politics starts. But I think “ability to pay” is a pretty broadly accepted principle for revenue collection.
Some of them are. And taking their money with them.
cite?
Should we confiscate it? Arrest them?
hand em a bottom of sunscreen (gets pretty toasty in Somalia) and then kick em in the ass on their way up the jetway.
s/bottom/bottle
That’s a good point which I had forgotten. In addition to needing a cite from McKT regarding his claim that the rich are moving away, where are they going? What nations are benefitting from this significant influx of wealthy Americans? I think income tax rates in Europe are significantly higher than here. What are some appealing first world countries with lower income taxes than the U.S.?
If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient.
Most businesses do not found new markets- they compete with existing businesses for market share. If I open a restaurant and hire 20 people, Im probably not increasing the total number of meals eaten in restaurants very much- so Im not really adding much to employment. Or, if I start a plumbing business, Im almost certainly not increasing the number of household plumbing emergencies. One would hope so, anyway.
What you’ve done is create a simplified model where, in the absence of that business, those 1000 people just sit on their hands and the people who used that service or bought that good just set their money on fire instead of going to a competitor or buying something different. And that’s not a very good model.
I don’t know why this sort of fallacy is so common- it’s right up there with employment as a gift that employers offer to employees rather than a free market exchange of value.
I found this chart:
http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg
Are rich Americans moving to Japan, Mexico, NZ, Australia, and Iceland?
Also, I could use someone explaining that chart to me re: Corporate taxes. It seems to be near 40% but I have read repeatedly that the effective rates paid by corporations are significantly smaller than that.
If I were rich I would seriously consider moving to NZ, though not for tax reasons.
why do you think a majority of Americans favor taking even more of someone’s money, just because they have a whole lot of it?
I’m not sure that a majority do favor that.
I personally favor it because (a) we need the money and (b) if you’re going to get it from income tax, a progressive scheme creates the least overall pain.
I don’t have any aversion whatsoever to people making astronomically large amounts of money. What I do have an aversion to are people making personal fortunes by extracting money from the productive economy without creating anything resembling a commensurate amount of value.
As far as I’m concerned, the Bill Gates’ and Warren Buffets of the world should be very, very wealthy. Sam Walton, too.
Those guys created a lot of value, not only for themselves but for lots of other people.
The Joe Cassanos of the world, not so much.
Since you are interested in specific numbers, here’s my suggestion:
Less than $250K, no change from current rates.
$250K – $400K, 36%.
$400K – $1M, 40%.
$1M – $5M, 45%.
$5M and up, 50%.
Since, for better or worse, nobody’s talking about changes to taxes on investment income and capital gains, the impact on the actual day-to-day lives of anybody affected by a tax regime like what I’ve outlined will be more or less noise.
People who make big money as a result of being, really and truly, highly productive are generally in the game because *they like being highly productive*. These kind of changes in the marginal rates on their top dollars are not going to chase them away.
They do what they do because they enjoy doing what they do. The money is gravy. Lovely, delicious gravy, but gravy.
The only folks who will see this as a disincentive sufficient to get them to pack up their tent and go home are folks who are purely in it for the $$$. As far as I’m concerned, we can’t get them out of the picture fast enough.
Seriously, greedy people – by which I mean really greedy people, not people who are successful by virtue of actually creating some kind of value – can go straight to hell as far as I’m concerned. All they do is screw the world up for the rest of us. They’re anti-social, destructive parasites.
Also: it’s absolutely unclear to me that “the wealthy employ more people than the middle class”.
As we are reminded on a daily basis, most job growth comes from small businesses, whose owners are generally not wealthy.
The very large employers are generally public corporations, whose owners either are not wealthy, or are folks whose involvement in the operations of the enterprise consists of making their fungible dollars available for investment and cashing dividend checks. They have little or nothing to do with “creating jobs”. They’re quite often more than happy to see jobs go away, as long as it improves their ROI.
McKinneyTexas is spot on. I see where Eric suggested a more progressive approach with higher rates at the top tiers would be politically popular. Is this what prompted McK to ask the question about a majority of Americans favoring taking more money from those who earn a lot?
Income taxation, basically, is very un-American. In the early 20th century, while the nation suffered from a severe case of temporary insanity, a Constitutional amendment was adopted that permits this confiscation of individual personal property. A majority of real Americans see it this way and is the reason Eric’s proposals for raising income taxes on the very productive is not already in place. Not enough real Americans suffer from this level of sense of entitlement yet.
So if, according to the mythology on the Right, our current income distribution is a result of, (and a reward for), the individual’s massive contribution to societal productivity I suppose the only moral thing to do is to tax the crap out of inheritance in order to make sure the consanguineous deadbeats surrounding these paragons pull their own weight. Playing favorites with family members distorts the markets, donchaknow. And while we are at it let’s make real estate a single person lifetime lease — non-transferrable.
New monopoly board every generation. Woot!
Also, regarding this:
If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient.
I’d say the *1,000 people who get up and go to work every day* in the business in question have something to do with the value that is created.
If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts
MS-DOS was not written by Microsoft.
The guy who actually did the innovation and wrote the code (he called it QDOS, for “Quick and Dirty Operating System”) was Tim Paterson of Seattle Computer Products. Microsoft bought the rights to QDOS for $50,000, keeping the IBM deal a secret from Seattle Computer Products.
Microsoft founded several industries by
a.) cheating the actual innovator
b.) exploiting ruthless business practices to exploit an early advantage
a pattern the company has followed for decades, with decreasing success.
Bill Gates was one of the best business strategists in the nation, but he was never a particularly good programmer, nor an innovator (Windows is a poor copy of Apple’s Lisa). He was incredibly ruthless and focussed on extracting every dime from the customer, even if MS had to beat it out of them.
Technically, the federal government, which issues fiat currency, can spend without borrowing or taxing. Revenue and borrowing perform functions other than what they do for private entities or states. That doesn’t mean that the federal government shouldn’t ever borrow or tax, or that it should spend without regard to the amount it spends or what it spends it on. Anyway, that’s a fundamental understanding that might lead to different conclusions than the traditional ways of thinking about national finances.
To the extent that things work the way they do and will continue to do so because of traditional thinking, once you’ve accepted the concept of progressive taxation, you need to justify the numbers proposed on something more than what they happen to be right now, as though that somehow makes them ideal by default. So that’s where we are. Numbers will have to be crunched, but I’m willing to take a stab at it, just for kicks as a starting point, based on my impressions of life thus far.
For individuals (these are marginal rates for the dollars earned falling in those ranges, not overall rates for individuals based on the total earned):
0 to 15k at -10%
15k to 30k at 0%
30k to 50k at 4%
50k to 80k at 9%
80k to 135k at 16%
135k to 225k at 25%
225k to 450k at 35%
450k to 1M at 47%
1M to 5M at 55%
5M and up at 60%
Oh no, nous. Now you’ve done it. You’re mentioned the DEATH TAX.
Remember, inherited wealth is something that every REAL American holds sacred.
Income taxation, basically, is very un-American.
Let’s go back to tariffs, fees, and luxury taxes.
Mortgage exemptions on primary residence only, and in fact a significant federal excise tax on second (and third, etc) homes.
Buy a pleasure boat? Pay 50% sales tax to Uncle.
Expensive wine, good cigar, small-batch bourbon, custom-made dress shirt or bespoke suit? Rolex watch? Nice Italian shoes? 50% to Uncle.
And definitely don’t forget tariffs. What’s our foreign trade deficit these days?
That’s how we used to roll. Want to go back, I’m fine with it, as long as we get the revenue we need.
He was incredibly ruthless and focussed on extracting every dime from the customer, even if MS had to beat it out of them.
You’re not just a user, you’re a beta tester!
A majority of real Americans see it this way…
something tells me that the truth of this assertion depends on the definition of “real American”, and that “real American” is defined in such a way that makes the assertion 100% true.
Do people actually WANT an aristocracy? I’m confused.
I want to know about the minority of “Real Americans” who don’t see it that way. I mean (as cleek points out), aren’t they disqualified?
Re: “supply side” arguments, keep in mind that at the upper levels, a lot of them fall apart.
The fear is that, if someone is going to get taxed “too much” on a large amount of profit, they might not work “too hard” to get that large amount of profit.
But there’s two issues to consider.
One, we’re not near that point in marginal tax rates. Our upper rate is 40%, when the tax cuts expire. You’re still taking home a nice chunk of change after paying your tax bill.
Two, a great many (most?) big dollar decisions aren’t about *work*, they’re about use of a pile of money that’s already earned. Take it home as salary, or find some way to deduct it – which is more attractive? Tax rates have to go pretty high before the attractiveness of “just take it home” starts to fade.
(I think 50% is a big psychological barrier. At that point, you can double a charitable contribution if it’s deductible, and your net take home pay is the same.)
The other side of it is that a marginal rate that discourages “just take it home as profit” isn’t necessarily a *bad* thing, depending on how people can deduct the money. They might plow the money back into the business, donate to charity, start other businesses, etc..
If you are taxed at 70%, you might think that paying $60k a year in salary and benefits for a personal assistant is a good deal – it’s $18k a year out of pocket to you. If you’re taxed at 30%, you’re paying 42k, 2.33x as much for that assistant – you’ll get your own damn coffee.
In the early 20th century, while the nation suffered from a severe case of temporary insanity, a Constitutional amendment was adopted that permits this confiscation of individual personal property. A majority of real Americans see it this way and is the reason Eric’s proposals for raising income taxes on the very productive is not already in place.
As a Real American — i.e., someone whose maternal ancestors have been residents of these shores since before 1800, plus I’m a straight, white, male property owner, so, you know — I say you’re wrong.
But if you can explain to me how Paris Hilton is “very productive,” I’m all ears.
I mean, did someone honestly just use “real Americans,” unironically, to refer to a category other than “people who hold American citizenship?” Really? And does that person actually expect to be taken seriously? Like, as a human being?
a Constitutional amendment was adopted that permits this confiscation of individual personal property.
Is there any kind of tax that *is not* a “confiscation” of individual personal property?
Also, what the 16th Amendment did was basically clarify whether tax on income was or was not a direct tax. It’s a much narrower issue than what you’re alluding to here.
Let’s go back to tariffs, fees, and luxury taxes.
And excise taxes on . . . [cue scary music] . . . alcohol, tobacco and firearms! Look out, paw, it’s the revenuers!
You’re not just a user, you’re a beta tester!
“At Microsoft, quality is job 1.1.”
It’s as if we have a new Internet law in the making: Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation.
It’s certainly a constant on this thread.
If it’s really a given on the right that progressive taxation is unfair, unjust, and downright un-American, I have to wonder why its elimination isn’t given more serious consideration by conservative policy-makers. We had some “flat tax” ballyhoo in the late 80s and early 90s (remember when people actually believed Steve Forbes could be elected as…well, anything? good times, man), but nothing since. And yet there seems to be an awful lot of conservatives who believe very strongly that I, Paris Hilton, and the guy who cleans the bathroom at my gym should all pay exactly the same proportion of our income as tax.
Wha’happun?
s/b “It’s certainly a constant on this *blog*.”
Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation.
i dub this Kvetch’s Law.
And it’s always worth remembering that the tragic economic devastation that began with the end of WWII and that lasted through the 50’s, 60’s, and 70’s was the result of tax rates between 70 and 94% on income over $200,000.
@John,
but if those rates were between 25 and 35%, imagine how much more wonderful our lives would be now. why, the innovations would be staggering! we’d have flying cars, jetpacks and robot sex slaves !
i dub this Kvetch’s Law.
I am honored.
To be fair, while it’s important to note that those higher tax brackets didn’t result in DOOM, the USA was just in a really sweet place after WWII. The rest of the industrialized world had just been bombed to all hell. That was simply unsustainable.
McKTX: “If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts.”
Joel covered the part about Bill Gates “inventing MS-DOS” already above, and russel got to the point about that the person who starts the business that employs 1000 people not actually doing the work to be 1000 times more productive, unless you assume those 1000 people would do nothing. There are times, yes, when one individual is critically important to history or the economy, but the odds are, a) that any single person isn’t that person, and b) if that person hadn’t been there, someone else would have been that critical person.
“They understand intuitively that borrowing is bad and to continue doing so at ever higher rates is worse. Much worse.”
And borrowing at lower rates is better, then? Like when the rates are near 0, as they are now? Interest rates do not march ever upwards on some unstoppable curve. And most people understand intuitively that borrowing is not bad in every situation, like if you invest in a productive business, or repairs and upgrades to your home, or for college, or for a car or other transportation method, or… You can make the obvious metaphorical parallels yourself, I trust.
I don’t have any beef against people being rich. I have a beef against people taking huge incomes for themselves, and confiscating all of the growth the country has had for the past few decades for themselves, and non-productive industries like finance simply skimming off transaction fees and management fees instead of actually investing in productive businesses. And people declaring that they are so much more critical and important than the rest of us to “deserve” 1000-10000 times what the rest of us earn, while they chop up profitable companies, raid the public treasury, and steer their companies into the ground.
Income taxation, basically, is very un-American…. A majority of real Americans see it this way
Given that the second part is merely an instantiation of the No True Scotsman fallacy, is the first part even an argument? I say that shirking one’s responsibilities to one’s country is un-American, and a majority of real Americans see it *that* way. Also, they don’t like pineapple on their pizza cos it’s gross.
‘Wha’happun?’
With Democrats(Progressives) in power, i.e. controlling the agenda, all we are likely to see is proposals to increase bracket rates. I, for one, have lived my life in a world of progressive income tax rates, so I’m adapted to it. The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity. And once upon a time the total income tax burden was spread over a greater percentage of earners. Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation.
I favor a flat tax over a progressive tax (worked in a way to eliminate most ways to avoid paying and with adjustments for low income situations). But my greatest concern, at the federal level, is to keep the taxation level low in order to reduce the power exercised at the federal level. Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don’t know why a number of commenters here seem to see this as illegitimate.
Finally, I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?
A majority of real Americans see it this way and is the reason Eric’s proposals for raising income taxes on the very productive is not already in place. Not enough real Americans suffer from this level of sense of entitlement yet.
What the hell do you know about a “real” American? You wouldn’t recognize a “real” American if one put a boot up your hindside.
Anyway, real Americans actually overwhelmingly support the idea. See here and here.
The problem is, by golly, really rich people have a disproportionate amount of political power.
Which is bleedingly, blindingly obvious, and it has always been. Really
The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity.
Yeah, I believe that would be the Golden Era of the 1950s and 1960s. Ozzie, Harriet, etc. Rough times, those.
And once upon a time the total income tax burden was spread over a greater percentage of earners.
As was wealth itself! Funny how that works. As wealth has become more narrowly concentrated, there are fewer people that have wealth. Wow.
Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation.
Not true. They pay all sorts of taxes, even on income.
But again, wealth is polarized in the US to a greater extent than at any point since the 1920s.
The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity.
This is complete fantasy. And, to boot, as Tim Noah points out in the Slate series I linked to above, the differential between the top 20% and bottom 20% was only a quarter of what it is today.
I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?
1. Nobody but you is using the word “evil,” so, you know.
2. States currently have wildly different levels of income taxes, municipal taxes, sales taxes, real property taxes, personal property taxes, etc., so nothing is stopping you now, Sunny Jim.
I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?
Would there be a US Army? What about highways that travel between states?
With Democrats(Progressives) in power, i.e. controlling the agenda, all we are likely to see is proposals to increase bracket rates.
Not an answer to my question. Republicans have been “in power” plenty of times in the past several decades, and I don’t recall any of them so much as proposing a flat tax on income, let alone working to make it happen. Not Reagan, not Bush I or II, not Gingrich’s freshman class in 1994. Like I said, it was basically a faddish idea that everybody kicked around for a couple of years, and then it was forgotten.
Why does the GOP support the maintenance of a tax system that’s inherently repugnant to Real Americans™?
I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?
Let me see if I get this straight. Red-staters tend to build state governments that have very low taxes and provide very little in the way of government services. What services they do provide tend to be done on the cheap and are thus, often substandard (compare schools in MA to MS). As a result, they suffer lots of poverty and economic stagnation, which causes the federal government to transfer tons of cash from blue states to those red states.
Now, if conservative red staters had the guts to simply refuse the massive transfers of federal cash to their states, that might be reasonable: their states would suffer, but that would be their own choice. Instead, they get to have it both ways: they get to have low state taxes AND they get economically productive blue states to send them the cash that keeps their states from collapsing. Brilliant! But not particularly ethical. I wouldn’t say it is evil; just unethical, in the way that most welfare cheating is.
“With Democrats(Progressives) in power, i.e. controlling the agenda…”
Yes, because we all know the Republicans have not had any power to drive the agenda and get out their side of the story to prevent the Muslim socialist death panels that will take away your car and guns and give them to illegal immigrants.
Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation.”
Leaving aside the payroll tax (which comes from income and affects everyone and is thus an income tax), and all the non-income based taxes out there, this is still nonsense. First, even if it was true, the problem here is not that the taxes are set up badly, it’s that that many people make so little income that they’re in the tax brackets affected by EITC and the like. I find it hard to get outraged by the fact that people who make less than $50K, and have two kids, get income tax credits and deductions. Though I’d prefer a simpler tax system, with less deductions, since deductions make things complicated for unnecessary reasons. Here’s the article I got info from. Also note that several of the deductions and credits are temporary parts of the stimulus, like the Making Work Pay tax credit, which is what pushed the hypothetical family in the article over the edge.
“But my greatest concern, at the federal level, is to keep the taxation level low in order to reduce the power exercised at the federal level.”
A flat tax is bad for many reasons, fundamentally because of the marginal value of money. But this justification in particular is very weak. Okay, so if we reduce the power at the federal level, what happens? There’s a void of power, and more money is concentrated in the hands of wealthy individuals and corporations. So therefore, the power that the federal government’s not exercising would be taken over by corporations and individuals who are accountable to no one, and this is better because how?
I have never understood the Libertarians who think that concentrations of government power are the only dangerous concentrations of power. The government, which is at least nominally responsible and accountable to its citizens, needs to be powerful enough to stand up to other concentrations of power that aren’t.
” Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don’t know why a number of commenters here seem to see this as illegitimate.”
Well, for one, many of us have a different definition of “legitimate means”, for example, see the way Bill Gates made mucho dinero through unethical business practices and outright law-breaking. Also, I for one am not sure how any legitimate means can justify someone making 1000+ times more than the average person, they certainly do not add that much more to the productive capacity of the country than anyone else in their position would. I also don’t see how people’s ability to define their lives through wealth and the power it brings justifies the continued concentration of wealth, it seems more of a justification that we should allow MORE people to define their lives the way they choose through wealth (or at least decently well-off-ness).
Would there be a US Army? What about highways that travel between states?
I foresee a lot of this:
I have to wonder why its elimination isn’t given more serious consideration by conservative policy-makers.
Social Security first, progressive tax regime after that.
Priorities, dude.
I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences.
This more or less goes back to the debate between the Federalists and the folks who preferred the good old Articles of Confederation.
To be perfectly honest, I’d be willing to go this way if it would get conservatives to quit whining.
But I suspect the result would not be quite the paradise of personal freedom you think it would.
You need to ask yourself which of the services you and your state currently receive from the feds you would be willing to give up.
‘The problem is, by golly, really rich people have a disproportionate amount of political power.’
And as you said, it has always been that way and, may I add, it will remain so.
There are a couple of possibilities (maybe more) that can occur if marginal tax rates on the highest incomes are increased. Both are bad. I prefer to have the money in the hands of rich people.
One, total federal tax revenue increases, thus increasing the power of the federal government. Bad.
Two, fewer people pay federal income taxes, increasing the sense of entitlement that someone else should pay the bills. Bad.
Government is corrupt. Bigger government is more corrupt.
Eric,
I was just curious, as a top tier self hater, how many people do you sign the paycheck for?
And, how much does your investment banker make when you lose money.
No answer expected, not really any of my business, but let’s not conflate having a junior partner salary at a law firm with starting a business that employs 10 people and clears 300k a year.
No answer expected, not really any of my business, but let’s not conflate having a junior partner salary at a law firm with starting a business that employs 10 people and clears 300k a year.
No such conflation on MY part Marty. The conflation was all yours.
Read better, or keep the snark in your throat.
McTex suggested that I hate wealthy people.
I pointed out that, by the definition of the tax brackets, I am one.
And, just so you know, the money that I generate for the firm helps to pay many salaries, including the senior partners that don’t bill as much as me, but take out more.
I believe that’s called: efficiency multiplier!
So, someone who feels like making simplified explanations please explain to me how someone making upwards of $5 million a year is going to be demotivated if his taxes go up.
I mean, if you want that additional money because you are actually going to spend money at that rate, you have to be working essentially full time at spending it — which means that you aren’t doing anything productive. But I expect that those folks are doing something productive. I just doubt that they are working for the extra money. Rather, at that level the motivation is either
a) you love what you are doing, or
b) you are trying to score status points vs others making similar amounts.
(Who knows, maybe someone commenting here is in that income bracket and can give us some first-hand insights into what motivates them. That would be cool.)
I have never understood the Libertarians who think that concentrations of government power are the only dangerous concentrations of power.
Seriously.
Libertarians can have decentralized political power when the rest of us get a decentralized economy and financial markets.
Once upon a time it was common for corporations to not be allowed to operate outside of the state they were chartered in. They couldn’t own other corporations. They could only conduct business or other operations they were specifically chartered for. Their charters could be, and often were, time-limited.
Good times.
You give me that, and then we can talk about your state’s rights nirvana.
Also:
Everybody wants to rein in the feds, now that there’s a national highway system, and electricity across most of the country, and reliable sources of good water and flood control, and navigable rivers and ports, and national air traffic and other transportation management, and a national weather service, and whatever other 1,000 things I could rattle off if I wanted to take the time.
You want the feds off your back? Give all of that back and we can talk.
Valiant attempt to move the goalposts, Marty, as always.
[i]Government is corrupt.[/i]
Yawn. So is the Catholic Church. What’s it got to do with the price of tea in China?
Government is corrupt. Bigger government is more corrupt.
So, the least corrupt part of the planet right now is either Somalia or the ungoverned tribal regions between Afghanistan and Pakistan.
Gotcha.
People are corrupt.
That is why the founding fathers set up a government of checks and balances, to spread around the power nodes and veto points so as to check corruption.
This, because Madison et al recognized that humans, individually, are prone to corruption, and thus checks were needed.
The government is the least sucky way of providing those.
Don’t believe me? Fly to Mogadishu.
Government is corrupt. Bigger government is more corrupt.
And rich people are awesome.
OK, got it now. Thanks.
Uncle,
the flat tax was only popular because “populist” politicians (what a weird description of Forbes) convinced a lot of people that rich folks were better at taking advantage of tax breaks.
I would guess, just a guess, that if you froze the brackets and reduced the tax breaks for the wealthy you could get a movement for that also.
‘Well, for one, many of us have a different definition of “legitimate means”, for example, see the way Bill Gates made mucho dinero through unethical business practices and outright law-breaking.’
I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty.
I also don’t see how people’s ability to define their lives through wealth and the power it brings justifies the continued concentration of wealth, it seems more of a justification that we should allow MORE people to define their lives the way they choose through wealth (or at least decently well-off-ness).
So concentration of wealth through ownership of private property (a defining principle of the American political system) is unjustified, but takings by the federal government from the wealthy for redistribution is OK?
… then he likely had to borrow a whole heck of a lot of money to do it. And yet you are feverishly screaming that “borrowing is bad!11!!!!” However, borrowing just gave 1000 people their jobs. Well, McKinney… which is it? I ask you: WHICH IS IT? If you don’t want people to borrow money, then you’re throwing 1000 people out of work. This sort of hostility to working people is, unfortunately, typical or the right in this day and age.
Uncle Kvetch: Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation
I’ve seen that going on here for a long time, and these days it’s safe to say that it is 99% due to exactly four regular commenters here.
I mean, I presume other people must get something out of trying to argue about taxes with McKTX, BB, Marty, and GOB, but for the life of me I can’t think what. The only effect is to make every one of these threads exactly the same after a while. Apart from GOB, who I’m pretty sure is insulting on purpose (Marty does it by accident), they’re all capable of talking interestingly on other subjects and seem to enjoy being here. But seriously folks, what’s the point of engaging the same threadjack every time? Is it just like cat having to scratch on something?
So concentration of wealth through ownership of private property (a defining principle of the American political system) is unjustified
Somebody else eat the straw. I’m full.
But seriously folks, what’s the point of engaging the same threadjack every time? Is it just like cat having to scratch on something?
Dude’s got a point.
Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don’t know why a number of commenters here seem to see this as illegitimate.
Because when there are very large concentrations of power outside of democratic control, democracy becomes a meaningless formal exercise. Which is what I would call “un-American” if I were inclined to use that word.
‘Let me see if I get this straight. Red-staters tend to build state governments that have very low taxes and provide very little in the way of government services. What services they do provide tend to be done on the cheap and are thus, often substandard (compare schools in MA to MS). As a result, they suffer lots of poverty and economic stagnation, which causes the federal government to transfer tons of cash from blue states to those red states.
Now, if conservative red staters had the guts to simply refuse the massive transfers of federal cash to their states, that might be reasonable: their states would suffer, but that would be their own choice. Instead, they get to have it both ways: they get to have low state taxes AND they get economically productive blue states to send them the cash that keeps their states from collapsing. Brilliant! But not particularly ethical. I wouldn’t say it is evil; just unethical, in the way that most welfare cheating is.’
You correct me if I get this wrong. Much of what you describe is facilitated through the concept of revenue sharing legislated under the leadership of Lyndon Johnson and Hubert Humphrey. Your kind of politicians, no? I do not support this concept.
Texas is usually cited here as a big offender along the lines you describe, but it looks as if people are voting with their feet. Recent events in California also show people (productive people) are voting with their feet.
GOB, you still believe that old lie about starving the beast? You really think the government will spend less if you deny it revenue? WHERE HAVE YOU BEEN THE LAST TEN YEARS?
No, the government will spend less if/when the voters demand that it cut programs X, Y and Z and reward candidates who push for said cuts. Of course, when you try and get voters to actually propose spending cuts (to areas of the budget that are actually significant), things suddenly get difficult. Because people tend to like Social Security, Medicare and the Bestest Army in the World (the big expenditures).
Starving the Beast is a myth.
Texas is usually cited here as a big offender along the lines you describe, but it looks as if people are voting with their feet. Recent events in California also show people (productive people) are voting with their feet.
Not Texas. Georgia is up there though.
But yeah, even Rick Perry with all his talk about secession was there demanding every last dollar for Texas. But in terms of taking more than giving, GA is bad, LA and MI, AL, etc.
Texas is one of the fewer members of the confederacy that doesn’t have a negative balance of payments to the federal government. All that aside, cut it with the “real Americans” crap. Yes, there is a fringe element in the United States that doesn’t believe in income taxes, but that’s what they are, a fringe element, and no amount of telling themselves that they’re the only “real Americans” will make that so. We had a fight about the public safety net, and your side lost. Now stop trying to destroy the United States in the hopes that you can build your low-tax crumbling infrastructure utopia of unpaved roads, 3rd world poverty, and inequity out of the ashes. Trying to say that such a vision is what “real Americans” believe in is a public insult to the people who created the modern world you have the undeserved privilege to live in.
“X is corrupt. Bigger X is more corrupt” is true for just about every value of X.
I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty.
One of the things you can buy with umpteen billion dollars is really good lawyers. Ask any robber baron.
“We had a fight about the public safety net, and your side lost.”
But, much like the aforementioned Confederacy – it did not accept that defeat. Thus the seemingly neverending attempt to chip away at the New Deal.
Eric,
Sorry, it wasn’t meant as snark. It was meant to point out exactly what you said, there are jobs, and people in them, who make xxx dollars that are NOT wealthy, yet people who are wealthy (10 person company, presumably worth something) that make exactly as much or less annually. The conflation of those two things is evident in every one of these discussions.
To make it less personal, again my apologies, a senior executive in a publicly traded company making 4B dollars a year is perceived to have the multiplier effect for the shareholders that a junior partner has for the senior partners in a law firm.
Hiring Mark Hurd added six billion to Oracles shareholder value in one day, his 20M package may be worth it to those shareholders.
The hedge fund manager that makes his clients 10% in a year the S&P is flat may be worth his 10M bonus to those paying him.
Economic growth is driven by the guys who take that money, or mortgage their houses, to have the working capital to pay a payroll as they build their business. Taxes should be applied differently to those things in two ways.
First, the guys making the multiplier you describe should be treated as income earners, raising their taxes is ok but they do tend to spend the excess or invest in the public markets so it, well, multiplies.
The guy mortgaging his house to create a payroll should get all kinds lower taxes. He may be rich but he is doing exactly what we need him to do. He is the closest thing to a creator of the money to be multiplied that you can get. His effort is explicitly to create more jobs at a risk we should be willing to reward, not just in the short term.
All the discussions of Paris Hilton don’t discuss whether Conrad took the risks (maybe he didn’t) to create thousands of jobs that ultimately weree the value that Paris lives off.
All that said, between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi, sorry I don’t agree.
I think it was taxation without representation that was the “unAmerican” part, goodoleboy.
But while we’re parsing “real” Americans from the other type of Americans, let’s play a game.
O.K. everyone who considers themselves a real American, line up over here against this wall. Now, the rest of you line up against the other wall.
Well, that’s odd, everyone is up against the “real American” wall. Alright, mill around, let’s try this again , dum de dmu tuddy do .. alright … as before .. real Americans over here, and the rest of ya, whatever you think you are, over there on the other side ..
… again, the entire crowd is on the real American side of the room.
… let’s do this another way in another venue. How about those who profess themselves to be real Americans and also accuse those who don’t agree them of being …. unreal Americans? … line up over here on that side of the boxing ring or target range, whichever.
… now, those who are real Americans as well, but are tired of being accused of being unreal Americans .. to the other side.
Would anyone like to say anything about this arrangement?
Yes, you … countme? is it, yes, countme? wants to speak.
Yes, umm, I just want to point out to the folks on the “profess to be real Americans but everyone else is not” side of the boxing ring or shooting range, whatever, that from this date forward if I (not speaking for anyone else) am ever again accused of not being a real American by anyone in any venue (on the street, in a bar, at a dinner party, at your daughter’s confirmation, on the Internet, on a bus, during a meeting at your place of business, at a picnic, in a political debate, pick your venue) I will kick the living, effing sh*t out of that individual.
It stops now.
Marty, honey, maybe you don’t understand, and I’m pretty sure you don’t, but Mr. Hurd receives a LARGER SALARY for the value he creates. It is true that he pays more in taxes, but that is because makes more money.
As for a business owner, he benefits from lower capital gains taxes when he sells his business and from lower taxes on dividends if he chooses stop working. The moral hazard becomes when dishonest brokers attempt to game the system by claiming that their salaries are really “capital gains” for the purpose of tax evasion.
If you want to go into the moral worth of jobs as a determinant of one’s taxes, then ultimately we’re going to have to decide that hedge fund managers have marginal rates of 90% and teachers 5%.
All that said, between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi, sorry I don’t agree.
Well, that was an interesting discussion starter.
However, questioning my patriotic bona fides, or status as a “real” American – a lot less so.
As are sweeping statements about governments being corrupt, with bigger govts being more corrupt, without recognizing that there are places on this planet right now where the “no government” experiment is playing out, and it ain’t pretty.
Ditto with regards to suggestions of hating on rich people.
Again, Adam Freakin Smith favored progressive taxation. So did Teddy Roosevelt.
Did Adam Smith simply hate capitalism and rich people? Really?
OK, then, let’s take it to level 2 and leave that claptrap behind.
explain to me how someone making upwards of $5 million a year is going to be demotivated if his taxes go up.
Upthread I proposed raising the top marginal rate on incomes above $5M to 50%. At present, they are 36%. So, a 14% increase.
If you go from making $5M a year to $6M a year, under russell-nomics you would thus pay $100K more per year.
To simplify the math, let’s say the overall income tax hit on your $6M man is 40%. So, you’d be paying an extra $100K on a take-home of $3.6M.
$100K is 2.7% of $3.6M.
Or, another way to look at it: if our guy goes Galt instead, he’s forgoing $500K of additional income to save having to pay $100K.
Just to put some real numbers on it.
concentration of wealth through ownership of private property (a defining principle of the American political system)
Really, I have no idea what planet this comment was beamed in from. This seems borderline delusional to me.
The American political system is about self-government through a representative Republic. It’s about the rule of law, and about constraining the power of any individual person or institution through a system of checks and balances.
The Constitution recognizes the right of individuals to own and enjoy private property.
That is not, remotely, the same as what you have said here. In fact, concentrations of private wealth were viewed with great suspicion throughout this nation’s entire history, for all of the self-obvious reasons.
I’m not sure what country you think you’re living in GOB, but it ain’t an America I recognize.
We got a problem bro.
‘GOB, you still believe that old lie about starving the beast? You really think the government will spend less if you deny it revenue? WHERE HAVE YOU BEEN THE LAST TEN YEARS’
I’ve been here and I concur. Tax revenues are still one side of that equation.
‘Once upon a time it was common for corporations to not be allowed to operate outside of the state they were chartered in. They couldn’t own other corporations. They could only conduct business or other operations they were specifically chartered for. Their charters could be, and often were, time-limited.
Good times.
You give me that, and then we can talk about your state’s rights nirvana.’
I tend to agree with Russell on this. I would like to see a solution that reduces corporate influence without infringing individual liberty.
‘And rich people are awesome’
No, they are corrupt, as well. This is why size matters so much. I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property.
Eric, I thought I did?
countme: please abstain from physical threats.
While it is repugnant to be insulted with suggestions about real Americans, we must keep it civil, and abstain from threats.
Not acceptable. Thanks.
People riding their irrational dead horses about how they don’t even believe that progressive taxation should even exist is just troll bait and a waste of our collective time. I get it: some people are irrational doctrinaire libertarians who feed their crazed ideological drug habit with social security checks and life in a parasite state that supports itself with the largesse of the federal government from people like us in productive states with decent infrastructure and modern amenities. I get it: you are high off the libertarian crack. Don’t let us know about your addictions in every single thread. I can’t stand druggies that have to evangelize for their poison of choice, even if I believe it should be legal.
Eric, I thought I did?
Agreed. I said that was an interesting discussion starter. It was the other stuff, not from you (although I misinterpreted your earlier comment) that was really unproductive.
“People riding their irrational dead horses about how they don’t even believe that progressive taxation should even exist is just troll bait and a waste of our collective time.”
But this isn’t me, I haven’t once decried the concept of progressive taxation. Form, level, how to calculate, maybe. So don’t throw me in this bucket.
“I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property.”
So you recognize the problem, but you object to the proposed solution. Ok, fair enough. I’ve yet to see a libertarian solution (concrete policy, not airy theory) that made sense to me. If you have one to offer, I’m interested. That would be more interesting than doing the “taxation is theft!” thing again.
“I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty.”
United States v. Microsoft, the Findings of Fact, before the Bush Justice Dept dropped the case with a weak-ass settlement include a clear explanation of Microsoft’s monopoly position, “and that Microsoft had taken actions to crush threats to that monopoly, including Apple, Java, Netscape, Lotus Notes, Real Networks, Linux, and others” And the conclusions of law said that Microsoft had a monopoly, tied in IE, and repeatedly violated the Sherman Act.
So yes, Microsoft and Bill Gates HAVE been taken to court, and were proved to have repeatedly violated the law.
“One, total federal tax revenue increases, thus increasing the power of the federal government. Bad.
Two, fewer people pay federal income taxes, increasing the sense of entitlement that someone else should pay the bills. Bad.
Government is corrupt. Bigger government is more corrupt.”
One: Argument by assertion, with no explanation of why a more powerful federal government is bad.
Two: Argument by assertion, ignores the many other taxes everyone pays, and ignores the points made above.
Three: More opportunities for corruption exist in any organization as it gets larger, how is government uniquely worse in this case than say, Microsoft, GE, BP or any other giant corporation, many of which are larger, in the sense of wealth, than most governments in the world?
I would like to see a solution that reduces corporate influence without infringing individual liberty
I’d also like a talking taco that craps ice cream, while we’re at it.
The only way to accomplish the limitation of any kind of negative influence is via the law, and to do that, someone’s “liberty” is going to be infringed. That’s what the law is.
Cripes, we tried to “limit corporate influence” over elections, and look what happened. Your ideological comrades put the kibbosh on that posthaste.
“I’m not ready to confiscate private property”
Sure you are. Just not at the Federal level so much.
You may refer to me as a True American.
Thank you.
I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property.
OK, we get it. By your reasoning, all taxation is a confiscation of private property, and therefore theft.
You’ll come back in a moment saying that’s not what you said.
Unfortunately, it’s what you said.
Unless having a 35% maximum marginal tax rate does not constitute confiscating private property, but a 39.5% rate does, which would be patently absurd.
But no, that’s not what you said. Even though it’s what you said.
And round and round we go.
Now’s the part where you complain about liberals shouting you down because they can’t tolerate dissenting views.
I’m starting to get the impression that it’s an imperfect world. *sigh*
Marty: But this isn’t me, I haven’t once decried the concept of progressive taxation. Form, level, how to calculate, maybe. So don’t throw me in this bucket.
I apologize for having incorrectly bucketed you. Indeed, you’re not one of the ones who do this. I think you do have knee-jerk responses on other subjects that are really annoying, and are very fond of straw men– such as this:
between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi
That is weak, weak, weak. Even if I had complained about “discussing multiple views on things,” I’m not in any position of authority here and neither is Phil – in fact we seem to be in the minority when it comes to not wanting to have these repetitive arguments; most everyone else seems happy to do this ad nauseam.
What I said is that when it comes to anything involving taxes, certain commenters (the bucket I shouldn’t have thrown you in) always express an identical and predictable view which, from very extensive past history, is clearly not subject to change by any outside evidence or any other person’s comments. They’re perfectly free to express it; but every single time others here try to debate it in good faith, the result is exactly the same, which makes me wonder what the point is.
Also, it’s not just a different point of view; it’s one that amounts to negating the value of the entire discussion, since said commenters largely reject the legitimacy of the system whose details we’re debating, on unshakable ideological grounds. It’s as if Eric kept posting about the merits of the San Francisco Giants, and others argued passionately in favor of the Oakland A’s, and then one of those three stalwarts posted “BASEBALL SUCKS, IT’S NOT EVEN A GAME”… and everyone switched gears to try to convince them otherwise… again… and again… and again.
No one’s shutting down the conversation. You’re not a martyr (just the first 5 letters of one). Heat, kitchen, etc.
UK,
There is a big difference, in my mind, between taxing income and wealth. Taxing income was a late phenomenon (finally made permanent in the US in 1913), but taxing property (ie wealth) has been the norm for centuries.
I would be inclined to support lower income taxes and higher wealth taxes if we could get the definition of wealth a little more clearly defined.
Perhaps we don’t tax capital gains, we just have a tax on the assets themselves every year, if they decline in value then the people who have them pay less.
The people who would truly benefit the most from owning assets in a reasonably safe, etc. country, where the defense, infrastructure etc. made the owning of those assets more secure would pay to have them protected.
However, I admit I am not well informed on the progressivity of these concepts compared to the graduated income tax.
Marty: Any thoughts on financial transaction taxes (Tobin tax, “Robin Hood tax,” etc.)? Easier and less unwieldy than assessing and taxing wealth directly.
I would be inclined to support lower income taxes and higher wealth taxes if we could get the definition of wealth a little more clearly defined.
That’s actually an intriguing idea. The devil is in the details, of course, and I’m the furthest thing from an expert on this, but I think that could be a step in the right direction.
Drum specifically says that there is “essentially no evidence” that the rich will lose their ambition if taxed at an incrementally-higher marginal rate.
If you wanted, you could dispute that with evidence, but you haven’t done so.
Eric:
Yes, of course.
But we now have Republican candidates ahead in polls and probable winners in elections who have made (sometimes through their armed supporters) physical threats against those on the other side (pretty much ALL of the other sides) they deem to be less than “real American”.
And, they’ll have the full force and power of government at their disposal to carry out those threats.
Shouldn’t posting rules at Obsidian Wings stay abreast of the world at large?
If Thomas Jefferson showed up here to comment and said to another commenter regarding the latter’s views “From time to time the tree of liberty must be watered with the blood of patriots and tyrants”, if that’s the exact quote offhand, would there be a warning?
Or is the elegance and passive-voiced nature of the Jefferson quote (now co-opted by the contemporary threatening and violent Right) somehow different than kicking the … etc?
Rhetorical question, natch.
This was Osama Bin Laden’s pitch to America to embrace Islam: one of the benefits was the low, low taxes (3% I think) that were on total wealth.
Shouldn’t posting rules at Obsidian Wings stay abreast of the world at large?
Heaven forfend. I spend most of my day in the world at large; I practically live in it. You do NOT want to go there.
The idea that there are “real Americans” and some other kind is hateful.
Responding as if the notion of “real Americans” can be the basis for any kind of reasoned discussion legitimates something that should not be legitimated by respectful response.
I’m not in charge, but I think the best way to treat someone who starts a thought train with the notion of “real Americans” is 100% non-response, until an apology and a retraction of that idea have been offered.
Argue about tax rates all you like. But don’t treat someone who bases his contributions on the idea of “real Americans” as someone who has anything intelligent to say. You can’t build a building on a rotten foundation.
There is no such thing as a “real” American. There is not one American, whether descended from 400 years of ancestors on this continent or newly sworn into citizenship yesterday, who has the remotest shred of a right to define people by such an arrogant and self-aggrandizing yardstick.
However, I admit I am not well informed on the progressivity of these concepts compared to the graduated income tax.
I agree with Uncle K that the idea of a tax on wealth per se, rather than on income, is an interesting one.
The distribution of wealth in this country is, by a large margin, more unequal than that of income. The debate over how to assess it would no doubt be entertaining.
Personally I think it would be a perfectly reasonable thing. I doubt it would stand a snowball’s chance in hell of passing, for all of the same reasons that people resist making the income tax relatively more progressive.
Hogan,
Only a quick read, I am not sure that the evolution of thought on this maps to my view on taxing wealth. Reading through it seems to be a way to tax the financial sector, with some rational justifications, to protect from systemic issues.
The earlier versions discussed seemed more focused on creating market stability, and the Swedish experiment seemed to have had some bad consequences.
Conceptually it seems to originally have been a sales tax on financial transactions, I don’t object to that concept at all. I would like to be able to tax personal wealth more effectively though, without a transaction occurring.
Would a wealth tax incentivize me to maximize the amount of my income I spend on beer (so that I can literally piss it away in the most enjoyable way)?
Seriously, though, it’s an interesting idea, if totally unrealistic politically. I don’t think I would let the political unreality of it stop me from pondering the various potential implementations of such a thing. Why not have some fun?
You don’t already maximize your beer expenditure? For shame!
“Would a wealth tax incentivize me to maximize the amount of my income I spend on beer (so that I can literally piss it away in the most enjoyable way)?”
Stimulus!
Marty,
Part of the appeal for me is that defining and assessing taxable wealth leads directly toward the same sort of gaming and complicating (or, if you’re John Lee Hooker, backbiting and syndicating) that defining taxable income has led to now (i.e., roughly 98.95 percent of the Internal Revenue Code). I suspect that transactions are more easily defined and measured, and harder (though certainly not impossible) to hide off the radar above a certain size.
Would a wealth tax incentivize me to maximize the amount of my income I spend on beer (so that I can literally piss it away in the most enjoyable way)?
Like I need more of an incentive to do that.
Janie: from one unreal American to another, you go girl!
The following is a comment I started to compose about 3 hours ago. It’s a bit stale now that we’ve had a few comments acknowledging that the “income tax” is not the only tax worth arguing about. But here it is anyway:
Way upthread, Russell mentioned Bill Gates, Warren Buffett, and Sam Walton. To extend Kvetch’s Law: Gates, Buffett, and Walton are the Hitler, Stalin, and Mao of tax threads; when they come up, you know the discussion has reached some primal place where it’s more about The Meaning of Life than about the tax code.
Don’t get me wrong: I think The Meaning of Life is important — more important than the tax code, even. I just want to say that Gates, Buffett, and Walton are practically irrelevant to the progressivity or otherwise of the income tax.
Bill Gates did not amass a $50B fortune by “earning” a $2B/yr “income” for 25 years. Whether his wealth was founded on a swindle, or on business acumen, or on creativity and hard work, it is NOT the accumulation of after-tax income. Warren Buffett’s salary may not even BE in the top marginal bracket. Sam Walton, peace be upon him, did not leave his heirs tens of billions of dollars of “income”.
McTx, GOB, and Marty seem convinced that higher taxes on really rich people make the rest of us worse off. I am being as charitable as I can, here. It would be uncharitable to suspect that McTx, GOB, and Marty are themselves really rich people whose only concern is their own tax bill. Since I positively seethe with goodwill toward my fellow men, I insist on believing that their message really is: your life would be better, dear libruls, if the likes of Gates, Buffett, and Walton were taxed less.
Never mind that part of the appeal is purely emotional: think how bad you’ll feel about the unfairness of taxing really rich people more heavily. That’s a Meaning of Life question. Some people are pained by cruelty to animals, some by cruelty to billionaires. Emotions count for something.
Focus instead on this: the “income tax” has almost nothing to do with whether billionaires are, or are not, chipping their “fair” share into the Treasury. Billionaires don’t have “income”; they have capital gains, they have inheritances, and — to an obscene extent — outright subsidies from local, state, and federal government.
–TP
Government is corrupt. Bigger government is more corrupt.
Seconding Nate- I don’t see this causal relationship. There are plenty of weak, inefficient, and corrupt governments. There are also quite a few efficient, large governments. While government corruption occurs, do you have evidence that it increases substantially as government itself grows?
And if this is your big concern, and you otherwise think big government is ok, then let’s talk about sunshine laws etc. This is akin to a Luddite environmentalist who ostensibly opposes a factory because of its pollution- but not trying to get it to adopt improved pollution controls, just to block it.
Finally, I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?
I think it’s weird that this becomes a moral position to conservatives- ie I think this is the other way around. A government program at the federal level is presumably exactly as moral as one at the state level or local level.
But I have a practical problem with devolution; there are too many things that affect multiple states because of their close interactions. For example, many corporations choose to locate in Delaware due to corporation-friendly legal code. This deprives the people of other states some of the ability to control the corporations doing business in their states at either the federal or state level.
The correct answer to me is to understand what’s best done at what level. Rather than some ideological insistence that we devolve as much as possible, to the benefit of those that would game the system by using the lowest common denominator among state or local law.
I would be inclined to support lower income taxes and higher wealth taxes if we could get the definition of wealth a little more clearly defined.
Hear hear! But probably impractical, especially for the very wealthy who can probably hide their wealth effectively. And, I would be somewhat worried about the necessity of the government knowing everyone’s assets that would be required for this to work effectively- but I imagine that there would be ways to address this concern.
Hogan,
I see the complexity in doing it, I think though that if we don’t then we end up with a lot of stale money invested in the S&P for ten years or more. There is no transaction, so no recognized gain, when the year comes that it loses some then everybody restructures their portfolio in the year they will pay the least and then even transaction based costs wouldn’t count much year over year.
I think if Forbes can create a list of millionaires we should be able to figure it out.
Like I need more of an incentive to do that.
Not with the Phillies back in first place.
I’ll refrain from and apologize for the use of the term ‘real American’, which, incidentally, was not meant to refer to anyone here.
‘Is there any kind of tax that *is not* a “confiscation” of individual personal property?’
Russell: I suggest that confiscation begins when the spending goes beyond lawful levels, in other words, without authority. Many Americans already believe that there is significant tax revenue dedicated to wealth or income redistribution and that as current revenue levels are increased, we will get more of the same.
We won’t have to wait much longer to see exactly where the electorate stands on this.
Well, I guess I messed up how I worded that incidental. What I meant, of course, was that it did not mean that anyone here was not a ‘real American”.
GOB — thank you.
Well, I guess I messed up how I worded that incidental.
I was gonna say . . . another insult in the same sentence as the apology? Well played, young fellow.
We won’t have to wait much longer to see exactly where the electorate stands on this.
If you’re talking about the midterms, I don’t think they’re quite as much of a one-issue referendum as you might like.
This is hardly the first time you’ve called into question the reality of patriotism of others on this site. As a fake American, I say: GFY.
I suggest that confiscation begins when the spending goes beyond lawful levels, in other words, without authority.
I don’t know what either of those mean, practically. There are no lawful limits to spending, and all spending is done via the authority of the US Congress (or similarly at the state and local levels) via procedures set forth in our Constitution. Could you expand on what you mean by this?
We won’t have to wait much longer to see exactly where the electorate stands on this.
Claiming that this election is a referendum on progressive taxation doesn’t make a lot of sense to me. Clinton raised taxes and got re-elected. Bush cut taxes and got re-elected. The economy is in the tank, and when that happens the party in power tends to suffer at the ballot box- reading more than this into things is wishful thinking IMO.
I suggest that confiscation begins when the spending goes beyond lawful levels
And one man’s ceiling is another man’s floor.
Nothing that is actually being considered goes beyond lawful levels, for any reasonably mainstream definition of “lawful”.
The midterms will bring whatever they bring. When the dust settles, we will still have a lot of bills to pay, and we’ll still need revenue.
If you want the feds to spend less, you’re going to have to tackle DoD, the middle class entitlements generally, and the rising cost of health care in particular.
There’s not enough headroom in the rest of the budget to make a difference.
I don’t advocate raising the marginal income tax rates because I want to stick it to rich people, or because I think the feds need to level income disparities, or because I want the feds to take over the freaking economy of the US.
I advocate it because we need the money to continue doing the things we’ve already signed up to do.
What I’d submit for your consideration is the idea that there are good, legitimate, and lawful reasons that the federal government is larger now than it was in 1789.
If you want to turn the clock back, you’re going to need to touch a lot more stuff than the federal government.
And what you will never, ever, ever sell me on is the idea that the purpose of this country at its founding was to encourage and facilitate the concentration of private wealth. That is, frankly, a profoundly ahistorical position.
GoodOleBoy:
Apology (second try) accepted. I didn’t mean to break your jaw either. Kidding.
Thanks.
As a humorous (I hope) aside, it always gets me when folks accuse others of things like being unAmerican (to choose one), but make sure to point out that they aren’t talking about anyone within earshot, even though I have suspicions about a couple of you standing right here.
Excluding present company is tough to do on the Internet. I mean, theoretically, EVERYONE is here.
But y’all know who I’m talking about.
‘I think it’s weird that this becomes a moral position to conservatives- ie I think this is the other way around. A government program at the federal level is presumably exactly as moral as one at the state level or local level.’
‘The correct answer to me is to understand what’s best done at what level. Rather than some ideological insistence that we devolve as much as possible, to the benefit of those that would game the system by using the lowest common denominator among state or local law.’
I’m not sure why you see this with a moral component, and it’s not as much ideological as it is constitutional. If we amend the Constitution and grant the federal government supreme authority in all matters, so be it. If there is a moral component, it has to do with the federal usurpation of powers withheld from it in the Constitution.
To tie back to the post, I don’t care that the federal income tax is progressive, but I do care if the federal revenue base is deemed to have no limits because the federal government has no limits on its powers.
I don’t recall anything in the Constitution that limits the “revenue base” of the Federal Government, or what that has to do with “federal usurpation of powers withheld from it in the Constitution”, given the Constitution specifically allows an income tax.
I ever continue to be puzzled as to why Conservatives and Libertarians obsess about the evil usurpation of powers by things like taxes or health insurance, yet remain completely blase to things like torture, invasions, etc, and outright oppose things written into the Constitution, such as the imposition of cruel and unusual punishment.
I’m not sure why you see this with a moral component, and it’s not as much ideological as it is constitutional.
You said evil- afaict that was the first injection of morality into the matter. And I don’t think this is a good time to start the Constitutional powers thread-killing tangent.
To tie back to the post, I don’t care that the federal income tax is progressive, but I do care if the federal revenue base is deemed to have no limits because the federal government has no limits on its powers.
I don’t know why you’d assume that an unlimited budget implies unlimited non-spending powers. There isn’t anything in the Constitution forbidding Congress and the President from agreeing to a 105% income tax across the board and spending it all on defense (or paying down the debt)- we can clearly bust the budget spending just on things we all agree are legitimate federal concerns.
On Nate’s list of things “conservatives” are blase about, let’s emphasize the constitution’s stipulation that only Congress can declare war.
I’m not saying that “liberals” are blameless on the issue of war powers. But it’s self-styled “conservatives”, who are forever proclaiming their true allegiance to (parts of) the Constitution, that deserve special contempt.
And no: an “authorization to use military force” is NOT what the Founders meant by “declare war”. Real Americans understand that 🙂
–TP
On the other hand, if you do successfully amend the constitution, GOB will smear you as “un-American” and “insane”. A confiscator of personal property.
So don’t take his claim that he cares about the constitution at face value either.
Many Americans already believe that there is significant tax revenue dedicated to wealth or income redistribution
The difference between the top 1% and the rest of the country is larger and more pronounced than it has been at any point since we’ve been seriously measuring it — i.e., the last century or so — so clearly either “Many Americans” (who I guess have elected you to speak for them? or something?) are wrong; or they’re right, but the wealth and income redistribution is not going in the direction they think it is.
I’ll reiterate, since you don’t seem to get it: For the last 30 years, despite the fact that American worker productivity has increased on a fairly steady basis, 80 cents out of every single additional dollar in wealth production has gone to the top 20% of American earners, with the bottom 80% left to mete out the remaining 20 cents.
So don’t take his claim that he cares about the constitution at face value either.
Well, he can certainly disagree with a choice to amend the Constitution without forfeiting respect for the document or its procedures.
Having said that, Id pile on with Tony and Nate, with IMO the biggest Constitutional invention of all: judicial review. It’s a novelty invented post facto- although I think a very useful one and one that not only helps us stay on a Constitutional course but one that corrects a clear defect in the original.
But it’s just not in the document.
“I’ll reiterate, since you don’t seem to get it: For the last 30 years, despite the fact that American worker productivity has increased on a fairly steady basis, 80 cents out of every single additional dollar in wealth production has gone to the top 20% of American earners, with the bottom 80% left to mete out the remaining 20 cents.”
There is some place between 80 and 0 that is true. The problem is that a substantial amount of the increased wealth comes from financial investments (read hedge funds) that have little to do with increased productivity.
I don’t know what that delta is, but this statistic is more relevant in discussing the abyss between the rich and the middle class than a measure of who profited from productivity gains.
I agree; he could have done that. He could have said “The 16th amendment was ill-considered and a mistake. It should be repealed”. But he didn’t. He insulted and smeared the people who lobbied for it and passed it and called the Amendment itself “un-American”.
Marty, I’m not convinced by the hedge fund explanation. EU15 countries grew GDP at a rate comparable to the U.S. from the 1970s to today but didn’t increase inequality by nearly the same amount.
elm,
There surely are more factors, but the rise of hedge funds from 40(198? to 8000(in 2008) directly correlates to the widening gap. With only the wealthiest taking advantage, their financial leverage outpaced any historical reference. I can’t get all of those numbers, the hedge fund reporting is abysmal. However, by the end of 2008 there was 1.5 trillion dollars in assets under management across the industry (here)
I suspect that if I could get the numbers there would be an uptick in EU as the hedge funds became more known in the late 90’s through 2008.
Marty,
It’s not clear to me that hedge funds are giving a higher rate of return to the point of explaining a significant chunk of wealth or earnings differentials over the period.
There was a similar uptick in mutual funds prior to this explosion of hedge funds, and we have more data there- it’s still very hard to beat the market without accepting more risk/volatility, and passive investing offers a very good risk/return ratio.
And, we were originally talking about productivity gains- the Dept of Labor estimates that productivity gains for US workers from 1980-2009 were about 40%. Im not sure how that’s related to hedge fund performance in any case.
Carleton,
The challenge is in assessing how much those productivity gains were responsible for the increase in wealth. As we have seen recently, there is some growth in GDP(and productivity) required to generate new jobs at a fairly large clip just to accomodate the growth in the workforce. While salarie didn’t outstrip inflation, they did keep up accounting for some use of the increased productivity. Then we had a substantial hit to th economy in 2001(and aa smaller one 8 years earlier) that recovered fairly quickly.
The challenge I see is not in addressing the delta between the most wealthy and everyone else, it is just in determining how much of that was created by productivity gains and how much by advanced financial products held only by the wealthiest.
Even in the 1980’s you needed several million dollars of investment money just to participate, and the returns outpaced all other investments by a lot until 2007. In 2006 the EU even circulated a concern that so much of the big money was concentrated in the same investment strategies through these funds as they had become THE place for the very wealthy to invest.
I’m also curious why these hedge funds were able to out-perform any other investments. According to Wikipedia, the hedge funds were one of the major traders of derivatives, and the managers received management fees, and other fun things that helped wreck the economy. There shouldn’t be any way they should have been able to outpace general real growth.
So, in other words, how much of hedge funds was actually productive investment, and how much was pure scam, and how much did that pure scamming portion affect the reported growth of the economy?
There is some place between 80 and 0 that is true.
Per the CIA Factbook on the US:
“Since 1975, practically all the gains in household income have gone to the top 20% of households.”
They don’t break it down by how much is due to increases in productivity, how much due to financial innovations like hedge funds, etc. They just note the increase in household wealth, and where it went.
Practically all to the top 20%.
Are the top 20% of household income earners responsible for generating practically all of the value that that increase in wealth represents?
I find that unlikely.
In any case, I don’t really see much point in demonizing wealthy people, just as I don’t see much point in demonizing poor people.
As a nation, we owe a lot of money. Not so much that we need to totally freak out, but enough that we should pay attention.
People talk a lot about reducing costs, and reducing the size of government, and eliminating government programs, but all of those cost centers have constituencies, and they never actually seem to go away.
So, it looks (to me) like we’re going to have to catch up on the revenue side.
We raise a lot of federal revenue through income taxes. The income tax regime is currently at historically low rates, and has a historically non-progressive slope.
So, to me, it’s kind of a no-brainer. We should let the Bush cuts expire on high earners, and re-introduce some higher marginal rates at the real nosebleed income levels.
Whenever this gets suggested, folks claim that doing so will stifle economic growth, because it will be a disincentive for people to invest.
Well, nobody’s investing now. Everybody’s sitting on their cash.
And I’ve read about ten billion blog posts, magazine articles, white papers, what have you on the topic, and no-one – precisely not one person – has presented anything resembling a credible example of a historical correlation between higher marginal tax rates and stifled economic growth.
So I think that claim is a lot of hooey.
Raise the freaking rates, bring in the revenue, and pay the freaking bills. Or roll the money over into direct spending that will put the one in six people who wish they were either employed, or employed more, back to work.
If that means give them a damned broom and pay them to sweep sidewalks, do that. At least the sidewalks will be clean.
But there are about 1,000,000 other things they could do instead.
Or, if you want to be all fiscally conservative about it, just pay bills.
We need the money. That’s why we should raise the rates.
It ain’t rocket science.
‘And what you will never, ever, ever sell me on is the idea that the purpose of this country at its founding was to encourage and facilitate the concentration of private wealth.’
I’m having trouble with my construction today. One more sign of age, I suppose. The parenthetical modifier was only supposed to apply to ‘ownership of private property’.
So concentration of wealth through ownership of private property (a defining principle of the American political system) is unjustified…’
It ain’t rocket science.
worse, it’s politics.
IMHO, all the increase in national wealth comes from workforce productivity gains, and none of it from the “financial innovations” that Marty seems to think have produced some of it.
Now, I’m not really entitled to an opinion on this subject, but I kinda think Paul Volcker is. At the Future of Finance Initiative conference organised by The Wall Street Journal, he remarked :
Mr Volcker, who ran the Fed from 1979 to 1987 and is now chairman of President Obama’s Economic Recovery Advisory Board, told an audience that included some of the world’s most senior financiers :
From 2001 to 2008, the US engaged in a massive economic experiment to see if tax cuts for the wealthy stimulate job creation.
The outcome : no, they don’t, particularly.
Even rocket science ain’t rocket science anymore.
I’m having trouble with my construction today
No worries GOB, many thanks for the clarification.
And “I’m having trouble with my construction” is going right to the top of my go-to list of exculpatory phrases to be used when my wife catches me out on my latest bit of boneheadedness! 🙂
Rocket science hasn’t been the same since they could fit all the Apollo programs on my TI-83. Also, no more slide rules.
Brain surgery is the new rocket science.
I am entirely in favor of more, higher brackets, but I question the contention that this would be incredibly popular.
I fear that the majority of Americans (“real” or otherwise), having been fed a steady diet of anti-tax, rightwing propaganda with little to counterbalance it for more than a quarter century, oppose raising taxes. Period. They shouldn’t, but they do.
Whether they simply don’t like taxes on principle or view taxes on the ultrarich aspirationally, I’m not sure.
But this is a sensible policy that would be a much, much harder sell than it ought to be.
“This isn’t M-theory” works better for me.
‘I fear that the majority of Americans (“real” or otherwise), having been fed a steady diet of anti-tax, rightwing propaganda with little to counterbalance it for more than a quarter century, oppose raising taxes. Period.’
I agree with your basic questioning of the contention that higher tax brackets would be incredibly popular and maybe even with the premise that anti-tax ‘propaganda’ has undue influence. But why would that ‘propaganda’ be effective unless those taking up the anti-tax banner have thought about the issue and think they understand the related issues (in which case the ‘propaganda’ may be superfluous), or they don’t do much thinking but do respond to ‘propaganda’. In the latter case, how is the result explained? What I’m asking is how do we wind up with people who respond to ‘propaganda’, since, if these numbers are big enough, they conceivably can be made to respond to many other things that may or may not be valid?
Ben, I did not say “incredibly popular” But if you look at the links I posted up thread on the matter, it polls well.
Some support in the 70% range.
Now, obviously, if more brackets were proposed there would be howls of bloody murder and the numbers would come down some, but still, I think that arguing that someone makeing 370K and 370M shouldn’t be paying the same rate is not a hard sell.
People understand that there are different rates, and that the more you make the higher your rate goes.
Sure, it’s not a hard sell if the folks being sold are not the ones paying the additional tax.
But I think where this whole notion falls down is the suggestion that a higher tax rate for higher incomes is more fair. And that of course ushers in the question: fair to whom? And: why is it any of your business how much money people make?
This notion of minding your own business seems only to apply selectively, it seems to me.
Slartibartfast: Would you care to take a swing at the question of what, exactly, a person could do to make their work a hundred, a thousand, or more times more valuable than the work of the average person?
But I think where this whole notion falls down is the suggestion that a higher tax rate for higher incomes is more fair.
Yes, Adam Smith was in favor of this. As was Teddy Roosevelt. Those Communists.
The fairness, of course, comes in the fact that people require a certain amount of money for basic needs. Thus, if you take 50K from everyone regardless of their means, you might end up sending millions to the poor house, while barely causing a multi-millionaire to notice, let alone change spending habits, let alone feel constrained.
So, fair in the general, objective sense.
“This notion of minding your own business seems only to apply selectively, it seems to me.”
I am probably missing something, but isn’t that true of every society that has ever existed, as well as certainly being true of any democracy?
Outside of pure theory, can we currently arrange for society and our government to work otherwise?
I ask because I’m inclined to think not.
Thus I’m led to the conclusion that all we as a polity can do is discuss, and attempt to agree upon, where the selectivity should and shouldn’t apply.
That is, as a democracy, we get to elect governments that intrude in the lives of the citizenry, and our only practical choices are how much or little intrusion, and where and how, rather than to somehow get to have government without intrusion at all.
Some intrusion is part of the price we pay for living together as a society and a polity, I tend to think. So naturally it’s selective.
Which puts us back to talking about individual notions of what are the minimal intrusions we should have to put up with, and which are unnecesary violations.
There do seem to be two major stances:
a) fairness entails being treated in proportionate fashion;
b) fairness entails being treated in identical fashion.
That needs better rephrasing, and probably more, than I care to spend time on now, but perhaps I’ve gotten across a hint of what I mean. Or not.
Unsurprisingly, I agree with Eric’s sense of what’s fair, in his 4:34 p.m. comment.
I, in return, endorse Gary’s 4:40.
Sure, it’s not a hard sell if the folks being sold are not the ones paying the additional tax.
Tell that to Warren Buffett. But he might be an outlier. Then again, I don’t want my taxes to go up, but I’d understand if they had to and would rather I pay a dollar extra rather than someone who makes a lot less and is barely getting by.
fair to whom?
As fair as possible overall. Let’s also not forget we’re talking about levels of income, not individual human beings.
And: why is it any of your business how much money people make?
What does this mean? How does this apply to any given tax rate and not another? Are you suggesting we abolish the income tax?
Smith’s argument for a progressive tax scheme was as follows:
Assume you want to raise revenue by levying a tax of $100 on everybody, equally.
If you assess that tax on someone who makes $1,000 a year, it will likely deprive them of some necessity of life. Food, shelter, clothing.
If you assess that tax on someone who makes $1,000,000 a year, it will likely deprive them of a luxury, something inessential.
So, net/net, a progressive tax regime raises the necessary revenue, while imposing the least overall pain, because fewer people are deprived of necessities.
It’s a more or less common-sense argument, doesn’t require moral or ethical claims stronger than “it’s better to be deprived of something that isn’t essential than the other way around”, and doesn’t point fingers at or otherwise demonize either poor or wealthy folks.
Personally, I find it kind of appealing, for all of those reasons.
There are alternatives to income taxes, and over the years we’ve employed a number of them. They are, in general, unappealing these days for other reasons. We don’t want tariffs because we want free trade, we don’t want luxury taxes for reasons that aren’t clear to me, etc.
So, we raise a lot of revenue through income taxes, and a progressive regime makes that relatively less burdensome than it would otherwise be.
I don’t even get into discussions of “fair” because there are too many variables involved in any meaningful assessment of “fairness”.
The progressive scheme just results in a somewhat lower level of overall pain.
Works for me, YMMV.
And no, it’s really not anyone’s business how much money anyone else makes, and the point of a progressive tax scheme is not to publicize how much any one of us makes.
It’s just a way to raise revenue.
If we want to approach it the other way around and cut back on what we spend, we’re going to have to give up a lot of stuff also. I don’t see anybody – not one person – signing up for that.
TANSTAAFL.
My only quibble, Russell: “If you assess that [$100] tax on someone who makes $1,000,000 a year, it will likely deprive them of a luxury, something inessential.”
“Likely”?
And not just something inessential, but something almost unnoticeable.
Fairness is judged by identical treatment; fairness is judged by the result. That seems to be another way of putting the philosophical split, perhaps?
Another episode of what russell said.
Hey russell, can you shoot me an email?
ericred55
with the last part being hot then mail.
“And: why is it any of your business how much money people make?”
What?
So that I can find overpaid workforces and buy the American companies that employ them, using their balance sheets to leverage the money I’ve borrowed to purchase the company, shutter American facilities, fire American workers, and cut overhead and then ship the entire deal overseas to much lower paid workers, whose pay scales have been divulged to me by my investment banker — and then once those workers have reached a bare minimum standard of living — rinse and repeat until everyone is beggared.
Not that I think everyone gets beggared in such a scheme, but what the hoo-haa.
Besides, in everyday life, one does get to know the hourly rate earned by plumbers, attorneys, convenience store clerks, auto workers, and government employees, otherwise we wouldn’t be able to whine all of the time about how much everyone else is making at our expense.
I’d like to know how much everyone else gets paid per hour for whining.
And speaking of plumbers, how the hell much do they think I make that they charge such rates? Do I look like I’m made of money?
It would be nice to know a doctor’s take home pay, so you could comparison shop, but I guess given American values about the secrecy involving one’s pay, cutting healthcare costs is going to be tougher than I thought, because the the costs are SECRET.
I think what you mean is that no one has any business knowing what the privately-employed salaried employee makes or perhaps the hedge-fund manager who makes his money through fees and investment income.
If I didn’t know what everyone else makes, how would I know how to negotiate (not that I do) a salary.
NOW HIRING $7.25/hour. Whose business is THAT that they have to broadcast it all over the place?
One issue with the progressive tax structure: people who make higher incomes tend to have a greater interest in government services.
A person making $30k is basically paying for the government and services needed to produce a $30k/year job.
You can make that kind of money with the resources and support of a small town.
A person who can make ten million a year requires a lot more resources, a lot more infrastructure, and depends more highly on law enforcement and the courts.
It’s true – the person making $30k might be employed by someone making $10 million – so the person making the $30k might benefit as well from the person being able to make $10million. But that’s an indirect benefit.
Complaints about progressive taxation are often founded in an unwillingness to admit how much the government helps and protects the wealthy.
Mu. I answer thus: why do you think it’s your mission; your right to enforce some version of fairness, your version, via tax?
Chop that person down; take away all he has, and see how those average people who work for him do. I’d guess not all that well. Yes, I know: no one is discussing taking all. What I’m pointing to is the attempt to balance one person against a whole lot of others, and finding that one wanting. I’d like a bigger piece of the corporate pie as much as the next guy, but I try not to delude myself into thinking I’ve earned it.
I’m not arguing counter to progressive taxation. I’m wondering why anyone imagines that some number that they pluck from parts antisunward are any more valid than the numbers that I wish to see?
And why does my idea of rightness get trumped by yours?
Yes, I get it: societies since time nearly immemorial have done this sort of thing. And yes, we have taxed our most wealthy at 90%. I just don’t hear much in the way of rational explanation for what tax rates are correct in any objective way. And if the justice achieved by any particular set of tax rules is subjective, why not go whole hog and let the majority rip the higher bracket for…well, all?
Either there’s some rational basis for proposed tax schedules, or it just feels right, or some other possibilities that I haven’t yet seen. The just-feels-right possibility doesn’t sound all that just to me.
Who decides, and on what basis, is where I get stuck on this. Other than these things, I really don’t yet (and am not particularly in danger of that changing soon) have any dog in this particular fight.
Mu. I answer thus: why do you think it’s your mission; your right to enforce some version of fairness, your version, via tax?
It’s interesting that you quote a question and then post a “response” that has absolutely nothing to do with the question you quoted. I don’t know what the purpose of something like that is.
As for the rational basis for proposed tax schedules, those of us still clinging to our childhood nihilism will have difficulty finding said basis. Those of us who, in old age, admit that morality is real will have no such trouble.
slarti, I’d be interested in your reaction to the Smith argument.
Did you just mention morality?
See, that’s just what I’m talking about: the idea that you have the right to impose your own moral values on others.
I didn’t answer the question directly because my opinion in that particular matter is irrelevant. As, I say, is yours.
russell, I said this:
Plus a whole lot of other things that may or may not make sense. But further discussion of those things is going to have to wait for tomorrow, because I am tottering off to bed now.
the idea that you have the right to impose your own moral values on others.
I believe killing is wrong.
I believe I have – sadly – not the right, but the duty, to impose this moral value on you if you do not accept it.
To ignore that duty, to me, would be to succumb to childish nihilism.
“I’m wondering why anyone imagines that some number that they pluck from parts antisunward are any more valid than the numbers that I wish to see?”
I don’t imagine that; I think it’s something a democratic society should chose via thorough discussion and eventual majority rule of our elected representatives, and that the figures should be frequently re-evaluated and reconsidered.
“I just don’t hear much in the way of rational explanation for what tax rates are correct in any objective way.”
There is no objective way. That’s why you don’t hear about it. It’s a matter for human beings to decide democratically, in a democracy, via discussion and compromise of subjective opinions and serving the objective needs of the most influential interest groups.
The sausage making isn’t pretty, but that’s how democracy works.
“Who decides, and on what basis, is where I get stuck on this.”
This is terribly simple: Congress decides on federal taxes, and state legislatures on state taxes.
This is the way we’ve chosen to organize ourselves politically.
Politics isn’t engineering: it doesn’t work on a basis of proving what works best, nice as that might be, and much as we should continue to work to towards that as a goal.
Politics works on the basis of emotional people attempting to find rational compromises over irrational prejudices mixed with facts in a ratio that varies. Objectivity has nothing to do with it. People aren’t objective.
I’m wondering why anyone imagines that some number that they pluck from parts antisunward are any more valid than the numbers that I wish to see?
I’m quite in favor of a progressive income tax, and would like to make the tax more progressive.
I also think slarti’s point here is quite valid.
I think the issue of taxation might be a lot simpler if folks (including legislators) thought about taxes more as a way of raising needed revenue, and less as a way to try to engineer desired social outcomes.
Just my own opinion.
We have taxes because we, as members of one political body or another, incur financial obligations, and we need to pay the bills.
Taxes always suck, the decision of who or what to tax and how much is just a juggling act to decide where the pain gets allocated.
A reasonable criteria, to me, is to figure out how to raise the necessary revenue while doing the least overall harm.
And, of course, “least harm” is left as an exercise for the reader.
“I think the issue of taxation might be a lot simpler if folks (including legislators) thought about taxes more as a way of raising needed revenue, and less as a way to try to engineer desired social outcomes.”
I would tend to disagree. The engineered social outcomes are baked into the cake with any type/kind/amount of taxation. This engineering all to often takes on Talmudic qualities that hide, or at least obfuscate, the hidden assumptions that have a definite political bias and do indeed constitute “social engineering”.
In the good old days, we weren’t so shy. Look at the debates about tariffs before the Civil War, or populism and Bryan’s Cross of Gold speech.
Russell: TANSTAAFL
Actually, there is too such a thing as a Free Lunch.
But you have to be rich enough to buy politicians to get it.
–TP
I just don’t hear much in the way of rational explanation for what tax rates are correct in any objective way
Isn’t the rational explanation that nations have some sort of obligation to deal with threats and challenges, especially when there are other nations around. And while I’d assign a not insignificant level of rights to the individual, I’m not sure if I would claim that somehow taking money from that individual qualifies as something immoral, as you seem to do when you argue that one can’t invoke morality when looking at the question of taxation. I would definitely want the country that I am a part of to look down the road and take into account changes in the future.
And not hanging this on slarti (or anyone particular in this particular thread), but it seems bizarre that some of the same people who argue that the US is and should be No 1 also argue vociferously against the entire notion of taxation. I assume that is why they cling to notions of the inevitable power of the free market, because if they allowed the notion that government intervention might be required in some circumstances to move up in some table of rankings, they would find themselves twisted into some Gordian knot.
But if you look at the links I posted up thread on the matter, it polls well.
I should have followed your links, Eric.
Your data trumps my intuition (which is based, in large measure I realize, on my living in Oklahoma).
One nice thing about living in the Sooner State is that conversations with people from elsewhere in the US frequently reveal that the country is not quite as f**ked as one’s immediate experience would suggest.
” still don’t get why we have tax brackets instead of a smooth curve defining marginal tax rates as a function of adjusted gross income.”
I’ve thought about this, and concluded that the reason is that the average politician has somewhat of a grasp of addition and subtraction, gets hazy when multiplication and division are involved, and is clueless when it comes to algebra. Ditto for the average voter.
So, yeah, a polynomial equation might be more compact than that bracket chart, but the legislators couldn’t write it, and most of the tax payers couldn’t solve it.
Over here we managed for quite some time to have the worst of both worlds as far as the tax formula went: A recursive formula for several brackets with the equation of the lower bracket put as X in the equation for the next higher bracket. Difficult enough to be used in the final math exam at school. And the actual tax rate came by turning the resulting curve into a step function. Quadratic equations occur regularly in tax calculations (if one uses the formulas instead of the printed tables derived from it). I heard that under some circumstances even decadic logarithms have been spotted in tax law.
Actually creates lots of jobs since normal people are unable to do their tax return themselves and need paid specialists.
I have to add that the tax code did not contain the equations but a verbal description of them. It takes some time to turn those into a form one can use math on.
I read the whole thread, and I’d like to say that I’d like to see more discussion of the wealth tax.
I think A biblical tax of ten percent of wealth would be great. Say with a deductible of one million dollars.
Robert Heinlein had a idea for property tax which I think would adapt well to a wealth tax. Let people set their own value on their property for tax purposes but require them to sell at that same price to anyone offering.
This is pretty much what I was getting at; thanks, russell, for stating it so succinctly.
True, to varying degrees. For instance, if you attempt to extract too much revenue from the wealthy, they will turn some of their wealth and influence to engineering themselves deductions and exemptions to save themselves money. To me, such fiddlin’ about with the tax code only serves to distort the overall tax burden while adding complication to the tax code. It’s a twin evil, in my view.
Regarding having the tax rate be a polynomial: I don’t think that’s important or necessary. The tax table already represents a piecewise-continuous function whose breakpoints and slopes are relatively easy to understand. Replace that with a polynomial or some other continuous function whose coefficients don’t necessarily mean anything in terms of tax rates and you’re begging for even more confusion.
If you want to simplify tax, the tax table is, IMO, your last stop. Clean up the tax code, first, would be my preference.
Slarti,
You’re right that piece-wise linear tax rates are plenty good enough, and have nothing to do with the complexity that drives people nuts.
You’re wrong to worry about the rich engineering themselves deductions and exemptions (and subsidies!) IF we attempt to extract too much revenue from them. They’re already doing that, big time. Even Dubya’s tax cuts were not enough to stop them from doing it.
–TP
I’d like to know what Phil Davison thinks are the optimal tax rates.
I find this Grover Norquist “starving the beast” and limiting-taxation-in-order-to-limit-government line interesting because so many of those advocating it are conspicuously silent when it comes to the imperialistic outreach of American power, as though such power is disconnected from the very things they complain about. Hey, the second Bush administration hardly needed taxation to finance their geopolitical sense of self-expression and were as powerful as any government can be, with all the arrogance and cock-sureness you would expect from who was in that administration.
The most recent war, as we can account for, stripped what Iraqis there were who owned private property of what they had, respected no-one’s liberties, killed and tortured indiscriminately, gave free reign to American corporate interests in the region, and imposed what amounts to a puppet government. Listening to one awful drone of a Tea Party rally after another, you would think that they somehow thought all of this just paid for itself.
The taxation theme is something they bear dramatically because taxation is one of the relatively few things all Americans are subject to (albeit unevenly distributed), and they can’t stand the notion of being obligated to do the same kind of something some schmuck in Poofter’s Froth, Wyoming is obligated to do. Deep down, they couldn’t love government more if they married it, because they do not see government as a leveler of the commonweal but as the exercise of power. I can only conclude that government, to them, means war and a security state, not peace and a security net.
It all reminds me of something Vargas, the 20th century Brazilian dictator, used to say: “For my friends, anything. For my enemies, the law.” So it might just as well be with the 21st century Republican Party in the U.S.: “For our friends, anything. For our enemies, government and taxation.”
I think it’s more correct to say they have already done that, big time. Which is not to say new things aren’t being inserted from time to time. But what’s in the code stays in until someone legislates it back out.
The tax code doesn’t in general have sunset provisions, with a few exceptions such as the Bush tax cut. So if some of your upper-bracket compatriots carved out some tax-shelter territory for you decades ago, you still get to benefit now.
And in general, most people will take full advantage of whatever tax benefits are available, whether they think those benefits are good tax law or not. I’d bet that even Warren Buffet does that.
I’d bet that even Warren Buffet does that.
Why wouldn’t he, given the free rider problem?
What do you mean by free rider problem?