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June 10, 2008

Comments

When you start charging the "ultra-rich" more, you start getting the political pretense that you can vote for more stuff and foist the payments off on to someone else.

It's not a pretense; it's the way the Bush administration has been operating for the past 8 years. Except, of course, that they believe in charging the ultra-rich and the rich less, voting for more stuff, and foisting the payments off on to the middle-class and the poor. The notion that those who have less are selfish because they pay less is on a level with believing that the solution to hunger in the US is rice-cookers.

Who is in more need of the police - a man with nothing worth stealing, or a man with a flat-panel TV, DVD player, surround-sound system, two nice cars, and a beer-tossing mini-fridge?

Although it seems counterintuitive, in fact those most in need of police protection are usually the people with (almost) nothing worth stealing. The poor are by far the victims of the most violent and nonviolent crimes.

Sebastian wrote: Yes, and putting a pretty constant tax *rate* already deals with that and in a very obvious way. If the tax rate is 30% someone who gets from the society in such a way as to earn $1,000,000 will pay $300,000 in taxes. The person who earns $100,000 will pay only $30,000 in taxes. The person who earns $50,000 will pay $15,000 in taxes.

But Sebastian, you seem to be ignoring that fact that those at the low end have a much higher percentage of their income sunk into fixed necessities, like food and energy and housing. The progressive tax attempts to make the tax rate a tax on the spendable income, not simply the flat amount.

And even so, that still assumes that the rich and the poor benefit from society at the same rate, a premise with which I disagree. I do agree that the wealthy contribute to society in terms of job creation. That's why I'm in favor of tax deductions and write-offs for business expenses.

A lot of people (I'm generalizing; no one here that I've seen) complain about the complexity of the current tax code. I freely admit that it can be pretty hairy, it seems to me that it's trying to be fair. Higher rates for those who can pay, but deductions for those who contribute to societal stability strikes me as a pretty good balance.

OK, I'm afraid I'm starting to ramble. I apologize if I'm not making much sense. I just realized this comment turned into more of a stream-of-concsiousness than I intended. Sorry.

Also you seem to be ignoring the idea that industrialists at least may give back more already than you give them credit for. They helped create jobs.

That idea is being ignored because it's irrelevant.

Also, your point about the flat tax rate seems to (as usual) ignore the marginal utility of money.

Although it seems counterintuitive, in fact those most in need of police protection are usually the people with (almost) nothing worth stealing. The poor are by far the victims of the most violent and nonviolent crimes.

They're getting what they pay for.

Personally, I don't see that it's really possible to figure out how much each of us has benefited from government (meaning not just programs, but things like the rule of law), since it's impossible to determine what things would be like under anarchy. For that reason, I tend to think: well, we all do benefit quite a lot, and since (a) it's not clear that 'from each according to the benefit s/he has received' is the right standard to start with, and (b) who knows what it would imply?, why not just set things up so that people who can afford more pay a somewhat larger proportion of their money?

I suspect this seems unfair or something only given some idea that it's possible to figure out what each of us actually owes. Having thrown this idea overboard, I'm fine with saying: sure, I should pay a higher marginal rate than someone who is barely able to pay the rent.

For that reason, I tend to think: well, we all do benefit quite a lot, and since (a) it's not clear that 'from each according to the benefit s/he has received' is the right standard to start with, and (b) who knows what it would imply?, why not just set things up so that people who can afford more pay a somewhat larger proportion of their money?

Dammit hilzoy! Stop being so sensible, don't you know we've got things to drown in the bathtub?

Here's my point of view.

It doesn't matter who needs government services more, or who benefits from them more. Government is not, or at least ought not to be, a fee-for-service operation. The kinds of services we get from government -- national defense, legal system, public health and safety -- are stuff you need to have a functional society.

Everybody chips in, everybody benefits, the differences smooth out over time and over the whole population, and if they don't, you just don't worry about it, because it's more important that these things be in place than that everyone's sense of 'fairsies' gets satisfied.

Once upon a time, society was simpler, fewer public services were needed, and government was smaller.

Now society is more complex, more public services are needed, and government is larger.

If we want to go back, that's OK, but I doubt that other than BOB few of us really do. I doubt BOB really does.

As far as I can tell, governments can get away with taxing people with more money at a higher rate because that practice complies with a commonly held sense of general fair play.

We generally expect folks with greater gifts, of whatever type, to be more generous with those gifts, and it's generally considered to be kind of niggling on the part of those with the greater gifts to complain about it.

Strictly speaking, this is a departure from a purely algebraic idea of 'fairness', but people don't really live that way. Fairness, as normally used in human culture, is generally a little more flexible than that.

Plus, income taxes are only one of many, many taxes and fees that we all pay to fund government and public institutions.

Thanks -

Jes,if you comments about wealthy right-wingers was about me let me set you straight. I am neither. I am a retired soldier. I don't attack anyone any more. I have seen poverty most people could not even understand. I have done what I could to abate it.
There are many good points on both sides. Higher taxes don't seem to do much good,if any. Taking money from people because they have too much just doesn't seem right. Should their protection cost more? Should their roads be more expensive? Spend less as a nation. Great idea but no one wants to give up anything.
I wish my bank and the IRS was into fogiveness of debts.

...since it's impossible to determine what things would be like under anarchy.

Determine, no. Imagine, yes. I'm picturing walled fortresses with moats (or is that motes?) and wealth consisting mostly of livestock and slaves, very poorly distributed. And lots of dirty people without shoes or teeth. A precarious and generally yucky existence, even for the best off, at least in comparison to what we have in the US today.

Wayne: Jes,if you comments about wealthy right-wingers was about me

No, it was a general comment, not aimed at any individual on this blog. If I was thinking of any named individual, I was thinking of the kind of Republican politician who claims Christian principles for his anti-sex or anti-civil rights votes, then forgets all about those principles for his votes on tax and welfare. I'm sure you can think of some such names yourself: but no, I was not thinking of you.

Jes, it's not just Republicans. It is so many politicians. I agree with Wil Rogers" There oughta be one day a year when it's open season on the Senate" substitute politicians. I'm not calling for assasinations. Maybe, we could just wing'em.

hairshirthedonist: well, yeah, but I'm thinking that in order to really get an argument of the form "this 25% rate excessively burdens people making over $200,000/year" going, you'd need some pretty precise figures. Precision has a sort of spectral presence in the argument, but it doesn't really exist at all.

BTW, nicely put @ 3:40 PM, russell. It would be hard to get rich or wealthy the way most rich or wealthy people do today without the functioning society we have. If a little wealth redistribution keeps that healthy, we're all better off.

I might be a little slow on the uptake, Hilzoy, but I'm not sure which of my comments you're responding to. ???

are accompanied by a proposal to removal of the cap on the payroll tax

What's that aimed at accomplishing, I wonder?

Nevermind, Hilzoy. I figured it out. Your response was just focused in a way that my comment wasn't intended to be, sort of. I was getting at: we all do benefit quite a lot in my own weird way.

Sebastian said:

Yes. Absolutely. In fact, we really need a series of words to describe the ultrarich in this country; maybe one for the top 2%, the top 1%, the top .5%, the top .1%, a more palatable term than "f***-off rich", and so forth.

Not that this gives you a more palatable term, but it is an amusing and (sort of) related reference from Neal Stephenson's "Cryptonomicon" (*isked for posting guideline purposes):

Multiply those two things together and you get the kind of exponential growth that should get us all into f***-you money before we turn forty.

This is an allusion to a Randy/Avi conversation of two years ago wherein Avi actually calculated a specific numerical value for "f***-you money." It was not a fixed constant, however, but rather a cell in a spreadsheet linked to any number of continually fluctuating economic indicators. Sometimes when Avi is working at his computer he will leave the spreadsheet running in a tiny window in the corner so that he can see the current value of "f***-you money" at a glance.

Back to your regularly scheduled serious discussion now. Pardon the interruption ;)

Also you seem to be ignoring the idea that industrialists at least may give back more already than you give them credit for. They helped create jobs.

Oh yes, let us get down on our knees are kiss the feet of our capitalist masters. They could fire everyone and go off to some valley somewhere and create a businiss that doesn't need labor at all.

A business that doesn't create jobs is just one rich guy in a big office with nothing to do.

Hilzoy, "I suspect this seems unfair or something only given some idea that it's possible to figure out what each of us actually owes. Having thrown this idea overboard, I'm fine with saying: sure, I should pay a higher marginal rate than someone who is barely able to pay the rent."

If they are really barely able to pay the rent, in the sense of being poor not buying an expensive house, that is fine. If we want to exempt the poor from taxes and have a graduated rate ramping up to the full rate (soley because we don't want to disincentivize work by having a sharp jump from zero to 30% or wherever the sustainable point is) that is fine. We can as a majority of the citizenry decide to charitably exempt some smallish portion of the bottom. But once you get to the large majority of the citizenry, we are in a very different position. Putting the middle class in the position where they can vote for an increase in benefits while sticking the bill on other people isn't a good plan for making good choices about spending money. (Actually as a general statement I would say that putting people in a position where they can vote themselves benefits of whatever sort and stick other people with the costs is going to lead to bad decisions about almost any topic). The key problem in almost all of human relations is that choices involve tradeoffs. Getting to good solutions involves appreciating the tradeoffs. Being able to foist the costs on to other people leads to an avoidance of the tradeoff analysis. That leads to bad decision-making.

I have no trouble exempting the poor from taxes to some extent or other. That involves the majority deciding to pay the costs to provide a benefit for others. That is great. I do not support situations where the majority votes for benefits for itself while deciding that other people get to pay the costs. That is morally a very different situation.

BrianA, "Also, your point about the flat tax rate seems to (as usual) ignore the marginal utility of money."

The idea of the maginal utility of money is a steeply sloped curve (like a 1/x curve). I fully accept that when you are very poor the marginal difference is great. When you are merely poor the marginal difference is big. But the curve is asymptotic, and by the time you are well into the middle class the marginal differences between the x and x+1 and x+100 spots are already pretty small. Basically I suspect you believe that when you invoke "the marginal utility of money" you picture the middle class still on the steep end of the curve. To me they are already well into the flat-seeming part of the curve by the time you get the American middle class. I think the marginal utility of money is a fantastic argument when talking about the poor, and almost meaningless by the time you get to the middle class.

Oops, sorry, mis-attributed Anarch quote to Sebastian above.

von said:
"My statement, however, concerned the small business owner who is self-employed. Under Obama's plan, such a person will see (1) a direct and significant increase in his or her taxes to the extent his or her income exceeds the SS cap and (2) additional expenses (and therefore a disincentive) to hire high-wave employees due to the same."

I have been a self-employed small business owner for 15 years. In that time my income has ranged over every single tax bracket except the top one -- I have never had AGI in the $300K+ range. Some years I've been over the FICA cap, some not. I have never once turned away business due to tax considerations. I have usually purchased equipment in years when I was in a higher tax bracket -- not because it reduced my tax bill more in those years, but because those were the years when I had the money. I have never "created a job" -- but that was not remotely because of payroll taxes. Even if McCain or anyone else cuts the payroll tax to ZERO, it would not induce me to hire a helper. You know what would? Demand, that's what. If I had reasonable prospects of doubling my revenue next year (and thereby INCREASING my tax bill) by hiring someone or making a capital investment, a few percentage points either way in the tax code would be irrelevant to me.

I say all this to point out that I have direct personal experience of the tax code at all levels. From that vantage point, I say: tax the hell out of me while I'm "rich" so that you can tax me less when I'm "poor". The prospect of paying 39 cents, rather than 35 cents, on my 300,001st dollar of income next year is absolutely irrelevant to my incentive to MAKE that 300,001st dollar.

I would gladly vote, by the way, to tax my 3,000,001st dollar at 50 cents, if that would reduce the tax on my 30,001st dollar to 10 cents. Hell, I would gladly take my 30,000,001st dollar even if you taxed it at 70 cents -- provided we index to inflation, against the day when $30M a year is not enough to live on.

-- TP

"Also you seem to be ignoring the idea that industrialists at least may give back more already than you give them credit for. They helped create jobs.

Oh yes, let us get down on our knees are kiss the feet of our capitalist masters. They could fire everyone and go off to some valley somewhere and create a businiss that doesn't need labor at all."

First not all really fantastic businesses require much in the way of labor.

Second, I think you are missing my point. If you are going to engage in the (IMHO probably fruitless) attempt to argue that 'the rich' should pay more because they get more out of societal protections, you also need to factor in the positive side of that equation--making jobs etc.

No boot-kissing required for that analysis, unless you are in to that kind of thing. ;)

Sebastian: so you think that the difference between ($45k - $15k taxes) and ($100k - $34k taxes) is "almost meaningless"? That seems pretty absurd to me.

What Obama doesn’t have a grip on is that the tax system, in it’s current form, probably is pretty close to the achievable optimum for maximizing government revenue.

Obama would raise the rate to 39%, plus 13% for social security, plus 2.7% for Medicaid, plus who knows what else. That’s 54% going to the federal government alone. Tack on 10% for state taxes, local taxes, property taxes, etc. and two of three dollars that productive people earn will be taken from them.

People grudgingly pay half, which I believe is fair. But try to take two-thirds and people will change their behavior. Or they will relocate their businesses to somewhere http://www.belizelaw.org/lawadmin/PDF%20files/cap278.pdf ">warm where there are zero income taxes for ten years and zero taxes on dividends for twenty, the tax rate rising to up to 8% after the tax holiday.

Governments of the 21st Century are in competition for talent. They want talent. Talent is mobile. Obama doesn’t understand this. His mind operates with poor spatial awareness.

A lot of people (I'm generalizing; no one here that I've seen) complain about the complexity of the current tax code.

Many complaints about the complexity of the tax code are part of arguments that the solution is to reduce the number of tax brackets by moving to a "flat tax".

Of course the number of tax brackets has nothing to do with the complexity of taxes, since everyone gets the tax by looking it up in a table or calculating it with a computer program. There could be an infinite number of tax brackets (in fact that would be preferable, to avoid arbitrary breakpoints), and doing taxes would be no more complicated.

Hilzoy: here's a contrary view

My issue with that cite is that it is based entirely on estimates. The point of the study I linked earlier is that similar estimates prior to the previous cuts were completely wrong based on what actually happened.

From your CBO link - this is probably the core of it:
Thus, even though the responsiveness of realizations to a tax cut may not be enough to produce additional receipts over a long period, it may do so over a few years.

I don’t think we can accurately predict long term anyway, so I’m perfectly happy to do something that will possibly kick start things for a few years when we really need it. Doing the opposite at a time when things are bad and getting worse just strikes me as a bad idea.


Andrew: You don't suppose less revenues were garnered from capital gains because the largest stock market crash since the Great Depression happened the year after the tax raise? Ever heard of 'Black Monday'?

Well, seeing as we still don’t know exactly what caused Black Monday, I’m free to believe it was a secondary effect of the capital gains tax increase. ;) (But then I’m a Republitard so what can you do?)


Ugh: The other things that happened after 1986, besides a crash in the stock market, is that the Internal Revenue Code's "at-risk" rules were applied to real estate by the Tax Reform Act of 1986…

Certainly the general health of the economy and the market come into play. So throw out the 86 crash. Are there good alternate explanations for the significant increases in revenue from capital gains following the tax decreases in 81 (3 year + 49%), 97 (3 year + 49%), and 03 (3 year + 99%)? Hilzoy suggested that for 97 we were already on our way, coming out of recession. That’s plausible. 81? Breaking free of stagflation? 03? Was that all the folks making out in the housing bubble? I’m sure we can come up with alternate explanations – but can we really say “the capital gains tax rate cut had nothing to do with it all three times”? When I see that B was preceded by A not once or twice but 3 times in less than 30 years I tend to think that A has some bearing.


On all the rest (and to all the rest), I said from my first comment: Raise taxes if you have to (I’d rather cut expenses) but don’t try to convince me it will only be those evil rich taking the hit.

I’m fine with tax hikes. I realize that they are necessary. I can afford to pay more – it won’t kill me. I don’t like it, but I see it is necessary. My main point is quit telling folks (Obama) that it’s only going to impact those rich people – not you Mr/s. average American. Because that is crap. Quit blowing smoke up my a** and telling me its sunshine.

Stand up and tell us some hard truths Obama. "Things are rough and looking like they may get a lot rougher. Sorry folks, but we’re all in this together. Yes I’m going to raise your taxes and its going to impact much of the country, not just the rich. I’ll try to spare the poorest among us, but most of the rest of the country is just going to have to suck it up." Tell me something like that and you’ll earn my respect and I won’t even feel that bad about increased taxes…

It is interesting to note than in fully-democratic countries in the ‘developing world’, there is no such thing as a capital gains tax. That is because the handful of men who hold all the wealth don’t want to pay capital gains tax. There is instead a steep sales tax on everybody.

That is their plan for the US too, by the way. They are making good progress.

"Sebastian: so you think that the difference between ($45k - $15k taxes) and ($100k - $34k taxes) is "almost meaningless"? That seems pretty absurd to me."

I don't understand what you are saying.
$45,000 with $15,000 in taxes is 33.3%
$100,000 with $34,000 in taxes is 34%.

If you are asking me whether the marginal value of money is such that equalizing the tax rate on the $45,000 person won't be a big deal, the answer is yes. That would put the $45,000 person at $15,300.

The rich person is still paying $18,700 more which unsurprisingly is about 1/3 of the difference in their income.

You could sell me on a flat tax approach if it was applied to all income, and if there were no exemptions.

Without that, for all practical purposes a flat tax ends up being regressive. Wealthier people are more likely to have unearned income, and have access to more exemptions.

Plus, lots of other taxes are either flat (MA state tax frex) or regressive (sales taxes).

Net/net, the all-in tax burden is nowhere near as progressive as the marginal federal income tax rate.

Thanks -

Sebastian wrote: I don't understand what you are saying.

I see what you mean, Sebastian, but it's kind of ironic that you regard this as a reason to raise taxes for the person who is left with $30K a year to live on, because it's unfair to ask the person left with $66K a year to live on to pay any more.

Well and good, except someone making $45k is not going to be paying a third of his/her income as federal income tax.

"I see what you mean, Sebastian, but it's kind of ironic that you regard this as a reason to raise taxes for the person who is left with $30K a year to live on, because it's unfair to ask the person left with $66K a year to live on to pay any more."

I don't understand why you think it is ironic. I'm talking about equalizing the rate. So if you want to lower the $100,000 to 33.3% he is now paying $33,300. I don't think that $700 would be a big deal either. The illustration was about the marginal value of money. Unless you are positing fantastically different rates (15% vs. 70%) and maybe not even then, the marginal value of money by the time you get to the middle class isn't enough really justify a difference in rates.

"If hitting us up for another grand or two a year in taxes is going to make things better, I'm fine with that"

As Dennis Miller has said--"...but if only the "D's" would ask us nicely...." when they want to increase our taxes.

I don't understand why you think it is ironic. I'm talking about equalizing the rate.

You're saying that taking away more from the person who already has less is "equalizing the rate". If you don't find that ironic, perhaps your sense of humor is rusty? Get John Thullen to fix you with his steely gaze and rapier wit: don't think I'm needling you.

As Dennis Miller has said--"...but if only the "D's" would ask us nicely...." when they want to increase our taxes.

Just speaking for myself, dude.

To be honest, given all of the problems we're going to be facing in the next few years, changing the capital gains rate from 20% (as planned for 2011) to 25%, or the top marginal tax rate from 35% to 39%, are pretty damned far down my list of things to worry about.

I know it makes folks like Bartiromo pee their pants, but it's just really not going to rock my world.

Everyone hates paying taxes, but if you want to spend the money, you have to raise the money.

The normal day-in and day-out operation of the government doesn't actually cost all that much. Our big ticket items are the military, Medicaid/Medicare, and Social Security.

If we actually want to make a dent in the tax rate, we need to reign in the imperial ambitions of our foreign policy brainiacs, and figure out how to deliver basic health care to our population without it costing us 20% of GDP.

Everything else is tinkering around the edges.

Thanks -

Everything else is tinkering around the edges.

Sorry, I would add to that figuring out how to operate an industrial and post-industrial economy in the absence of cheap and plentiful oil.

As problems go, a single-digit bump in the top marginal tax rate to keep the lights on is small beer.

Thanks -

Obama would raise the rate to 39%, plus 13% for social security, plus 2.7% for Medicaid, plus who knows what else. That’s 54% going to the federal government alone. Tack on 10% for state taxes, local taxes, property taxes, etc. and two of three dollars that productive people earn will be taken from them.

1) There is no "the rate" to be raised to 39%, nor one such that it totals to 54%. If you don't understand marginal rates, you're already deeply unqualified to be discussing this topic.

2) If you're making so much money such that any of your income is subject to the top marginal rate -- be it 35% or 39% -- you're probably itemizing your deductions, and as such, you can deduct your property taxes and your state (and perhaps local) income tax from your federal income tax burden. For people who don't itemize, the standard deduction is supposed to help defer those costs.

3) Are the "unproductive people" you imagine in your head exempt from sales tax now?

Are there good alternate explanations for the significant increases in revenue from capital gains following the tax decreases in 81 (3 year + 49%), 97 (3 year + 49%), and 03 (3 year + 99%)?

81-84: out of recession
97-00: internet stock boom
03-06: out of 9/11 recession/internet bust

Hi Phil;

1. The median one percenter who pulls the revenue freight in America makes seven figures per year. What happens before 39% is not important. Depending on actual income, the ‘rate’ may be 37%, 38%, or the full 39%. People will have no desire to become a high income individual if Obama is going to take two-thirds of their stuff in the way that his father described in ‘Problems with Our Socialism.’

Obama senior wrote of how he coveted the stuff that Asians and Europeans had and that it was proper for Kenyans to take it. It didn’t quite work out, see Animal Farm for details. I get the feeling that a little of the old man rubbed off on junior.

2. Typical property taxes are around $2000 per year. 39% of $2000 is something like $800, which is insignificant for high income individuals. Even if property taxes were $20,000 per year, that’s only $8k/yr.

3. Claiming that high-income earners are productive does not exclude non-high income earners from being productive. Most American workers outside of the government are. They just don’t contribute significantly to the treasury.

Re-reading your comment Phil, you missed my point on sales taxes. As the electorate gets dumbed down through universal suffrage, dysgenic breeding, public schools, and immigration, it becomes easier for those with power to consolidate control.

This process has been largely completed in Latin America, which is why there is a sales tax instead of capital gains taxes.

the marginal value of money by the time you get to the middle class isn't enough really justify a difference in rates.

I doubt this. It's really hard to believe that someone making, say, $50K/yr., has anywhere close to the same (low) marginal utility of an extra dollar as someone making $500K, or $5 million.

In any case, this is not something we can measure, so I think your statement (and mine) should be regarded as personal opinion, not fact.

Geez, just tuned in today after tuning out last night around 5 am --- this has been great reading.

Mr. Punch, from 8:54 am, who seemed to disagree w/ something I wrote in the wee small hours:

After reading your post, I must say: You. Are. Right.

Thanks for enlightening me.

You, too, Cyllan (10:02 am).

John Thullen from 10:12 am --- "The key to wealth (for the average person who works for other people) is to save money regularly, period, regardless of what you invest in" --- you sure did give away the secret to building wealth for an Average Joe like myself in your terrific read.

Really it's no secret at all.

Then why is it so damn hard to do?

Made $17,000 my first year out of college in 1984, working for a small newspaper near Allentown, Pa., and felt very, very rich, even though I was very, very poor.

Spent one whole winter closing off half of my efficiency apartment, and before long, didn't even bother heating the other half --- heck, my Mom gave me an electric blanket for Christmas and that kept me warm at night.

But I felt rich. Here I was a 21-year-old kid right out of J-School, and lucky enough to have landed a job on a newspaper within two months after graduating, knowing that my much smarter, much wiser roommate spent nearly a whole year before he landed on a paper.

I felt rich because I was doing what I grew up wanting to do: cover sports and the people who play them.

Got out of the sportswriting business eight years ago, after 14-years on the Philadelphia pro beat (the Phillies, Flyers, Sixers, Eagles).

No longer felt rich or poor. Just had lost my zest for the job. Burned out, I guess. But I also grew tired of interviewing Million Dollar Athletes night after night and having roughly half of them treat you as if they were doing YOU a favor by talking to the press --- never mind that there wouldn't be any Million Dollar Athletes if it weren't for today's hyped-up 24-hour sports coverage, a concept many of these rich, spoiled athletes never got or simply ignored.

Now I am in sales, and 24 years after making 17K, I made $77,000 last year, almost double what I ever made as a sportswriter.

But do I feel rich?

Not financially.

I seem to be hardly getting by, yet would never dream of going without heat like that 21-year-old nut did.

But, in my 45 years, I have never felt so rich as a person, finally married, with a wonderful wife and a 9-year-old son who I adore. My wife --- who came here four summers ago from Russia with our son ---never ceases to amaze me with her optimism and cheerful nature.

We're broke this week, honey? Don't worry: We'll just eat more potatoes and mushrooms. And I love her potatoes, if you know what I mean. We have spirited arguments about the Russia of old: Age 37, she claims the Soviet Union was never a Communist state, rather a Socialist state, and often I find it hard to disagree with her. (Was she brainwashed growing up or was I?)

In the end, I have to agree with Cleek (1:39 pm) --- "Rich," he wrote, "is a relative term . . . 'Rich' is the fantasy of being able to meet all of your current expectations comfortably" --- and, my words: making that fantasy count beyond monetary terms.

John of the Dead (2:03 pm), your viewpoint was very humane, compassionate and sensible --- and a viewpoint, I feel, would definitely require a Democratic administration to fulfill.

(P.S. John of the Dead --- I finally checked out the Rainbow Bridge, one reason I was up so late last night. Please go back to "What Clinton Should Do Next" for my reaction.)

Sorry for the length of the missive.


What happens before 39% is not important.

No, it really, really is, because what happens before 39% is what pushed that extra dollar into that bracket.

People will have no desire to become a high income individual if Obama is going to take two-thirds of their stuff in the way that his father described in ‘Problems with Our Socialism.’

My personal experience with millionaires -- and I know several -- shows this not to be true, so you're going to have to do better than OMG SCARY MARXIST ORWELLIAN OBAMA before I take this as anything more than paranoiac neo-Reaganist tripe.

Typical property taxes are around $2000 per year.

Cite, please.

39% of $2000 is something like $800, which is insignificant for high income individuals. Even if property taxes were $20,000 per year, that’s only $8k/yr.

This is irrelevant to what I said, which is that you can't add together the 39% marginal rate plus property, state and local taxes to come up with some frightening number, since you can deduct those latter three from your taxable income, which in some cases will drop you back down below the 39% rate anyway.

Re-reading your comment Phil, you missed my point on sales taxes. As the electorate gets dumbed down through universal suffrage, dysgenic breeding, public schools, and immigration, it becomes easier for those with power to consolidate control.

Ooops. I forgot, I make it a point not to converse with racist xenophobes.

2. Typical property taxes are around $2000 per year. 39% of $2000 is something like $800, which is insignificant for high income individuals. Even if property taxes were $20,000 per year, that’s only $8k/yr.

Uh, what? Property tax varies widely from state to state; there's no such thing as typical. In rural Alabama, you might pay about $300 on $150k worth of property. Same place in Central Florida would run you about $2500. Other places are much steeper than Florida.

Sebastian: I'm not sure we need to deform large portions of the economic system just to get at the ultra rich or whatever you want to call them.

I didn't say anything about deforming the system, just that we need a finer-grained nomenclature for the rich than we currently have.

emile: I was actually thinking a little bit about that passage.

being rich is about having money, not having income. Rich people don't have to work"

There are some people down the block from here right now in the park who don't have to work. They sleep on the street and get their meals in the mission district. Are they rich? Why don't you join them then? Don't you want to be rich too?

They sit down and worry about bills; they make decisions about what they can/can't afford. Rich Folks don't do such things.

Oh, but they do. The more money you have, the more you worry about losing it all. You should feel sorry for those making $200k a year, they are the ones who have it really rough! Just ask them and they'll tell you, or scroll up a bit.

It is a curious trait of most Americans that we consider the word "rich" to be a generally negative term.

Why should it be curious? Most Americans are Christian. Those who spend their years accumulating wealth know full well that what they are doing is evil. Consider someone with 10 million dollars saved up. The person will claim they need their savings to ensure them against future problems. They will have all manner of justifications for they behavior. Meanwhile, people die for want of medicine that costs 10 dollars. They could save a million lives, or they could personally feel a bit more secure, and a million people die. How is that not pure evil? I place myself on the side of evil here, by the way, hoarding wealth against future calamity while the poor of the world do I care not what. 40 people died so I could wear nice shoes. So?

Let's just admit what we are, here - that seems to be the stumbling block.

"Apparently, even if you make around eight times the median per capita income in this country, you don't count as 'rich'."

Well, no. If we’re talking about two working parents with four kids in a high cost of living area, not even close to rich. Certainly not poor; possibly comfortable; more likely overextended like almost everyone else."

"Almost everyone else" means that, again, us poor people don't exist.
According to the most recent Census Bureau statistics, nearly 36 million Americans lived in poverty in 2003, an increase of 1.3 million from 2002. And since 2000, 4.4 million more people in this country are living in poverty. The Census Bureau defines poverty as an individual earning $9,393 or less and $14,680 or less for a family of three.

And American families are faring worse than they have in years. Last year 7.6 million American families -- or 10 percent of all families -- lived in poverty, a big jump from 2000.

"Last year" there being 2004, and it's gotten worse. OCSteve, why aren't more than 7.6 million American families, 10 percent of all American families, not part of "almost everyone else"? How is it we get defined out?

If 8 times the median income isn't rich, then how many times the median defines "rich" for you? Simple question.

"Rich" is a subjective term. To me, who has had only one year in his 49 years in which he made more than $8,000, "rich" is more or less anything over $12k a year for an individual, with over $20k a year very rich, and anything above that, I hardly know how you'd spend the money on stuff that wasn't ludicrously unnecessary. Over $40K for an individual (I've never planned for a family, so I'm sticking to costs for an individual) is incomprehensibly rich to me, and beyond that, just imagine.

But to most middle class folks, it isn't, and that's fine. But what is "rich" in your world, in terms of times the medianper capita income? If eight times richer than most people isn't "rich," is it twelve times? Twenty times?

And if you're only twice as rich as the median income in America, does that make you, according to you, poor? If you're four, or six, times richer than most people, are you still "poor"? How do you figure this?

I think that Phil called me names.

"Give me an annual income of $200k, and I'm sure I could find a way to live quite nicely even in Manhattan or San Francisco.

Sign me up too, please. I won't even complain about a higher marginal tax rate...

I'll be thrilled with $20k, and I'll do very happily in NYC for that much.

"But if they live in a high cost of living area with a huge mortgage and are facing putting 4 kids through college I doubt that they consider themselves rich."

People have endless ignorant delusions: so what? Is subjectivity an objective measure? No, it is not. I don't understand.

"Save your Laffer Curve nonsense for the Republitard echo chamber, OCSteve."

This is a site where Republicans are as welcome as Democrats; its primary founder was a Republican. He used to threaten to ban people who engaged in this sort of blanket insult. This not a civil way to refer to fellow commenters.

It most assuredly is not a civil way to respond to OCSteve, a person whose views are in the minority here, but who is civil nonetheless; please give him the courtesy he gives you.

"I mean seriously, it's clear from reading here that what everyone values is money and nothing else."

I read this as ironic, but I suggest that it's phrased in a way that will make that unclear to many readers.

So, I suggest a new tax rate based on a combination of intelligence tests done early in life.

Please, no. If there is anything the nation does not need right now, it is the invention of new ways to incentivize stupidity.

Also, I propose we eat Irish babies.

It most assuredly is not a civil way to respond to OCSteve, a person whose views are in the minority here, but who is civil nonetheless

I don't agree with that. OCSteve posted the following, as an argument that lowering capital gains tax rates increases tax revenues:

Year Tax Rate Capital Gains Taxes
1996 28% $62 billion
1997 20% $79 billion
1998 20% $89 billion
1999 20% $109 billion

He is not a financial naif. He is someone who knows exactly why capital gains tax receipts increased in those years, and he is someone who knows it has nothing to do with the tax rate and he is someone who knows exactly why you stop that series with the 1999 numbers. And still he posts it.

I don't consider that to be civility. Very much the opposite. And you protest too much.

He is not a financial naif. He is someone who knows exactly why capital gains tax receipts increased in those years, and he is someone who knows it has nothing to do with the tax rate and he is someone who knows exactly why you stop that series with the 1999 numbers. And still he posts it.

Umm, no. You might think there is a single trivially obvious explanation for the data, but that doesn't mean that that is true. OCSteve has done more than enough to earn a presumption of good faith; if he thought the analysis was garbage, he wouldn't have presented it.

Does that make him a naif? I don't think so. He doesn't do finance or government accounting or tax regulations for a living and to be honest, his willingness to search on the internet and read something with numbers puts him in the 99th percentile of Americans when it comes to thinking about political economy issues.

You don't know what's happening inside anyone else's head so please stop pretending that you do. And for the record, Gary did not protest too much.

You don't know what's happening inside anyone else's head so please stop pretending that you do

I'm so tired of this meme. If you don't learn to figure out what's going on inside other people's heads, you're going to have a hard time in this life.

It's really not that hard to do.

I feel there are some people who are better able to pay for the needs of modern society than others. Those people reap greater rewards from living in said society than those less able to pay

Really? You mean a poet with a Harvard degree who, even if s/he earns no money at all, can depend on the rest of us to at least try to ensure that s/he doesn't starve or sleep on a dirt floor, that person doesn't reap the reward of being able to follow his/her bliss in said society? From reading this thread I thought for sure that following that bliss would qualify them as more "wealthy" and mean that they therefore reap the greater rewards.

why not just set things up so that people who can afford more pay a somewhat larger proportion of their money

Why not just set things up so that people who can earn more get jobs (whether they like them or not) that allow them to pay a somewhat larger share of what's needed? Because hey, if its so incredibly important that the less fortunate among us are cared for, how incredibly selfish are people who don't earn as much as they possibly can in order to pay more taxes?

Also, I propose we eat Irish babies.

Finally, a fun thread kick off. Its not sports, whiskies, beer or Haiku, but I'll bite. I like mine pit BBQed on a bun with slaw on the sandwich so that I can use my one side choice for beans or fries. You?

I'm so tired of this meme. If you don't learn to figure out what's going on inside other people's heads, you're going to have a hard time in this life.

It's really not that hard to do.

Wow, you are good. You've got everyone all figured out by reading some stuff on the internet... I get the feeling that you honestly don't know what a breathtakingly giant a** this makes you sound like. Fortunately, I would never actually call you an a** (especially at OW) based on your comments on the internet.

Turbulence, if OCSteve were not a naif, we could not presume goodwill.

He is, and I do: but he does consistently argue for positions that would be morally inexcusable if he were not naively ignorant and yet full of evident goodwill, despite all.

OCSteve, hilzoy, and anyone else I may have offended,

Your criticism of my comment is well placed and well taken. Please accept my apologies.

I have been trying to dispel the 'lowering taxes increases revenue' myth for quite some time, and it is frustrating to see it continually popping up like a bad penny. I can live with people spreading around nonsense, but not when it means underfunding our government to a point which endangers the population and increases the crippling burden of debt on my children.
I'll just leave it at that for now.

If you don't learn to figure out what's going on inside other people's heads, you're going to have a hard time in this life.

Yep, there are techniques that although not foolproof, do tend to work better than arguing with the OCSteve in your head. Further discussion. Requests for clarification. Things of that nature. Observation occasionally requires that you dig the data out, rather than limiting yourself exclusively to the data that happens to fall in your lap.

It's really not that hard to do.

I agree. I encourage you to put just a wee bit more effort into it, before drawing conclusions that, from where I stand, appear to be completely incorrect.

Why, it's almost as if you're doing that on purpose. I conclude malevolent intent!

I don't consider that to be civility. Very much the opposite.

Just chiming in for a minute on this.

I think what you are accusing OC of is a lack of good faith, which is not the same thing as incivility. I believe you can advance an argument not in good faith here without violating the posting rules. You'll just get shredded if you try it.

Rightly or wrongly, you can probably also get away with using a word like "Republitard" if it's not directed at another poster, for example if you were to use it to characterize Republican foreign policy. Still kind of rude, and if you did it all the time folks might object. But not personal, if you get what I mean.

If you think OC's argument is bogus, attack the argument. If you think he's arguing in bad faith, just say that. No need for unwarranted name calling.

OC, in particular, has demonstrated both good will and good faith consistently for a long time. His track record is probably better than mine. So, most folks here are happy to give him the benefit of the doubt. He's earned it.

Thanks -

Gary: OCSteve, why aren't more than 7.6 million American families, 10 percent of all American families, not part of "almost everyone else"? How is it we get defined out?

I’m not sure I understand the question Gary. By “more likely overextended like almost everyone else” I’m certainly including poor people in the “almost everyone else” group who are overextended these days. The only ones I would exclude would be those wealthy enough not to worry about the mortgage/rent payment or credit card debt or losing a job, etc. Obviously those living in poverty are the most overextended. So my intended meaning is kind of 180 degrees from what you seemed to read.


now_what: He is not a financial naif. He is someone who knows exactly why capital gains tax receipts increased in those years, and he is someone who knows it has nothing to do with the tax rate and he is someone who knows exactly why you stop that series with the 1999 numbers. And still he posts it.

OK you’re on to me. I’m really one of those McCain sock-puppets. Having spent a couple of years establishing some level of trust with the regulars here, my mission is to convince this haven of lefties of all flavors (and some of the smartest folks on the Internet) that Obama’s economic policy is wrong and that they should all vote for McCain because GOP economic policy is like, just way better. I was going to swing it too until you discovered my dark secret and called me out. Darn those meddling kids!

Perhaps you missed where I speculated what some alternative explanations might have been when I responded to Ugh? Perhaps you missed where I mostly agreed with hilzoy that it was more likely an effect that lasts for only a few years? As you are apparently all knowing I guess you disagree with the CBO study hilzoy linked which suggests:

Thus, even though the responsiveness of realizations to a tax cut may not be enough to produce additional receipts over a long period, it may do so over a few years.

In any case, if you care to cite a reputable neutral study that attempts to prove whether the cart or the horse came first in the three mentioned periods I promise I’ll read it and consider it. It may be blindingly obvious to one who apparently knows so much (even what others exactly know!) but it’s not clear to me: did the improving economy spur asset sales resulting in higher cap gains tax revenue that just happened to coincide with the cut (3 times), or, is it possible that the cut led to increased asset sales (for a few years) thus increasing the revenue and spurring on the economy.

If, however, you stand by your assertion that discussing economic theories that run contrary to what Democrats believe counts as incivility, then we’re just done I guess. Please just ignore any comments I might make.

(Turb, Gary, Slarti, russell – thanks. Jes – thanks I think.;))

Sebastian: "I've always been troubled by the idea that we just have to do *something* about the ultra-rich if that something is going to upend how the rest of the country functions."

Why do you assume it would?

"Rules that are good for the middle class and rich but not ultra rich are generally good for the country as a whole."

Cite?

"Design the process so you can have good basic rules for the vast majority of people, and just apply those rules to the ultra-rich too."

Why should we do this?

"I strongly believe that it is important that citizens don't get the impression that they can get new services while generally foisting off the cost on other people."

I strongly believe that citizens shouldn't live in poverty, and that we are a vastly wealthy nation, and can easily afford this. Why should your belief about which policy preference we should make a priority be put into law and not mine? What's your argument for your preference?

"There aren't so many of the ultra-rich that you can get away with that as a general strategy, and if we build the poltics up as if that was a real solution, there is going to be a (more) serious fiscal problem."

How so?

"So, Marx may not have been a Christian, but Christians certainly were Marxists."

Marx wrote a lot of theory and thought that one has to adopt to be a Marxist, and Christ didn't sign up for most of it, nor did early Christians.

What Christ and the Christians were were communalists.

"What Obama doesn’t have a grip on is that the tax system, in it’s current form, probably is pretty close to the achievable optimum for maximizing government revenue."

Cite?

"Obama doesn’t understand this."

Cite?

"His mind operates with poor spatial awareness."

I'd ask for a cite to his psychological or neurological tests, but since you've written about this before, could you elaborate on the nature of your understanding of this, please? Is this similar in nature, as it appears to be, to your belief that liberals and Jews have a "genetic defect" that affects how they deal with other people?

That is because the handful of men who hold all the wealth don’t want to pay capital gains tax. There is instead a steep sales tax on everybody.

That is their plan for the US too, by the way."

Cite?

Thanks, BoB.

"I think that Phil called me names."

You can think whatever you like. If you want anyone else to pay attention, please quote the offending names, and either link to the comment, or give the time-stamp entry. Thanks!

Helping you out, I'm guessing it's this: "Ooops. I forgot, I make it a point not to converse with racist xenophobes."

If you'd like to complain to management, I suggest emailing.

"I don't consider that to be civility. Very much the opposite."

Take it up with the management. You are free to make a complaint. Meanwhile, "he started first" isn't an explanation well regarded by adults. And your calling someone a "Republitard" isn't apt to be regarded by many as the equivalent of posting an opinion you disagree with, I'm inclined to suspect, and I'm doubtful the blogowners will agree with you. But do ask, by all means, if you believe they'll agree with you.

"And you protest too much."

Cite to your metric, please?

"I'm so tired of this meme. If you don't learn to figure out what's going on inside other people's heads, you're going to have a hard time in this life."

The reason your tiredness should be the concern of others is?

Meanwhile, if you can figure out what's going on inside my head, what number am I thinking of? And how many fingers am I holding up?

"I don't consider that to be civility. Very much the opposite."

now-what: the management disagrees with you. Oh noes!

The management does not like accusations of bad faith, especially not against OCSteve and other wonderful people, who I will not list because I would inevitably leave someone out and then I'd get in trouble. :(

However, the management will turn a blind eye if you don't do it again.

"I strongly believe that it is important that citizens don't get the impression that they can get new services while generally foisting off the cost on other people."

I strongly believe that citizens shouldn't live in poverty, and that we are a vastly wealthy nation, and can easily afford this. Why should your belief about which policy preference we should make a priority be put into law and not mine? What's your argument for your preference?"

My preference creates the wealth you want to use.

Yours doesn't.

Yours merely exploits the wealth if it is there, and doesn't pay attention to how it gets there (at least in your formulation, perhaps you have more nuanced views on the subject.)

And for the record, I strongly believe that we (Americans) can afford for people not to be in 'absolute' poverty. (Relative poverty is a whole other thing). I just don't believe it is wise policy to have the majority think it can vote extra services without paying for it. The reason I don't think it is wise policy was already argued above. To repeat: policy is about weighing tradeoffs. One of the largest tradeoffs is cost/benefit. If you believe you can always foist the cost off on other people for the benefits you want, you are A) a user, B) wrong, and C) likely to mis-weigh the balance.

(Please note that the 'you' in the above sentences of this paragraph is addressed to a hypothetical collective 'you' not the personal Gary Farber 'you').

As I noted above, I have no problem with the majority voting up its own taxes and excluding some small portion of the bottom rungs from taxes altogether.

I have no problem with the majority voting up its own taxes to pay for services for the bottom rungs.

I have no problem with the majority voting up its own taxes to pay for services for the majority.

I have a problem with the majority voting up other people's taxes to pay for stuff they want. It creates the problems I outlined above.

Gary @ 4:10: Maybe I'm misreading and you didn't mean to imply that now_what had used the term "Republitard" as well as accusing OCS of incivility.

But just for the record (as far as my memory and -f can see), it was Andrew who wrote "Republitard," and he apologized for it later (8:13 a.m. 6/12 comment).

JanieM: You are correct. Andrew and I are cool.

As you are apparently all knowing I guess you disagree with the CBO study hilzoy linked which suggests

Disagree with it? The study hilzoy linked makes precisely the same argument I would make:

Largely because of the stock market boom of the 1990s, gains rose as a percentage of individual income tax receipts from about 7 percent in each year in the first half of the decade to about 12 percent in 2000.

That was kind of the point. It is blindingly obvious what drove the capital gains receipt numbers in the late '90s. The Federal Reserve studies say the same thing (by comparing to other countries' financial markets, they disprove the idea that the rise in the stock market was due to the tax cut). The idea that the capital gains cut stimulated the economy which led to the stock market increase is laughable because 1) capital gains cuts are a horrible method of financial stimulus compared to other fiscal measures - any effect on economic growth would have been tiny - and 2) the 90's stock market bubble wasn't correlated with underlying economic metrics. It was a speculative mania that would have been dampened, rather than fueled, by people deciding to take a significant amount of money out of it, and the incentive to do just that increased when the tax was cut.

is it possible that the cut led to increased asset sales (for a few years) thus increasing the revenue and spurring on the economy.

No.

If, however, you stand by your assertion that discussing economic theories that run contrary to what Democrats believe

That would be an odd assertion for me to make, given that I am not a member of a political party. And given that the Democratic party has become more conservative than the Republican party on economic issues in many ways, i.e., who was the last Republican president to reduce the national debt, and what year was it in?

But "opposed to the Republican party and its repugnant policies" does not equal "Democrat".


And no, Gary, I was not the author of the Republitard comment.

the 90's stock market bubble wasn't correlated with underlying economic metrics. It was a speculative mania

Please identify a "market bubble" that is not a "speculative mania".

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