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February 06, 2009

Comments

Just what is it that makes a mortgage backed security trading in the marketplace lose its value?

The sudden realization that the "value" was phony in the first place. Next question?

--TP

If the impact of the mortgage defaults is so minor, how come Freddie and Fannie failed so quickly?

GOB,

Please recall that the majority of high risk MBS were not issued by Fannie/Freddie, but by other originators. F/F only accepted loans that met their stricter criteria.

Thanks to the housing crunch, even those loans are being affected, but please make sure to properly place the blame.

Thank you,

Fraud Guy

GOB,

Because Fannie/Freddie came late to the game.

While the main originators had banked their losses against loans that were a lower % of house values before they started falling, when F/F got in near peak value, the incipient fall threatened their positions much faster than other entities.

This is just anger talking, but I'm almost at the point where I want to say, "fine, let's either do nothing, or go on a tax-cut-for-the-wealthy scheme and see where that gets us." If this country is too stupid and/or greedy to see that it is staring into the abyss, then let this whole sucker crash and burn.

As I remarked on another blog, I'm now starting to realize why countries have civil wars. I'm not saying I'm personally at this point (yet), but I understand.

The so-called “stimulus” bill, more aptly referred to as the Trillion Dollar Spending Bill, has liberal education, healthcare, and environmental policies in it. It had family planning funding in it too, before it was taken out due to public outcry.

Here are the facts:

• The bill gives the Department of Education an extra $142 billion this year. This is an unprecedented increase in federal power, designed to make Congress a national school board. Who do we want making decisions about our children’s future—Nancy Pelosi and Harry Reid or parents, teachers, and principals?

• The bill does create minimal “green jobs”, but only at the expense of other jobs. Instead of having coal plant workers, the Left would prefer there to be windmill builders—it is a zero sum game. Plus, the jobs in wind farms produce a less reliable output at a higher cost than jobs in coal or nuclear power. Additionally, the “stimulus” has over $35 billion for the Department of Energy, more than doubling their budget (their current budget is $23.8 billion).

• Lastly, the bill spends $87 billion to bail out states that have overrun their Medicaid budgets (while at the same time expanding this welfare program for the poor to the unemployed, regardless of income). The addition of billions of dollars for comparative effectiveness research and Health IT sets up a federal infrastructure for health care rationing. These provisions are an incremental strategy to have government control more and more of the health care sector – leaving individuals and families with less and less control over their personal health care decisions.

What are the consequences of this sort of proposal?

1) Bigger Government. At a trillion dollar price tag, this bill will likely triple the Federal government’s annual budget, and aims to extend the role and reach of the federal government. This bill makes the New Deal pale in comparison.

2) Massive debt. The United States looks to issue between $3.5 and $4 trillion of government debt over the next two years, possibly more, thanks to deficit spending under current policy, the stimulus bill, and the financing of TARP II. To put this in context, the total publicly held debt today is about $6.4 trillion, so we’re talking about increasing the outstanding debt by more than half in just two years.

3) Increased Interest Rates. Nations around the world are faced with similar prospects of enormous new debt issuance. Canada, for example, is expected to run a deficit this year for the first time in more than a decade, while Germany, the UK, and other countries in Europe and Asia are looking at huge deficits and huge stimulus plans. We’ve reached the point where deficits are now large enough nationally and worldwide to drive up interest rates.

The so-called “stimulus” bill, more aptly referred to as the Trillion Dollar Spending Bill

To quote:

"What do you think stimulus is?"

You're not impressing me, here.

If you are worried about interest rates then just don't borrow the money. Get your cash by raising taxes on the rich.

I recommend the Biblical tax of 10% of wealth.

Rich G

I haven't seen your comments here before, but you are in for it now.

Wealthy coservatives love to talk about sacrafice and love of country, yet they almost never send their children off to serve and when asked to make ANY type of personal sacrafice to save the economy (as us working schmucks regulary accept pay cuts to keep our companies afloat) they scream like stuck pigs. Do you all do anything for your country? Don't give me that shit about boosting it through commerce; anybody who works is entitled to say that.

I could go into a very long rant about how the wealthy consume a disproportionate share of the government budget, but I'm too pissed to keep typing, so I'll just say one more time; I know why countries have civil wars...

I know we need stimulus and in recognition of what I think that means, I would agree to increased federal outlays to go to those people in financial need in the current environment (because they are likely to spend whatever they get) as well as temporary spending in areas that can be identified to stimulate job creation. Also outlays that will help stabilize the financial system and the housing market (not to prop it up but to find a market level).

This type of legislation should not be used by the majority to push through permanent programs that are known to face substantial opposition under the guise of an emergency. That is why Emmanuel Rahm's comments during the campaign were not well received by many people.


Would you be arguing for a consumption tax instead of an income tax?

GoodOleBoy,

Sorry to take so long replying (it's a busy day today).

I don't favor replacing the income tax with a consumption tax, but I think we should shift to a mixed tax system with more comsumption taxes than we have now.

Increasing the gas tax (or perhaps better yet a more general carbon tax) in a phased in fashion would I think be the best place to do this, using market mechanisms in our pursuit of energy independence. For example I think it would be better to raise the effective price of gas via taxation and scrap the CAFE standards. If we did this then US domestic automakers wouldn't be stuck trying to sell into a market with dramatically different energy pricing than do our European and Asian competitors. They would be less exposed to foreign competition when oil prices go back up, than they will be if we continue to use regulation (CAFE) rather than market pricing to influence the mix of designs they offer to the public.

And yes, I realise that most comsumption taxes (esp. gas taxes) are regressive. That's why having a more steeply progressive income tax to balance things out is a necessary component to this change, IMHO.

That's why having a more steeply progressive income tax to balance things out is a necessary component to this change, IMHO.

How would you do that? Just askin.


This type of legislation should not be used by the majority to push through permanent programs that are known to face substantial opposition under the guise of an emergency.

In some respects this is a valid complaint which I have some sympathy for. My sympathy is tempered by the problem that (A) bundling multiple things together [some of which the opposition does not support] into a single bill is a standard legislative tactic practiced since time immemorial, and (B) the GOP has invested immense effort in demonizing any sort of permanent spending via the label "pork" to the point where it is almost impossible to have a rational discussion of the merits of individual programs (honeybees anyone?)

In an ideal world we could split the stimulus into three different bills: a tax cut bill, a direct transfer spending bill, and an infrastructure bill. Then we could vote on each them on their merits. I think we all know what would happen in this case - the GOP would vote in the tax cuts and direct transfer spending, and then demogogue "PORK!PORK!PORK!" to prevent anything at all from being passed with respect to infrastructure. Yay tax cuts - mission accomplished!

I don't trust the GOP or conservatives enough to risk going down that road. They haven't earned it. They need to show good faith effort before they can ask that much, and the effort from the GOP in the House and Senate is not exactly building up good will and trust right now.

How would you do that? Just askin.

Change the income tax code. Index the brackets more steeply. IMHO while we're at it we should add additional steps up in the marginal rate curve to recognize differences between the top 1 percent and the top 0.001 percent (with grades in between). Somebody who earns 1 million per year in income is not the same as Bill Gates or Warren B., nor should we tax their top marginal income the same way.

Or are you asking about the politics (i.e. how do we get the votes in Congress to pass something like this)?

Or are you asking about the politics (i.e. how do we get the votes in Congress to pass something like this)?

No, just the mechanics. E.g., do you leave the lower brackets as is or drop the marginal rate on income under ~40k to 0. I totally agree on recognizing differences between the top 1 percent and the top 0.001 percent, the top 0.001 percent are hiding in the reeds.

//Let's see . . . a guy who claims to be a math teacher says AnonymousinMA is correct. Another guy who claims to own trailer parks says he is not. Someone help me decide who to listen to!//

If you do the math yourself you will see that the trailer park guy is correct in his assertion that the DeMint set of tax rates (the second set in my earlier example) is more progressive than the current 2008 set of tax rates (the first set in my earlier example).

This is so because the threshhold where any tax is paid is at a higher income. Said another way, there is an offset of the whole rate structure towards the higher end of the income strata. Said another way:

//How? The rates now are 10%, 15%, 25%, 28%, 33%, and 35%. DeMint's proposal would change them to 0%, 5%, 15%, 18%, 23%, and 25%. The lower brackets get the greatest proportionate decrease.
10% is reduced 100% to 0%
15% is reduced 67% to 5%
25% is reduced 40% to 15%
28% is reduced 36% to 18%
33% is reduced 30% to 23%
35% is reduced 29% to 25%

This change makes the rates MORE progressive. I wonder if you did the math //

ScentofViolets, a math professor, says:

//This is sheer nonsense at best, malicious innumeracy at worst://

and // either this Dave character is simply regurgitating talking points with no sense of how absurd they are, or he knows damn well just how nonsensical it is, but is hoping someone will swallow the bait.//

but he is wrong. I am absolutely correct that the second set of rates, the DeMint rates are more progressive.



So Harry (the boxer) Reid just asked unanimous consent for 4 Senators to speak for the "compromise" amendment, followed by 4 Republicans of McConnel's choice. Little Davey Vitter made noises about objecting -- he wanted speakers "on each side" to alternate -- but finally acquiesced. So the "Majority Leader" got to offer "his" 4 speakers in a block:

Ben Nelson (DINO)
Susan Collins (R)
Arlen Specter (R)
Joe Lieberman (RIABN)

Just who the bloody hell won the election, anyway?

--TP

kcindc: //GOB, Ugh is saying that someone making $100,000 pays 25% of that in federal income tax, whereas the 400 richest American taxpayers (who average $263 million a year) are paying 17%. Dave's claim that "the effective rates are indeed progressive" is not true.//

Please refer to this chart which is based on CBO numbers ->
http://www.realclearmarkets.com/charts/tax_rates_across_the_income_spectrum-54.html

I do agree with Yomtov that the estate tax is useful for the very reason he cites: It works against //the creation of a hereditary aristocracy//

I am not against an estate tax.

Dave, first of all, we're talking about the top 0.0002%, so they're not on the chart. Second we're talking about federal income tax, not whatever bizarre calculation was cooked up to get those numbers. The fact that it includes corporate tax is a sure signal that something funny is going on.

A chart that included all taxes might be interesting, but this isn't that, since it excludes some of the most regressive ones, such as sales, because they aren't federal.

Larv

My assertion: "If you compare effective rates on all income earned for all income strata you'll see that the effective rates are indeed progressive."

My cite: Please refer to this chart which is based on CBO numbers ->
http://www.realclearmarkets.com/charts/tax_rates_across_the_income_spectrum-54.html

Larv is wrong at February 06, 2009 at 12:23 PM and Good Ole Boy backs him up at February 06, 2009 at 12:28 PM.

Hmm:

Far less consensus exists regarding how to attribute corporate income taxes. CBO assumes that corporate income taxes are borne by owners of capital in proportion to their income from interest, dividends, rents, and capital gains.

So when we want to argue that corporate taxes should be cut or eliminated (while ranting about "double taxation"), we'll say that they're passed through to consumers and thus result in us all paying higher prices. But when we want to argue that the tax system is fantastically progressive as it is, we'll assume in our calculations that all the corporate taxes come directly out of rich people's pockets.

So many blind sheep:

//GOB, Ugh is saying that someone making $100,000 pays 25% of that in federal income tax, whereas the 400 richest American taxpayers (who average $263 million a year) are paying 17%. Dave's claim that "the effective rates are indeed progressive" is not true.

Posted by: KCinDC | February 06, 2009 at 12:31 PM//

Again, debunked by d'd'd'dave at February 06, 2009 at 08:15 PM

I am not against an estate tax.

How did you come to this opinion, based only on things you have personally experienced?

Interesting chart. It seems to be promulgated by the Manhattan Institute, which received $19,470,416 in grants from 1985-2005, from foundations such as the Koch Family Foundations, the John M. Olin Foundation, Inc., the Lynde and Harry Bradley Foundation, the Scaife Foundations, and the Smith Richardson Foundation.link

Along with the wikipedia page, the sourcewatch page on the place is interesting, as is the rightweb's page

rook, 4:15p says

//The remaining set of tax rates is still progressive (arguably more so, as the ratio of income taxes paid by the rich will increase)//

Agreed.

But also: //the move would be regressive because you're cutting more tax dollars for the rich than for the poor... the CUT is regressive. As I said before, think in terms of dollars - John the Dishwasher will save about $1,000 while ARod saves at least $2,000,000.//

The problem is that words mean something. According to wikipedia "A progressive tax is a tax by which the tax rate increases as the taxable amount increases." The effective word is RATE not dollars.

If the rate was progressive before the change and more progressive after the change then the change was not regressive.


Wait, why are we borrowing $1,000,000,000,000 from the Chinese and Saudis to create an undetermined number of jobs with an unknown benefit to the economy?

Sigh. Let's say that the tax on tax an income of $10K was zero, and now it's being raised to a rate of 0.01%, i.e., one dollar. According to your figuring, this corresponds to a 'real' increase of - wait for it - infinity. And that is because, as it's been explained to you more than once already, you are using a percentage rate change of a percentage rate instead of just the percentage rate. Let's break your accounting in a different way: anyone making less than $250K pays no taxes, while anyone who makes more pays . . . one dollar. That's even more 'progressive' than before(at least, for people making at or under the threshold.)

I don't believe you're really this dense though. Which is actually a worse indictment than a charge of ignorance.

Wait, why are we borrowing $1,000,000,000,000 from the Chinese and Saudis to create an undetermined number of jobs with an unknown benefit to the economy?

So we can screw them later?

Again, debunked by d'd'd'dave at February 06, 2009 at 08:15 PM

And yet even that chart shows the highest earners paying a lower effective rate than earners immediately below them.

Yes. This is a mistatement: "If you plot these on a curve you will see that the second set of rates rises more steeply."

My assertion that the second set of rates is more progressive remains true. It is a fact that you, Mr. Credential waver, took issue with at February 06, 2009 at 10:31 AM. You said this while quoting me:

//This is sheer nonsense at best, malicious innumeracy at worst...

This change makes the rates MORE progressive. //

Fess up. You were wrong and I was right Mr. professor of mathematics at UMC.

I wager that you, as a way to maintain your dignity, will say that you were commenting on my process and not my conclusion.

Dave, you have not demonstrated that the change makes the rates more progressive. In fact, I don't see anyone on either side proposing a quantitative measure of progressivity that would allow such a comparison. I'm pretty sure that measures could be devised that would make either conclusion possible, but perhaps there's some generally accepted formula someone knows.

Do you think that the tax system proposed by ScentOfViolets at 08:56 PM is even more progressive than DeMint's?

d'd'd'dave,

I'll accept your debunking of my agreement with Larv. I'm assuming the earlier references to the top 400 individual filers were correct. I don't know how to get the data that would tell me the effective rate for the top bracket of individual filers.

I thought you said yesterday you kept these extreme differences with most of the posters here in your pocket. Did I misinterpret that?

In fact, I don't see anyone on either side proposing a quantitative measure of progressivity that would allow such a comparison.

There are such quantitative measures, in the example in this thread not enough information is given to use them. We would need to know not just the tax rates, but the income levels at which they each kicked in as well as the distribution of pre-tax income to do a complete analysis.

It is, of course, absurd and innumerate to state flatly that the set of lower tax rates is more progressive. It is easy enough to plug in numbers to the two sets of rates and show that switching from the first (higher) set of rates to the second can increase income inequality and raise the percentage of taxes paid by people with lower incomes, that is, to show that the second set could be less progressive.

The only way the second would be more progressive in any sense would be if the 0% tier in the second set of rates was sufficiently large. Then the second set could be more progressive in the sense that it could decrease the percentage of taxes paid by lower income workers, although it would still not be progressive in the sense of decreasing income inequality. Not even setting income tax rates to 0% for the bottom 90% of the population would be progressive in the sense of reducing income inequality if you simultaneously significantly reduce the top marginal rate.

If the rate was progressive before the change and more progressive after the change then the change was not regressive.

d'd'd'dave, your logic here is flawed. You're assuming equal distribution of tax revenue across brackets (which is kind of funny, actually). I'll try once more. Forget the proportions and lets just use a really simple example:

Poor people pay tax $10 and rich people pay tax $1,000. If you cut the tax by 10% for both, poor people pay tax $9 and rich people pay tax $900. The change is $1 for poor people and $100 for rich people. That change (which is what we're arguing about) is regressive. I can't make it any simpler.

Oh, and I'm assuming that when the government has that tax revenue, it's going to be distributed at equal benefit to each individual, regardless of income (a flimsy assumption, but hopefully not TOO far from the truth). So in my example, you're starting at $51.50 for both and moving to the $1 and $100 split I referred to. That's the change I'm calling regressive.

Maybe I'm asking for too much out of the word regressive. If the term must be reserved for tax rate changes (rather than the more general way it has been used with regard to economic policies in recent years) then there's clearly no change in progressiveness.

Can we at least agree this change results in a net gain for the rich (and inversely, a loss for the poor)? That's all I'm trying to say here.

//Poor people pay tax $10 and rich people pay tax $1,000. If you cut the tax by 10% for both, poor people pay tax $9 and rich people pay tax $900. The change is $1 for poor people and $100 for rich people. That change (which is what we're arguing about) is regressive. I can't make it any simpler.//

Rook, several things.
A. The rate sets I gave did not transform the first set into the second set by multiplying each rate by 0.9. Instead it subtracted 0.1 from each rate. 0.15 transformed as 0.15-0.10=0.05 rather than 0.15*0.9=0.135 as it seems you have done in your example.
B. I see that in your example, the rich person saves $99 more than the poor person and that you (and many others) call that dollar difference 'regressive'. I have been very careful to point out more than once that the definition of progressive taxes that I am using is about rates and not dollars. I am speaking apples and you are speaking oranges. It is difficult to converse when definitions of words are changing.

d'd'd'dave,

As a liberal, I think people are entitled to use words any way they like. French people are entitled to say "fromage" when they mean "cheese", and conservative people are entitled to say "progressive" when they mean "across the board". A rose by any other name, and all that.

You waste your time, however, when you slap the label "roses" on a bouquet of skunk cabbages, and try to convince people who like roses that you are, in fact, selling roses. What you persist in calling "progressive" is not what people who actually favor progressivity call "progressive".

To argue about whose definition of a word is "right" is a waste of time. We can, however, easily settle an argument about numbers. A tax rate table is made up of numbers. You propose a tax table, I propose a tax table, people vote between the two. It doesn't matter whether you tout your table as "more progressive", or denounce my table as "more progressive". (It's not clear whether you consider progressivity good or bad.) People choose between two sets of numbers, and that's that.

--TP

d'd'd'dave -

A. Yes, I invented a completely oversimplified scenario in order to make my point as clear as possible. Using earnings instead of taxes, the actual proposed decrease, and differential tax rates is closer to reality. The fact that an equal cut benefits the wealthy remains the same if I do that:

Poor Person: Earnings of $10,000, tax of $1,500 (I know it's more complicated than this, but let's just assume 15% for simplicity's sake). A cut of 10 percentage points on tax rate results in new tax of $500, a change of -$1,000.

Rich Person: Earnings of $1,000,000, tax of $300,000 (I know it's more complicated than this, but let's just assume 30% for simplicity's sake). A cut of 10 percentage points on tax rate results in new tax of $200,000, a change of -$100,000.

Poor person saves $1,000, rich person saves $100,000. (presumably this $101,000 would benefit them much more equally if the government had it). Satisfied?

B. It is difficult to converse when definitions of words are changing.

Yeah, I realized that and offered some clarification (see my last post). Dictionary backs you up, so I apologize for my loose application of the term.

You were wrong and I was right Mr. professor of mathematics at UMC.

The debate over who is the biggest mathematical poopyhead is all very entertaining, but what I'd like to know from dave is why he thinks lowering the tax rates will improve the economic situation.

I pretty much posted that at the front russell, yet he's so good at derailing the conversation. So, how about it d^3, how exactly do tax cuts create a quicker and larger stimulus to the economy than gobs of messy spending?

Sigh. It's not a matter of asserting authority. It's a matter of access to common knowledge that can be looked up at anyone's whim, i.e., this is not an empty opinion, but an already long since established fact. Note also that I explained why dave is wrong, and more than once: under his 'definition' setting the tax rate to zero for anyone making less than, say, $250K, and one dollar for anyone making over that amount is more 'progressive'. As other people have already pointed out, you need to know the complete schedule before you can make any objective claims to progressivity. You also have to determine how much in taxes you need to collect before setting the schedule. 'Progressive' means nothing in and of itself. Just try funding government operations on the schedule I used in my example.

If he didn't already get that point, it's probably hopeless, but I'll pile on none-the-less since his whole "I-made-a-misstatement-but-you-were-[b]wrong[/b]" dignity-maintenance dance was so very unseemingly.

d'''ave, you argue that it's the ratio between brackets that determines how "progressive" a tax scale is as compare to other possible codes. Let's test your logic. We'll start with a simple tax code where income over $200k is taxed at 99%, and income under that is taxed at 1%. Clearly, this is a progressive tax scale, albeit a ridiculously exaggerated one. So let's make a tax cut. We'll reduce the lower bracket to 0.01%, and the upper bracket to 0.99%. This keeps the ratio between brackets exactly the same. Are you willing to argue that the post-cut tax code is just as progressive as the pre-cut code? Or does perhaps size of tax burden within a single bracket across codes matter as well as the interplay of ratios between brackets within a single code if one wishes to quantify how "progressive" one code is compared to another?

I have only ever argued a single case. I have argued that if rates go from 10%, 15%, 25%, 28%, 33%, and 35% to 0%, 5%, 15%, 18%, 23%, and 25% and all other things (pretax income distribution and income levels where rates apply) remain equal then the rate schedule becomes more progressive. By more progressive I mean that a higher proportion of total tax revenues fall on the higher income strata.

This can be demonstrated using actual data. I’ll use 2005 because that is the last year for which I can find pretax income distribution numbers.

Tax Rate Schedules

2005 Married
Filing Jointly Modified
Income Marginal Marginal
Ceiling Rate Rate
$14,600 10% 0%
$59,400 15% 5%
$119,950 25% 15%
$182,800 28% 18%
$326,450 33% 23%
no limit 35% 25%
Source for 2005 tax rate schedule: IRS

Actual 2005 Income Distribution and Actual 2005 Married Marginal Tax Rates

Income Marginal Aggregate Share of
Quintile Distribution Rate Tax Total tax
Lowest 15,900 15% 1,655 2%
Second 37,400 15% 4,880 6%
Third 58,500 15% 8,045 9%
Fourth 85,200 25% 14,630 17%
Highest 231,300 33% 56,921 66%
Total Tax Revenues 86,131

Actual 2005 Income Distribution and Modified Marginal Rates

Income Marginal Aggregate Share of
Quintile Distribution Rate Tax Total tax
Lowest 15,900 5% 65 0%
Second 37,400 5% 1,140 3%
Third 58,500 5% 2,195 5%
Fourth 85,200 15% 6,110 14%
Highest 231,300 23% 33,791 78%
Total Tax Revenue 43,301

The share of total tax column reveals the degree of progressivity. Clearly the Modified Rates (final table) push more of the total tax burden onto the rich. The Modified Rates therefore are more progressive than the Actual 2005 rates.

Source for 2005 income distribution: http://www.cbo.gov/ftpdocs/88xx/doc8885/EffectiveTaxRates.shtml

Concavity, Convexity and Rate Progressivity

Now lets look at X,Y diagrams and some simple cases. The X axis represents income levels. The Y axis represents marginal tax rates.

Compare three lines.:

A. 0,0 1,1 2,2 A straight line
B. 0,0 1,2 2,2 A convex curve (bulging in the middle towards higher values of Y)
C. 0,0 1,0 2,2 A concave curve (sagging in the middle towards lower values of Y)

All three lines are progressive because they all trend towards the northeast and are in the northeast quadrant (not sure how to say that another way). That is, marginal rates increase as income levels increase. If one were to rank the lines in order of progressivity where the lowest progressivity is first and highest progressivity is last the ranking would be: B (convex), A (straight), C (concave).

Now compare two lines with identical concave inflection:

B. 0,0 1,2 2,2
D. 2,0 3,2 4,2

D is merely shifted 2 points to the east. Of these, D is more progressive. It shifts a higher proportion of total tax revenues toward the higher income strata. One must modify line D as follows to make it a complete schedule of marginal tax rates:
D. 0,0 2,0 3,2 4,2 This takes into account the incomes between 0,0 and 2,0.

From these comparisons, one can form a general conclusion. All other things (pretax income distribution and income levels where rates apply) being equal, a change that adds concavity to the line is increasing the progressivity. Shifting identical curves towards the east adds concavity.

Measuring the change: percent change in the change of a percent

Referring now to the rate sets previously described; namely set one:10%, 15%, 25%, 28%, 33%, and 35% and set two: 0%, 5%, 15%, 18%, 23%, and 25%: Lets look at how much each rate changed (the delta) between the first set and the second set. Specifically we’ll look at the ratio of the delta to the initial rate (the rate in the first set) expressed as a percent. The following table is one I showed in my comment at 2:27am on February 6:

10% is reduced 100% to 0%
15% is reduced 67% to 5%

25% is reduced 40% to 15%

28% is reduced 36% to 18%

33% is reduced 30% to 23%

35% is reduced 29% to 25%

I asserted in that comment that the fact that the lower brackets received the highest proportionate decrease (represented by the 100%, 67%, 40%, 36%, 30%, 29% series) indicated that the second set of rates was more progressive than the first set.

I was challenged on this assertion by AnonymousinMA at 9:21a on Feb. 6 who said “This argument has hit a personal pet peeve of mine in quantitative analysis. The percent change of a percent MAKES NO SENSE.” And “This is a classic example of a bad use of numbers. While there may be contexts where it makes sense to talk about a percent change of a percentage (though I can't really think of any), this is definitely NOT one of them.” Scent ofViolets, a mathematics professor at UMC, backs him up at 10:31a on Feb 6 saying: “This is sheer nonsense at best, malicious innumeracy at worst” and “The only way to compare rate changes that is consistent - for very good reasons - is to use percentage differences, not percentage ratios. This is covered in elementary statistics classes, so either this Dave character is simply regurgitating talking points with no sense of how absurd they are, or he knows damn well just how nonsensical it is, but is hoping someone will swallow the bait.” Phil at 11:19a on Feb 6 “takes the bait” as ScentofViolets would say and follows after the credential waver like a sheep. He says: “Let's see . . . a guy who claims to be a math teacher says AnonymousinMA [another math teacher] is correct. Another guy who claims to own trailer parks says he is not. Someone help me decide who to listen to!”

In the last section I showed that the degree of concavity of a line is a proxy for degree of rate progressivity. More concavity equals more progressivity. Now I will show that my method of analysis is an effective means of detecting whether one line is more or less concave then another line. My method of analysis is to look at the trend in the percentage differences between a series of points on one line and a series of points on another line. (Please note that I make this claim only for lines in the northeast quadrant that do not double back on themselves. I believe all known non-negative tax rate schedules are such lines.)

The following schedules are lines A, B, C, and D that I described in X,Y diagram terms in the first section. Here I express them as a series of marginal tax rates. The first column is the income limits to which each rate applies, the second column is the rate, the third column is the aggregate tax that a person earning exactly that income will need to pay. Imagine that a state which uses any of these rate schedules has only four taxpayers and that the pretax income distribution of the taxpayers is $1000, $2000, $3000, and $4000. With that in mind, the fourth column represents the percentage of the states total tax revenues owed by the person at that income level.

Income Marginal Aggregate Share of
Ceiling Rate Tax Total tax
Line A: Straight
1,000 10% 100 5%
2,000 20% 300 15%
3,000 30% 600 30%
4,000 40% 1,000 50%
Total tax 2,000

Line B: Convex
1,000 20% 200 6%
2,000 40% 600 19%
3,000 40% 1,000 31%
4,000 40% 1,400 44%
Total tax 3,200

Line C: Concave
1,000 0% - 0%
2,000 0% - 0%
3,000 20% 200 25%
4,000 40% 600 75%
Total tax 800

Line D: Concave
1,000 0% - 0%
2,000 20% 200 11%
3,000 40% 600 33%
4,000 40% 1,000 56%
Total tax 1,800


You can see from the fourth column that each of the rate schedules are progressive, some more than others. Their progressivity rank from least to greatest is in the following order: B, A, D, C.

Now let’s compare the rates, using my percent change method and see what is revealed.

Comparison of A to B
Marginal Marginal Delta Delta /
Rate Rate (Col 1- Col 2) First Column
Line A Line B
10% 20% 10% 100%
20% 40% 20% 100%
30% 40% 10% 33%
40% 40% 0% 0%

Comparison of A to C
Marginal Marginal Delta Delta /
Rate Rate (Col 1- Col 2) First Column
Line A Line C
10% 0% -10% -100%
20% 0% -20% -100%
30% 20% -10% -33%
40% 40% 0% 0%

Comparison of B to D
Marginal Marginal Delta Delta /
Rate Rate (Col 1- Col 2) First Column
Line B Line D
20% 0% -20% -100%
40% 20% -20% -50%
40% 40% 0% 0%
40% 40% 0% 0%

I showed above that the progressivity of the schedules ranks from low to high in the order: B, A, D, C. We would expect that if the rate schedule changed from A to B that progressivity would decrease. Notice that the trend of column four for the comparison of A and B is decreasing: 100,100,33,0. We would expect that if the rate schedule changed from A to C that progressivity would increase. Notice that the trend of column four for the comparison of A and C is increasing: -100,-100,-33,0. Finally, we would expect that if the rate schedule changed from B to D that progressivity would increase. Notice that the trend of column four for the comparison of B and D is increasing: -100,-50,0,0. To summarize, the fourth column shows a rising trend when progressivity has increased and it shows a falling trend when progressivity has decreased. My method of analysis, which is to look at the trend in the percentage differences between a series of points on one line and a series of points on another line, is an effective means of detecting whether one line is more or less concave then another line.

The math professors erred when the denounced my method as nonsense and innumeracy.

NV
//Are you willing to argue that the post-cut tax code is just as progressive as the pre-cut code?//

Yes. They are equally progressive if the marginal rates are all that changed; meaning pretax income distribution and the income brackets to which the rates apply are the same before and after the rate cut.

My method shows as much.

ReeksofViolets

//As other people have already pointed out, you need to know the complete schedule before you can make any objective claims to progressivity.//

This is not true. If income distribution and the income brackets the rates apply to are constant, then a rate change alone can be judged as to whether it brings more or less progressivity.

//You also have to determine how much in taxes you need to collect before setting the schedule.//

Yes. But DeMint never claimed his rate changes would be revenue neutral, nor have I. All I have argued is that a specific method of determining whether a rate change is more or less progressive does work.

/ 'Progressive' means nothing in and of itself.//

Except that there is an actual definition of Tax Progressivity which I have been using. If you want to claim the words mean nothing specific than why bother to argue anything...or talk, or read or even think?

// Just try funding government operations on the schedule I used in my example.//

It's not much different than handing out $800 billion dollars every two or three months. Neither is a sustainable way to fund government.

russell and Matth

//how about it d^3, how exactly do tax cuts create a quicker and larger stimulus to the economy than gobs of messy spending?//

I'm not saying they do. I have said before that I think it is okay for the bill to fund infrastructure and make sure that existing safety net programs have enough money to meet the added demands that will placed on them by increasing numbers of people. Beyond that, I have no faith that added money will be well spent by the government. If they want to 'stimulate' beyond that I think the money is better spent by leaving it in the hands of the people from whence it came - tax cuts.

I'm not saying tax cuts have a greater 'stimulus' multiplier than some other method. I'm just saying that if the safety net is secure i'd rather not burn the money for the sake of a 'stimulant'. It's better to let 140 million tax payers each make their own stimulant decisions with their own money than let a bunch of idiot congressmen and senators decide what to do with it.

Rook

I understand your point. You are making a qualitative judgement. You are saying it is better for tax cuts to be roughly dollar equal among income strata. I have not made a value judgement in my comments until tonight. I have only been arguing for a method of evaluating the effect of a marginal rate change on income tax progressivity.

You argue for after-tax income equality (or at least in that direction). I personally value efficiency over equality. I have a notion that income/wealth flows in general towards efficient producers of good value (obviously there are exceptions i.e. madoff, hereditary wealth, injuries, crime, warfare, etc). I don't see lack of income or wealth principally as a sign of unfairness in the system. I see it principally as a sign that a person hasn't created value in an extraordinarily efficient way. It is not a character judgement. I keep in mind that there is a thin crust of people who are creating extraordinary value; some by dumb luck, some by brilliance, some by sheer hard work. The individual members of this group change all the time in a creative destruction sort of way. It is natural. There is a broader, but still thin crust of impoverished people. The vast majority is in the middle. The middle represents the normal average state of life. Life is mostly about getting by punctuated by occasional periods of prosperity and occasional periods of want. I think efficient use of resources helps everyone. That's why I don't think it makes sense to strip resources from one just for the sake of equalizing. In my view, it is okay for the efficient one to fund a basic safety net for the inefficient ones (and the unlucky ones and the efficient ones). But I wouldn't equalize just for the sake of it. But that's just me. And it takes all kinds doesn't it?

One thing does confound me about the tax arguments of 'after-tax income equalizers'. It's that they argue for high income earners to pay unequal, higher dollars for tax increases but they argue for equal dollars for all when cutting taxes. I can't quite imagine what a rate schedule would be where the rates climbed as you went up but they were equal when you came down.

It's better to let 140 million tax payers each make their own stimulant decisions with their own money than let a bunch of idiot congressmen and senators decide what to do with it.

That's a nice principle, but what a great number of those 140 million tax payers will do is either pay down debt or put the cash in their mattress. That's what I will be doing with any surplus funds I stumble across for the near future. That will do bugger-all for the demand side.

Another thing to note is that a lot of the stuff that is being cut out of the bill in the name of eliminating wasteful spending is safety net stuff.

Also, and more fundamentally, I actually disagree that private individuals will always make better use of money that Congress.

Better for what?

People will use their money to pursue their private interests. There's nothing wrong with that, it just is what it is.

There are a lot of important things that will *never* be undertaken or funded through purely private initiative. They will only happen if public institutions, frex government, takes them on.

Finally, I'm not sure the "it's their money" thing holds water. Yes, the money we all pay in taxes is our money. We earned it, and we should have a voice in what happens with it.

But if you live in this country, you are obliged to contribute toward the operation of its institutions, and toward the fulfillment of the various commitments we make as a nation. If that disturbs you, you need to get over it, because pretty much any nation you will actually want to live in will have the same requirement.

We ran the country for quite a while on tariffs and luxury taxes. It was a very, very different country then, and a very, very different world. Think twice before you say you'd like to turn back the hands of time.

russell
// what a great number of those 140 million tax payers will do is either pay down debt or put the cash in their mattress//

Okay, fine. If that's what they think is best than they should do it. But that is not the end of the road. I wager there won't be more than 20% of the population who are mattress types. In the case of the other 80% the money will be recirculated by the creditors in some manner, probably through new loans for new projects. And new projects represent new spending. Using money to pay down debt does not make the money disappear it just makes the debt disappear. The money moves on to do it's work elsewhere. And don't discount the psychological value to consumers of having less debt. It makes them more able to spend.

// I actually disagree that private individuals will always make better use of money that Congress.//

I haven't said always. Each one will do what he feels is best. What some think is best is snorting cocaine. Obviously they err. I do believe that a million little decisions are more efficient than a few big ones (i.e. decisions taken by govt)

//There are a lot of important things that will *never* be undertaken or funded through purely private initiative. They will only happen if public institutions, frex government, takes them on.//

If such things haven't been taken on in times of prosperity because they were deemed too expensive or of low priority then what makes them suddenly worthy? I say nothing makes them suddenly more worthy. It's only that advocates of spending see an opportunity.

//But if you live in this country, you are obliged to contribute toward the operation of its institutions, and toward the fulfillment of the various commitments we make as a nation.//

Well, duh. I pay my taxes. Is there a rule that I have to like everything the govt does with it? I don't go out and march or throw molotov cocktails. I just complain a little and go back to work. I think it is called debate. The ability to do such a thing is one thing that makes a country desirable isn't it?

//We ran the country for quite a while on tariffs and luxury taxes. It was a very, very different country then, and a very, very different world. Think twice before you say you'd like to turn back the hands of time.//

Did I say I wanted to turn back the hands of time? I don't remember saying that.

d'd'd'dave,

You have just commented 23 times on one thread. I think tonight you should take a break and go get laid.

The flaw in anonymous' proof at 9:21a on feb 6 is that he redefined the words "progressive' and 'regressive'. He shifted the object of the definition from 'tax paid' to 'income kept'. It is my understanding that terms mean things in mathematics, 1 is 1 and 2 is 2 but 2 is not 1 and 1 is not 2. anonymous abandoned that rule in his analysis of my work. That is the flaw in his proof.

You're up awfully late, dave. And, essentially, repeating yourself, though doubtless you think you've presented a new argument(hint: what is the difference between 'necessary' and 'sufficient', as we say in the math biz? Oh, and I'm not a professor, btw, I merely said that I teach math.)

But you haven't answered what are really the core questions: Isn't dropping taxes to zero for everyone who make $250K or less a year, and dropping taxes to one dollar for everyone making over that amount 'progessive' by your definition? In fact, far, far more 'progressive' than anything else so far proposed?

If you raise taxes from zero to one dollar on someone who makes $10K, and from 10% to 99.999% on someone who makes $100K, isn't that 'regressive', again by your definition?

These aren't hard questions to answer.

I do believe that a million little decisions are more efficient than a few big ones (i.e. decisions taken by govt)

Decisions about what?

My overall point here is that the decisions made by private individuals, reasonable and good as those may be in terms of their own interest, may well be destructive in the bigger picture.

The situation at hand is exactly an example of this. When I pay down personal debt, frex, the money goes to financial institutions who are *themselves* hoarding cash, because they're waiting for the next shoe, or series of shoes, to drop.

It *is not* always true that 140 million private decisions will create a better result than a few decisions made by "the idiots" in government.

Idiocy can, as it turns out, be quite widespread.

Regarding this:

I have a notion that income/wealth flows in general towards efficient producers of good value

I think it's more accurate to say that, in this country, income and wealth flows in general to capital.

Finally, it's far from clear to me that efficiency is always of greater value than equality. Sometimes, and for some things, it is, sometimes is isn't.

I have a notion that income/wealth flows in general towards efficient producers of good value

I think it's more accurate to say that, in this country, income and wealth flows in general to capital.

Sorry, just to expand on this:

I think it's accurate to say that income and wealth are *created* by efficient producers of good value.

The direction in which the income and wealth flow is a somewhat different issue, and IMO most reliably flows to capital.

Violets
//But you haven't answered what are really the core questions: Isn't dropping taxes to zero for everyone who make $250K or less a year, and dropping taxes to one dollar for everyone making over that amount 'progessive' by your definition? In fact, far, far more 'progressive' than anything else so far proposed?//

Yes, the new rates are progressive. They are more progressive than the current federal rates. And they are more progressive than anything i've heard proposed.

//If you raise taxes from zero to one dollar on someone who makes $10K, and from 10% to 99.999% on someone who makes $100K, isn't that 'regressive', again by your definition?//

Yes, the second second set of rates is more regressive. It moves from 100% of total tax revenues being paid by the upper bracket to only 99.999%. It is not revenue neutral though.

So what? How does that refute my point? I suspect you're looking at the sheer size of the rate increase on the higher bracket as 'progression' though you haven't said so.

d^3, this whole post was about how inefficient tax cuts are for stimulating the economy, you agree that they won't be very good at that, but you still natter on endlessly about how they are the best thing we could do. If the economy were a vehicle, careening down a hill, mostly out of control, you'd be the guy in the back seat arguing that we need to change the spark plugs and maybe get a cleaner engine, but to hell with actually doing something about where it's going. Either you don't really see what the problem is here, or you just don't care. The original post was all about stimulus, yet you've had according to others over 20 posts to address that and the best we can get is that efficiency is more important than the actual state of the situation. I think it'd be best that you get some perspective and attempt to be constructive about the actual situation, not your personal hobby horse.

d'd'd'dave:

They are equally progressive if the marginal rates are all that changed; meaning pretax income distribution and the income brackets to which the rates apply are the same before and after the rate cut.

My method shows as much.

Ah, but therein lies the rub. As near as I can tell, your method is just that: your method. What you're doing does not to the best of my knowledge represent any commonly-accepted measure of progressivity of a tax code.

Specifically, you claim progressive as you use it means "a higher proportion of total tax revenues fall on the higher income strata." But in fact, nowhere do you make this argument; you never address anything but personal income tax. Specifically, you argue that if statutory personal income tax rates are more progressive, the tax code is more progressive.

Um. No. Economists beg to differ. In my (admittedly nowhere near exhaustive) survey of literature to come up with a commonly accepted measure of tax progressivity, I found no one using statutory marginal rates in isolation. I found some using the top bracket marginal rate, by which measure the tax cut in question certainly makes the code less progressive; I found some using measures of pre-versus-post-tax income inequality ("effective progressivity"), by which measure the tax cut in question certainly makes the code less progressive; I found some using average and marginal rates with average deductions and credits accounted for ("structural progressivity"). This latter is the closest to what you argue for, but even that isn't it, as you look simply at the statutory rates and pass judgment based on that.

Which is to say, you're using an arbitrary definition of "progressive". Most pointedly, you are using an arbitrary and non-standard measure of progressivity between different tax codes. Whether a tax coded is progressive is simple and not in dispute: does the tax code place a disproportionately larger tax burden on the wealthy than on poor? If yes, it is progressive; if no, it is proportionate ("flat") or regressive. However, what is in dispute is how to quantify differences in progressivity. You've chosen an ad hoc measure of your own devising, namely the slope of the line described by the statutory marginal personal income tax rates. You did not define this until fairly late in the argument; rather, you took for granted that your arbitrary definition was correct. However, as you yourself say,

The problem is that words mean something. According to wikipedia "A progressive tax is a tax by which the tax rate increases as the taxable amount increases." The effective word is RATE not dollars.

If the rate was progressive before the change and more progressive after the change then the change was not regressive.

You will note that while you cite a definition of progressivity, you fail to cite a definition of quantification of progressivity. This is critical, because it's on just such a definition that your argument hinges. You've imposed your (non-standard) definition on the discussion, and for most of the conversation at best implicitly provided it. This leads you to make statements like the last one in the above quote. And it leads some of your interlocutors to vehemently disagree with you. If you're using your private definition, particularly if you neglect to provide it, you undermine the grounds for meaningful communication. Words have commonly-agreed-upon meaning. By such commonly-agreed-upon meaning, the DeMint change is not perforce a progressive change. Using non-homemade measures of progressivity, your best hope of demonstrating that it will in fact increase the progressivity of the American personal income tax code would be to compare effective tax rates before and after the change - not simply citing statutory rates.

This is not a word game, though one gets the idea you feel it is, that you're chuckling at the notion that silly leftists will bristle and sputter ineffectually if you can force them to conceive a regressive change in tax policy as being progressive. Words mean something, and the progressivity of an income tax code is not derived from examining the statutory income tax rates... it must at the very least consider effective income tax rates. If you wish to argue that the change is a move towards a more progressive tax structure, you need to consider all taxes, not simply income taxes. But if you're content to deal strictly with income taxes, even then you must use commonly accepted - not personally conceived - measures of tax progressivity. Otherwise, you're not making an argument, but instead playing a silly word game to tweak the noses of those you argue with.

The flaw in anonymous' proof at 9:21a on feb 6 is that he redefined the words "progressive' and 'regressive'. He shifted the object of the definition from 'tax paid' to 'income kept'. It is my understanding that terms mean things in mathematics, 1 is 1 and 2 is 2 but 2 is not 1 and 1 is not 2. anonymous abandoned that rule in his analysis of my work. That is the flaw in his proof.

This raises an interesting point. You think that mathematics is the field we need to be considering in this matter? That might explain your cockeyed conception of what a progressive tax policy entails.

But more to the point, you affirm my interpretation of the above: you have failed to use commonly accepted measures of the preogressivity of tax codes to quantify the progressivity of the DeMint change. You have instead devised your own ad hoc measures. If this is a basis for dismissing arguments out of hand your arguments can certainly be dismissed.

Sigh. Dave, when you raise taxes from 0% to 10%, or 1%, or 0.00001%, how much of a tax increase is this, using your ratio definition? Tell the truth.

And this doesn't even make sense:

//If you raise taxes from zero to one dollar on someone who makes $10K, and from 10% to 99.999% on someone who makes $100K, isn't that 'regressive', again by your definition?//

Yes, the second second set of rates is more regressive. It moves from 100% of total tax revenues being paid by the upper bracket to only 99.999%. It is not revenue neutral though.

So if there's 1,000,000 people in the lower bracket, and only one person in the upper, the upper tax bracket is paying 99.999% of the revenue. But I think you're starting to realize that you have to consider something besides just ratios(in fact, to the extent ratios are considered at all, they are applied to pre- and post-tax income. Not on the taxes themselves. In my first question above, what is the ratio of change in post-tax income? Sound a little more reasonable?)

This isn't rocket science. It isn't even, properly speaking, college level math.

mattH

//you still natter on endlessly about how they are the best thing we could do//

Not true. I have nattered on endlessly about a specific method of quantitative analysis. I believe I did not make a value judgement about whether tax cuts were the best thing we could do until just a few hours ago (2:15a on Feb 8).

//I think it'd be best that you get some perspective and attempt to be constructive about the actual situation, not your personal hobby horse.//

Thank you for telling me what you think would be best.

Everyone else seems to be doing a decent job of explaining the flaws in d'd'd'dave's arguments so I'll just make two points:

So, thinking of taxes rather than food and using the pocketbooks of the lunch companions as an example, C would pay the first $70 until he/she had only $30 left. Then C and B would split the next $44 between them equally, leaving each of the three with $8 apiece.

C will have paid $92, B will have paid $22, and A would've paid $0.

And you believe this model is 'fair'?

I got my PhD last year* so most of my friends are still in grad school. I, however, went into industry, where I'm getting paid about five times as much as they are. [Actually, only about four times as much after taxes, but let's not quibble.] When we go out for drinks, yes, sometimes everyone buys their own -- particularly because, having been in grad school far longer than they, I have a significantly higher amount of debt -- but sometimes, yes, I buy the round. Why not? Comparatively, I've got the money and they don't.

And yes, that's fair, and you'd have to be an idiot to think otherwise.

* In math, incidentally, so a word of caution: your mathematical dick-waving makes you look like an idiot, not an authority. Stick with presenting your argument, such as it is.

Violets
//Sigh. Dave, when you raise taxes from 0% to 10%, or 1%, or 0.00001%, how much of a tax increase is this, using your ratio definition? Tell the truth.//

The change in each of these rates in proportion to the initial rate is infinite: 0%->10%, 0%->1%, and 0%->0.0001%. The dollar amount of the increase cannot be determined because you haven't provided the pretax income income figure.

//And this doesn't even make sense:

"If you raise taxes from zero to one dollar on someone who makes $10K, and from 10% to 99.999% on someone who makes $100K, isn't that 'regressive', again by your definition?"

Yes, the second set of rates is more regressive. It moves from 100% of total tax revenues being paid by the upper bracket to only 99.999%. It is not revenue neutral though.

So if there's 1,000,000 people in the lower bracket, and only one person in the upper, the upper tax bracket is paying 99.999% of the revenue.//

But it does make sense. You said //someone who makes $10K// and //someone who makes $100K//. Someone is not a plural. 'Some people' or even 'some' is plural but 'someone' is singulr. It is one individual. Using one person at $10k and one person at $100k *does* yield the 99.999% figure because the total population is only two persons.

But, to get to your point, changing a rate does not change the underlying pre-tax income distribution. The population earns what it earns without regard to the tax rate applied to it (Caveat: this applies in the short-term. There is probably a long term effect. I assume we are dealing here with the short term).

Go back and look at my method. I said all other things (pre-tax income distributions and the income brackets to which the rates apply) being equal, rate changes alone can be evaluated for their tendency to be more or less progressive.) Normally, when evaluating an algebraic equation one tries to isolate equivalent units on each side and remove them. That is essentially what I have done. Since pre-tax income distributions rates and income brackets do not change just because rates do, I have defined them as equal and removed them from each side.

But lets go ahead and apply the same rate change to an income distribution of 1,000,000 people in the lower bracket, and only one person in the upper bracket. The rate for the low bracket goes from 0%->0.01% and the rate for the high bracket goes from 10% to 99.999%. The result is that one high bracket guy pays $89,999.10 (or $99,999 depending on if the high bracket guy gets the benefit of the 0.01% rate on his first $10k) and each of the million low bracket folks pays $1. The proportion of total tax revenues paid by the high bracket guy drops from 100% to 8.25% (or 9.09% depending). The result is still a less progressive income tax regime than before the rate change. The rate change raises alot more revenue though.

//But I think you're starting to realize that you have to consider something besides just ratios//

Nope. But I hope you're beginning to realize the opposite.

//In my first question above, what is the ratio of change in post-tax income?//

The rate at which a person keeps their money changes as follows: 100%->90%, 100%->99%, and 100%->99.99%. The ratio of each change to the initial rate is: -10%, -1%, -0.001%.

//This isn't rocket science. It isn't even, properly speaking, college level math.//

Which begs the question, when will you admit that my point is valid.

If I may suggest something: it appears you are hung up on assuming a comprehensive revenue neutral change is occurring. I grant you that if you desire a revenue neutral outcome and you are changing the marginal rates then you must also change the income bracket levels to achieve revenue neutrality (in a closed system where income distribution doesn't change). Go back and look, I have always defined income distribution and income bracket changes out of the analysis. In real life, revenue neutrality NEVER occurs when rates are changed.

Dave, 'tax bracket' is not an individual. I'm just throwing this out to show that all you're doing is playing "If you can't make me say I'm wrong I win."

But at least you admit that this is a regressive tax increase by your reckoning: most people would say that it's progressive. In fact, what is the usual practice, insofar as just ratios are concerned is to look at income changes. So in the first case, we have 9999/10000=0.9999 vs 1/10000=0.0001. Whadda surprise, a highly progressive tax - at least as most people measure it. Your problem, as I've mentioned more than once, is that you're treating this as ratio data rather than interval data, and you can't do that (no true zero.) Income, otoh, does have a true zero, and, should you decide to apply ratios, will give you an accurate result.

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