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March 08, 2009

Comments

"This might work."

The negative income tax.

Well-known communist Milton Friedman.

"Because Norman, and people like him, would blow their subsidy on drugs the minute they get it. They would have nothing left for food, housing, clothing, etc."

That's another problem, but it wouldn't be a problem of poverty.

"They need a mommy to actually follow them around and make sure they don't do stupid things."

That's true. People who are very poor are poor for reasons, and not, in most cases, reasons of choice.

They're poor variously because of mental illness, emotional illness, physical illness, dependencies of one sort or another, dependencies of others upon them, lack of skills, lack of knowledge, lack of knowledge of appropriate behavior, lack of self-control, lack of intelligence, and so on and so forth.

And so many people do need help beyond simply being handed a stack of bills.

So I wouldn't argue that a negative income tax is a cure-all. There still need to be mental health services available, physical health services available, child care, and anything else necessary to help people gain the tools they need to survive and get ahead, or to enable people to at least not suffer.

But making sure they have enough minimal money not to be poor would be a huge start.

And it would wipe out poverty: just not everyone's problems. But I certainly agree that wiping out everyone's problems isn't on the horizon.

I'm happy to settle, though, for wiping out povery, and making available the tools for more or less everyone to survive adequately. (And, yes, that includes allowing for a certain amount of relaxation/stress-relief/entertainment, which is a necessity for mental and emotional health.)

russell, 2:40p
//I'm not aware that 'eliminating all poverty' is the goal of Obama's tax proposals.//

I agree. That has not been Obama's stated goal. My comments about the success of the war on poverty were a response to one or two comments up thread which loosely argue that the rich who favor lower taxes must want poverty because higher taxes fund transfers to poorer people which ends poverty.

How is that for a poorly written run on sentence?


I do get that part, dave. I didn't really understand how bobbyp was applying "Simple: From each according to their abilities, to each according to their needs." to the determination of the value of, say, an assembly line worker's output. That's the context I didn't get. I just think you're taking that quote and putting into a much broader and different context than in bobbyp's comment. He's an imaginary "you" because I don't see where he made an argument remotely resembling the one you seemed to be addressing. And it's a blog. Jumping in on a conversation is what it's about.

"Simple: From each according to their abilities, to each according to their needs."

Is there any possible way to square a notion like this with the concepts embodied in the United States' founding principles? I think not.

This sort of abstraction of the discussion at hand annoys me because it has nothing to do with the specific numbers 35 and 39.6. Are we arguing over progressive taxation in general, or addressing the point that the new marginal rate is nothing new or historically anomalous or outrageous?

Is there any possible way to square a notion like this with the concepts embodied in the United States' founding principles?

I'm not actually endorsing the notion, but I'm not seeing how it's incompatible with the idea of unalienable rights to life, liberty, and the pursuit of happiness. In fact, it seems to fit pretty well with it.

I don't see how it makes sense to muddle the "founding principles" with ideas about capitalism and communism that weren't developed until after the founding occurred.

Cleek
//It's a biblical ideal, even//

First, something that occurred in the bible is not necessarily a biblical ideal. Second, the early christian church as portrayed in this passage of Acts had a characteristic that made this practice work for them. It is a characteristic that CANNOT work in a more heterogenous population. It was this:

"the multitude of them that believed were of one heart and of one soul: neither said any of them that ought of the things which he possessed was his own; but they had all things common."

One heart and one soul cannot be legislated. It is a voluntary thing.

The only place in the Bible I am aware of where an ideal civil economy is described is in the book of Joshua where land was partitioned more or less equally among families and a system was instituted whereby land could not be sold permanently but only leased for the period up to the next jubilee. This basically enabled one generation to do something stupid but all was put back to more or less even every 50 years.

hairshirt
//He's an imaginary "you" because I don't see where he made an argument remotely resembling the one you seemed to be addressing.//
I see. Fair enough.

First, something that occurred in the bible is not necessarily a biblical ideal.

it is Biblical in the sense that the source of the phrase is the Bible, and the idea which the phrase embodies is from the Bible. i'm obviously not implying that Jesus was preaching communism.

hairshirthedonist at 2:35:

And it's a blog. Jumping in on a conversation is what it's about.

hairshirthedonist at 2:39:

This sort of abstraction of the discussion at hand annoys me because it has nothing to do with the specific numbers 35 and 39.6. Are we arguing over progressive taxation in general, or addressing the point that the new marginal rate is nothing new or historically anomalous or outrageous?

It's a blog. Expanding, contracting, deflecting, ignoring, and in general addressing the original topic as creatively and/or annoyingly as possible is what it's about. ;)

By the way, although I'm in favor of a negative income tax (which would replace existing welfare programs - Gary Farber provides the links), the negative income tax is not relevant to the current discussion.

Drat! JanieM wins.

"243: you chart reinforces my point that since the war on poverty was established formally by LBJ in 1965 there has been no significant change."

I don't know what chart you're reading, but the posted chart says this: the percent of Americans living in poverty in 1965 was approximately 17%.

By 1970, after Johnson passed a chunk of his "War On Poverty" bills, the percentage of Americans living in poverty had declined to approximately 12%.

Over six million fewer Americans were living in poverty, and that's including the absolute rise in population.

How is this insignifcant?

Under Nixon and Ford's "benign neglect" of poverty programs, the poverty rate stagnated.

In a stunning surprise, after Ronald Reagan was elected, the poverty rate rose again, from that approximately 12% to a shade over 15%, a jump of some 25 million Americans, to over 35 million Americans. There was a small decline then under his presidency, down to about 32 million.

Then a sharp rise in numbers under G. H. W. Bush, and then after Bill Clinton was elected, a drop from around 39 million to around 32 million.

How is all this insignificant?

"...36.5 million people (approx 1 in 8 Americans) were below the official poverty thresholds in 2006, compared to 31.1 million in 2000[14], and that there was an increase of 4.9 million poor from 2000 to 2006 while the total population grew by 17.5 million."

That's a lot of people. But maybe they all are just lazy, and the undeserving poor.

"Is there any possible way to square a notion like this with the concepts embodied in the United States' founding principles? I think not."

I'm curious, as a side issue, which specific founding principles, found in which specific documents, you have in mind.

Goodness. Thank you, Cleek.

Gary,

Top of head, but I think it is squareable with the following:

Declaration of Independence
1. Life
2. Liberty
3. Pursuit of happiness

Preamble to the Constitution
1. More perfect union
2. Establish Justice
3. Ensure domestic tranquility
4. Promote the general welfare
5. Secure the blessings of liberty, to ourselves and our posterity.

The only place in the Bible I am aware of where an ideal civil economy is described is in the book of Joshua where land was partitioned more or less equally among families...

I think the relevant civil law is spread across a couple of books, but this is essentially correct. The only place where specific, detailed rules for civil economy are laid out are those specified for the nation of Israel in its early days.

The topic of how the poor should be treated, however, comes up frequently in the Bible. By "frequently" I mean "everywhere".

Nor is there much private vs public distinction on the topic. Individuals, societies, and governments are all held to account for how they treat the poor and powerless.

If what the Bible says is something you're inclined to be concerned about, it's something that really ought to jump right out at you.

Other than the civic obligations laid out for the nation of Israel in the Pentateuch, the only discussion that comes to mind on taxes per se is "render unto Caesar what is Caesar's".

I still think the OECD Data is far trickier than you think, von. One thing it doesn't take account of is income distribution. According to the Wikipedia entry on the Gini Coefficient, which is the formula used to measure income inequality, the US is in the same category as Mexico when it comes to income distribution. The gap between rich and poor is far greater here than in Canada, Western Europe, Japan, etc. So, given that there's more income inequality here, it also stands to reason that the 2% of the population earning the majority of the $$ in the US (maybe as much as 60%)would also have a larger share of the tax burden. Countries with more income equality don't have to vary rates so much.

Also check out the comparison of tax rates on dividends for individuals at the OECD. Wow! US recipients of dividend checks make off like bandits compared to divident recipients in the rest of the developed world. I imagine the difference is due to the creation of the category "qualified dividends" taxed at a flat rate of 15% that doesn't exist elsewhere.

None of the data I've seen suggests to me that the rich are overtaxed in the US. Quite the contrary.

"Do unto others what you would have them do unto you" is not exactly a Biblical dictum, since it apparently predates Moses, let alone Jesus. But it does constitute a bedrock of Judeo-Christian preachment, if not always Judeo-Christian practice.

So whenever anybody speaks approvingly of Biblical values or Judeo-Christian ethics in the context of present-day political economy, I can't help wondering how the Golden Rule figures into the argument. Does the Golden Rule support, or oppose, an estate tax, for instance?

The notion that the god of Abraham has anything to say about the difference between 35% and 39.6% on the income tax is of course laughable on its face.

--TP

One other thing that might be worth considering, on top of many of the points addressed above, is wage stagnation in the lower, and lower middle classes... Ten or twelve years ago, typical pay for grunt work construction in these parts was 10 dollars an hour. Today, it is the same, even less in some instances, assuming you can find any project to latch on to.

Skilled laborers had a good run for a while, but the bubble burst, and now they too scrap for the 10 dollars an hour and a steady paycheck. Point is, I'd bet that wages haven't gone up at all for a decent slice of working adults, despite all the economic growth and productivity increases hyped by talking heads on CNBC these many years. I know anecdotes don't qualify as data points, but you can almost taste the hurt around here, having to pay twice as much for nearly everything, all on a late 90's paycheck.

$20,000 per person times 300,000,000 is 6 trillion dollars. We don't have that kind of cash.

Obama's tax plans, worst case, are for a 22.7% increase in marginal tax rate, not 7-9%. Bush's tax cut, by comparision, was from 39.6% to 35%, or 9%. The marginal rate under Bush was actually 37.9% (35 + 2.9 medicare) and the top rate under Obama, if he gets his 4% bump in FICA on people earning over 250K, will be 46.5% (35 + 4.6 + 2.9 + 4 = 46.5%).

Bush's tax cuts were denounced as 'radical' and 'extreme', yet the consensus here is that 2.5 times those cuts in increases is no big deal, and certainly outvoting 5% of the taxpaying population for this increase is not 'soaking' those people--the evidence for this being that other people around the world are doing it too.

If Obama gets his way on taxes, we won't have to argue about whether a 46% tax rate will influence behavior since the issue will no longer be theoretical, but regardless, I have a question for Hilzoy and the other tax-raisers: is there a limit you would place on the cumulative marginal rate you would charge on incomes between 250K and 1.5mm? If so, what is that limit? At what point would you say, enough, tax rates will not go any higher?

"$20,000 per person times 300,000,000 is 6 trillion dollars."

Forgive me for being unclear: the suggestion would be a negative income tax that makes sure those who don't earn that much have the missing amount given to them. Thus, someone who earns $17,000 a year would qualify for $3,000. Not $20,000. (And that was just pulling a number out of a hat. Maybe it should be $15,000; maybe another number; I'm not proposing an actual specific number.)

Eliminating poverty would in no way require giving $20,000, or $15,000, or whatever, a year to people who already earn that much, of course.

"Bush's tax cuts were denounced as 'radical' and 'extreme', yet the consensus here is that 2.5 times those cuts in increases is no big deal, and certainly outvoting 5% of the taxpaying population for this increase is not 'soaking' those people"

Again, how would this make us worse off than through most of the entire history of the income tax, when upper rates were far higher? Why was the Eisenhower administration such a tragedy of socialism?

"Because Norman, and people like him, would blow their subsidy on drugs the minute they get it."

d'd'd'dave: Why is it that you insist if one is impoverished they must also be a drug addict?

By your reckoning, if I lost my home and job tomorrow, I'd be well on my way to drug addiction.

On the other hand, if I had hit the last big Powerball, got something like a $50 million payout, I would be rich and, possibly, become so bored with my new-found lifestyle that, what the hell, maybe I'd try some of the white stuff. Hell, I could afford it. And I wouldn't be poor, but damn, all of the sudden I'm addicted to cocaine.

Take it easy on the poor, d'd'd'dave, some of them might even be virtuous.

"Because Norman, and people like him, would blow their subsidy on drugs the minute they get it."

d'd'd'dave: Why is it that you insist if one is impoverished they must also be a drug addict?

That's not what triple-d said. He referred to "people like [Norman]." He didn't say all impoverished people are like Norman.

Obama's tax plans, worst case, are for a 22.7% increase in marginal tax rate

Hey mckinney I've put cites up for where I come up with 7-9%.

Where's your number coming from?

"Because Norman, and people like him, would blow their subsidy on drugs the minute they get it. They would have nothing left for food, housing, clothing, etc.

"I'm not saying every poor person is like Norman but there are many."

True, Gary. But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me.

Russell: I believe you are talking about additional percentage points and McKinney is talking about a ratio between percentage points.

46.5% divided by 37.9% (his numbers) = 1.227.

I don't think I ever saw an answer to this question when I asked it last week.

Why do these discussions keep referring to "$250,000" and "top bracket" in the same breath?

$250,000 is not in the top bracket. It isn't even close to the top bracket. In 2008 the top bracket started at $357,700 for 3 of the 4 tax filing statuses (MFS bracket limits are half the limits for the other statuses). In 2009 it is $372,950.

http://www.mytwodollars.com/2009/01/14/federal-tax-brackets-law-changes-for-2009/> This information can be found without any trouble at all.

So, is Obama proposing to lower the brackets so that $250,000 is in the top tier? Or is it just the proposal for FICA to kick in that has a connection to $250,000?

Just wondering.

OK I get it.

A jump from 35% -> 46.5% is a increase of 22.7% in the rate. Except I make that out to be a 24.7% increase. Except it's actually from 37.9% if you include Medicare, so it's 18.4%.

In any case, we're back in 'percentage of a percentage' territory, where a tax increase from, frex, 1% to 2% is a 100% increase, rather than a 1% increase.

Personally, when I talk about the *difference* between two rates, I do *subtraction*.

46.5 - 37.9 is 8.6.

But yeah, worst case looks something like 46.5% on income over a quarter of a million bucks. Add in state, property, etc etc etc and your wealthy person is paying a lot of money in taxes, assuming they don't have some way of moving the numbers around.

Yeah, it sucks. But their worst day is about a million times better than the folks losing their jobs, homes, savings, health insurance, and whatever else they have to lose.

So, you know, buck up.

The reason Bush's tax cuts were criticized was because they favored wealthy people over less wealthy people. That strikes a lot of folks as being f'ing unfair on its face.

The reason they were created with expiration dates was because they were unsustainable.

If you want to know how the economy would fare if they were extended indefinitely, look at the economy now. They are in place now.

Since the top marginal rate in this country has been as high as 90% without the republic falling to its knees, my guess is that it could, in fact, go higher than 39.6%, or 46.5% fully loaded if you want to look at it that way.

Whether it should or not is a topic for a different day, and different circumstances. My guess is that we'll never see tax rates at any income level that high again. Just my guess.

But what's on the table is what we intend to do now, today, in the circumstances that apply now, and today.

certainly outvoting 5% of the taxpaying population for this increase is not 'soaking' those people

Here's my modest proposal mckinney.

Let's put together a basic household bundle of goods and services. Rent or mortgage, heat, food, transportation, clothes. Base it on basic stuff, nothing fancy. Come up with a number, regionally adjusted, for what it costs to keep, say, four people going at a reasonable, basic level of comfort, health and safety.

And when I say 'comfort', I mean they're not hungry, cold, or in physical danger. That's all.

Now let's levy a flat tax at some number on all household income above that cost. Look at the bottom line of the US budget, add up the total household income of all households *above that basic level of subsistence*. Add enough money back in to the budget if we need to to bring folks living below that level, up to that level.

Divide the budget bottom line by that aggregate income level, and that's your flat tax rate. Apply that rate to all household income *above the subsistence cost*, across the board, to all households without exception.

If the cost of the household bundle this year is $20K, and you make $20K, you pay nothing.

If you make $10K, you get $10K back.

If you make $100K, you pay the rate * $80K.

If you make $1M, you pay the rate * $980K.

Are you up for that?

If not, why not?

"But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me."

Whatever it sounds like to you, that's not what he wrote.

"My guess is that we'll never see tax rates at any income level that high again."

When Kang and Kodos invade, we may need that much money for defense.

Also, once Skynet has wiped out most of the human race, the tax burden will fall far more heavily on everyone.

btfb, what I just wrote to you reads more harshly than I intended it; sorry about that. I'm a stickler for accurate reading, but I didn't mean to be offensive.

Bedtime

"Because Norman, and people like him, would blow their subsidy on drugs the minute they get it."

"d'd'd'dave: Why is it that you insist if one is impoverished they must also be a drug addict?"

I didn't talk about everyone who is impoverished. I talked about Norman (a specific person) and people like him. If an impoverished person is not like him than my statement doesn't apply to them.

I was responding to the concept of eliminating poverty. My point was that no matter what you do some percentage (however small) will still be in poverty because there are Normans in the world. If you go back and read what i've written on this thread I think you'll see that.

//True, Gary. But it still sounds like a pretty sweeping, and stereotyped, condemnation against the poor to me. //

Those sounds are coming from within your own head.

"If an impoverished person is not like him than my statement doesn't apply to them."

To reiterate: this is, in fact, what d'd'd'dave wrote. I'm fine with jumping on d'd'd'dave for things he wrote, but he shouldn't be jumped on for things he did not, in fact, say or imply.

"My point was that no matter what you do some percentage (however small) will still be in poverty because there are Normans in the world."

Setting aside arguments over what "poverty" means exactly, and whether someone is impoverished if they have a decent income (whatever the source), and expend it ill-advisedly, I'm left asking: so what? What's this assertion got to do with the fact that we can provide for poor people, and eliminate, by any definition, poverty for all but your tiny fraction of people, without impoverishing the rest of the citizenry?

Russell, 8:59p
I'm up for that if the basket of items could be hardcoded in some way.

The problem is that the next day there would be a movement to add things to the basket of goods. Someone would say the people who get just the basket are discriminated against. Someone else would say income inequality still happens so the system is awful. Studies would appear that say everyone needs two weeks of paid travel to a tropical climate. Someone would point to Norman and wonder why he is ragged and undernourished despite having a basket...etc.

"Those sounds are coming from within your own head."

On the other hand, given your first comment on this thread, there's a whole pot and kettle thing to contemplate.

Gary, 9:02p. Thank you.

Gary, 9:30p. It was a mostly a joke. I find it interesting when a person thinks one taking is a crime but another taking is not.

"I find it interesting when a person thinks one taking is a crime but another taking is not."

How is it different from thinking one killing (say, of an enemy on the battlefield in war) -- is different from another killing (say, a randomly gunning down three people in on a street)?

Things that are different are, indeed, different.

Either government can legitimately and morally tax people, or it can't. Is it your position that it can't? Last I looked, I understood otherwise, but perhaps I misunderstood. If, on the other hand, government can legitimately tax, then we're just debating degrees, not moral blacks and whites, and it should be obviously that unlike kinds of takings can be unlike.

Someone would say the people who get just the basket are discriminated against.

And what we have now are folks saying that we can't raise the top marginal tax rate because, if we do, we'll be punishing the most successful among us for their success.

Really, I'm not trying to break your chops, but to me it just sounds like SSDD.

Regarding Norman, there will always be the Normans of the world. We should give them medical care, something decent to eat, and a place to live, because otherwise they will just live in the street, and that sucks.

Chances are some of them will actually get better, and then the world will be that much more a better place.

Why should we do that? Because we can. Most folks would do it for a dog, but for some reason doing it for another human being is just beyond them. And that's beyond me.

Regarding Norman, there will always be the Normans of the world. We should give them medical care, something decent to eat, and a place to live, because otherwise they will just live in the street, and that sucks.

Chances are some of them will actually get better, and then the world will be that much more a better place.

As ever, agreeing with Russell, let me add that Normans are Normans for reasons: because they have problems of one sort or another.

They have psychological problems, or emotional problems, or problems from horrible upbringing, or brain injury, or having fallen into drug addiction, or a history of trauma, or some reason or another.

Now, in some cases, people become twisted enough that they become sociopathic, and are dangerous to others. Those folks we may indeed have to lock up.

But those who are merely effed up, for one reason or another, are pretty darn rarely effed up because they woke up one day, and said "I want to lead an effed up life." Living an effed up life, as a rule, makes one miserable. And either unloved, or in very unhealthy relationships.

No healthy person simply enjoys deliberately taking advantage of everyone around them.

Generally speaking, if people have problems, and they can be helped within any degree of reason, it's a good thing for society to give them that help, and help them get out of self-destructive ways, because for the most part, in the end, we wind up having to, no matter what, whether it's imprisoning them, institutionalizing them, or just burying their bodies, and cleaning up the damage they've done.

Setting aside common decency and and moral arguments, it's just cheaper in the long run.

I find it interesting when a person thinks one taking is a crime but another taking is not.

Look, I'm going to follow up on this in good faith in the hope that there's some point in doing so. I'm skeptical, but what the hell.

On one hand: the President of the US has proposed raising the effective tax rate, net/net, on income above a quarter million bucks (or, per JanieM, maybe a lot more than a quarter million bucks) by something under ten percent. It's unclear what, if any, of that will actually happen, because it has to be approved by Congress, which is made up of people who we actually elect.

On the other hand the government of Israel is going to immediately come and raze some folks' homes to the very ground. Because they didn't have a permit when they built it. Decades before the nation itself even existed.

For the love of god, please tell me you see a difference between the two.

Seriously. I'm not joking. I'm asking you to tell me you see a difference between the two of these things.

Oh, and "Norman, and people like him, would blow their subsidy on drugs the minute they get it."

People do mood-changing drugs because they're self-medicating. Because they don't know how to feel good, otherwise. And because once they've started a habit, it becomes harder and harder to break it. (Ask anyone who has tried to quit smoking.)

If people are taking drugs to the point where it badly impairs their life, they're by definition screwed up. Now, I'll certainly agree that by no means can everyone be helped, and by no means can every drug addict be led to get out of their addiction. As they say, you have to want to change.

And before that happens, severe drug addicts can screw up the lives of anyone near them who will let them. I have no illusions about that, and amn't claiming otherwise.

Some people are just going to kill themselves, or lived ruined lives, no matter what.

But let's not put drug addiction in a category like "lazy," say, or automatically consider them simply willfully out to lead screwed up lives. Being an impaired and effed up drug addict is not, as a rule, a happy life, or a life that people who feel they have choices choose.

"On the other hand the government of Israel is going to immediately come and raze some folks' homes to the very ground."

Extremely trivially, and just nitpicking in this case, no, it was postponed (basically, until the media's attention goes elsewhere, or some kind of pressure, probably foreign, makes the city stop permanently).

From the WSJ story:

[...] Jerusalem city leaders met over the weekend and decided to postpone demolition plans until the controversy faded, according to Mr. Margalit, though there has been no official announcement.

None of the data I've seen suggests to me that the rich are overtaxed in the US. Quite the contrary.

Tobie, we're arguing a bit past each other. Yes, I generally favor lower taxes (on the rich as well as the poor). But the specific argument I'm making here isn't that the rich pay less tax in the US as compared to the EU average. Everyone pays less tax in the US as compared to the EU average. The significant difference is that a large number of folks in the US pay no taxes, and the US relies on the rich for more tax revenue than the EU average. I don't think that it's sustainable.

This isn't a problem that Obama created; it's been ongoing since the 1970s. But it is a problem that Obama is exacerbating. He'll be forced to correct course sooner, and harder, than he'd like. The next set of tax increases -- and they are coming -- will hit the middle class.

russell

//Seriously. I'm not joking. I'm asking you to tell me you see a difference between the two of these things.//

I see a difference of degree. The israel thing is hugely unjust. The other thing is mildly unjust. There have been many many comments on this blog that have expressed that the second one (taking from a minority for the many via taxation) is absolutely just.

Do you see qualitative difference or a difference of degrees?

Gary,

Is there a point where you would draw a line and say citizen A gets no more help? If so where is it? Does the line change depending on your perception of how many resources are available to use in the helping?

The significant difference is that a large number of folks in the US pay no taxes

That's not true and you know it.

The next set of tax increases -- and they are coming -- will hit the middle class.

Why? Is it because raising taxes on "the rich" any more is logically impossible?

Come to think of it, I suppose it would be possible to raise taxes at the top so much that "the rich" would be reduced to "middle-class", after taxes. Then "the next set of tax increases" would have to hit the middle class, by definition. But we're a long ways from that.

--TP

Too many questions to answer with too much work ahead of me, but just a few quickies:

1. I am still waiting for someone to tell me the top marginal rate past which even progressives won't go.

2. Comparing rates of 40 years ago with current rates is not apples to apples. The tax code then was much more 'deduction friendly', for that was worth.

3. When tax rates dropped to 28% under Reagan, so too were many deductions rolled back or eliminated--that was the supposed trade off.

4. Putting together a basic living package and guaranteeing it to all is neither practical nor desirable. GF believes, in good faith, that most people will not take advantage of this. With respect, I disagree. A sad percentage of humanity is, for reasons I can't fathom, willing to get by at whatever subsistence level they can wrangle out of the system--call them the Jerry Springer set--and I have no desire to underwrite that program. And besides, as Triple D points out, whatever base you establish will never be enough. Further, it costs too much. Finally, as a matter of personal preference, people ought to get by under their own horsepower. I know--and have represented--many 'working poor' (a term I don't really like, because it sounds condescending) and the majority of them don't have plans to remain that way for long and they fully intend for their children to do better. Being in Houston, most of these folks have arrived fairly recently from Mexico. Most if not all expect to pull their weight and aren't looking for anything besides work. A sizable percentage own their own businesses and have employees.

5. I contrast the work ethic of recent immigrants with people I've known since high school--lazy, disinterested, apathetic at one extreme and just unmotivated and unambitious at the other--who anyone could tell would never go any distance in life. Or people with great potential who quit college, or never went, simply because it was easier to go out and take some lame-ass job. Now, well into life, some are doing ok, others not so much. Meanwhile, others practiced deferred gratification, got our kids through school, paid off tons of debt and now what? It's time to redistribute our income and because we are outnumbered, we are necessarily outvoted. Seems to me the fairness argument cuts both ways.

Do you see qualitative difference or a difference of degrees?

Qualitative, and not just one but a handful of qualitative differences.

Is there a point where you would draw a line and say citizen A gets no more help? If so where is it?

Not addressed to me, but my reply is "when they're dead".

The significant difference is that a large number of folks in the US pay no taxes

That's not true and you know it.

Likely so, but since it's been pointed out to him a few times so far, my guess is that he'll keep saying it.

I am still waiting for someone to tell me the top marginal rate past which even progressives won't go.

It's been 90%. That seems too high to me.

Putting together a basic living package and guaranteeing it to all is neither practical nor desirable.

I'll take that as a 'no'. A flat rate above some basic level of subsistence will not do it for you.

Thanks, because like your question about 'what is the rate above which progressives will not go', I'm always curious to know what possible tax scheme would actually be satisfactory to conservatives.

I suspect the answer is 'none', but I guess I'll keep looking.

It's time to redistribute our income and because we are outnumbered, we are necessarily outvoted. Seems to me the fairness argument cuts both ways.

Yeah, it's tough on a wealthy guy.

Holding the weight of the world on your shoulders, and what thanks do you get? Every time you turn around, they just want more, more, more.

Galt's Gulch, dude.

I don't mean to be disrespectful, but IMVHO you, triple d, and all the other guys like yourselves need to get some perspective.

Why? Is it because raising taxes on "the rich" any more is logically impossible?

Come to think of it, I suppose it would be possible to raise taxes at the top so much that "the rich" would be reduced to "middle-class", after taxes. Then "the next set of tax increases" would have to hit the middle class, by definition. But we're a long ways from that.

It's not logically impossible; it's just unsustainable. If trends continue, we'll end up with more than half of folks paying no income tax. That was sustainable when the income tax was small and a minute part of the federal budget. It's not sustainable when the income tax is large and growing. At some point, the top 10, 20, 30% -- who vote in larger numbers and has disproprotionate political power as compared to the rest of the population -- will insist that further tax increases be shared.

That's one reason why, for instance, the FDR's 1932 income taxes had virtually everyone paying income tax. Historically, high earners are willing to tolerate paying more on the top end if they perceive the system as fundamentally fair.

A system in which the government is primarily funded by a minority while the majority enjoys receipts is not perceived as fundamentally fair. Eventually, more political power will flow to those that pay the tax. Over the long term, this is not a stable system. I don't know of a democracy that has been able to sustain it. (Those democracies that have tried -- Venezuela springs to mind -- tend not to stay democracies.)

2. Comparing rates of 40 years ago with current rates is not apples to apples. The tax code then was much more 'deduction friendly', for that was worth.

Oh, I'd guess there's more to it than that. For one thing, computers weren't commonly in use for tracking income and funds transfers. Sure, the IRS has used computers since 1961, and Bank of America a bit longer, but these were computers used to compute based on local data. There wasn't much internode communication. There certainly wasn't a Bank Secrecy Act until 1970, so large cash transfers were quite a lot easier to hide.

It'd be nice to see some discussion of the prevalency of cheating before and after the advent of computerized transactions, but I'm not sure how anyone would know.

That's not true and you know it.

Sure: everyone with an income pays FICA. Everyone who buys anything pays sales tax where it's levied. Everyone pays property tax in one way or another, and everyone pays some chunk of corporate income tax on the goods they purchase. Also, everyone pays fuel tax in one form or another, because it's embedded in the price of everything that's transported.

But no individual with an income less than about $9500 pays federal income tax, nor do married couples having income less than about $19k. I think that's probably what von is speaking to. It's possible that the line where federal tax becomes nonzero can go a bit higher, but that depends on more specifics. Possibly I've calculated just a little low, too, because I didn't compute the hit to FICA properly.

Over the long term, this is not a stable system. I don't know of a democracy that has been able to sustain it.

Do you know of a democracy that's been able to sustain the levels of inequality we're seeing now? I understand your fear of a majority voting for higher taxes on a minority, but right now we have a tiny minority making sums of money unimaginable to most of the population and wielding their disproportionate power to maintain things like endless flows of taxpayer money to prop up zombie banks and minimize their own losses at the expense of everyone else. And it's not the poor who profit from wars, privatization of government functions, corporate welfare, and plenty of other government spending.

A system in which the government is primarily funded by a minority while the majority enjoys receipts is not perceived as fundamentally fair.

When I have some time to do some digging, I need to get some numbers on total federal tax burden by income class.

For the short term, I'll point out that, by dollar amount expended, the largest form in which 'receipts' are distributed are Social Security and Medicare. Those two programs alone make up about 35% of the federal budget.

Medicare is funded by an absolutely flat tax on income, excluding investment income such as dividends and interest.

Social Security is funded by an absolutely regressive tax, levied on wage income only up to $102,000.00.

How far do you want to take this 'fairness' thing? If you want to take it to the mat, I'll be happy to go there with you. Just let me know.

Social Security is funded by an absolutely regressive tax, levied on wage income only up to $102,000.00.

Quibble: cap is now at $106,800.

Quibble: cap is now at $106,800.

Noted.

Also previously unknown to me:

Self-employed people are liable for the full 15.3% combined SS and Medicare hit, however the income basis for that tax for self-employed people is 92.35% of net earnings.

That's a wiki cite, if the information is incorrect please let me know.

The difference -- 7.65% -- happens to be equal to what their employer would pay if they were not self-employed.

So, folks who run their own businesses, or are partners in businesses, are paying at the same effective rate as employed people.

So those of you who worried that you might be liable for an unfair portion of even those taxes by virtue of being business owners need worry no more.

Oh, that sounds wrong. It sounds like it's a 7.65% discount on a 7.65% tax. But it's Wikipedia, and I'm a guy who has never once been self-employed.

Russell -- I may be misunderstanding your point, but I think this only "works" -- and even then only in terms of percentages, not in terms of net income -- if you count the employer's amount of SS + Medicare as part of "salary."

I.e. in a simplified calculation:

If you are employed and you make $100,000, you pay $7,650 in SS and Medicare, i.e. the 7.65% we all know and love.

If you are self-employed and you make $100,000, you pay 15.3% on $92,350, or $14,130, or 14.13% of the $100,000. (True: not the "full" 15.3%, but a lot more than 7.65%.)

If you're counting the employer's SS + Medicare contribution for an employee as part of the employee's "salary," you have $107,650, of which $15,300 is paid to SS + Medicare, for an effective rate (on the $107,650) of 14.2%, which is actually a bit higher than the percentage for the self-employed.

But the employee still nets $6,480 more than the self-employed worker: $92,350 as compared to $85,870.

Just to make sure we don't run out of additional plot twists: half the total self-employment tax is deductible in calculating Adjusted Gross Income. I.e., like an employee, you don't pay income tax on the (self-)employer portion of your SS + Medicare.

In general I am saying "What Russell said" to every word you write here, so I hate to quibble.... If I've got something screwed up in my assumptions or my math, I'd be glad to be corrected. Well, a little abashed, but glad at the same time.

Not that this is a conclusive argument, but that sounds too coincidental - the same percentage discount on the same percentage tax.

hairshirthedonist: I don't think it's accidental at all. The point is that you shouldn't have to pay (employee's portion of) SS + Medicare on (that portion of your income that's the employer's portion of) SS + Medicare. That would be double-taxing for real.

Is there any possible way to square a notion like this with the concepts embodied in the United States' founding principles? I think not.

The United States was founded by slaveowners on the concept that an unfree person was worth 2/3rds of a free person. Quite so.

(besides: it's all too Christian, and the US is above all a secular nation)

"accidental" s/b "coincidental"

Do you know of a democracy that's been able to sustain the levels of inequality we're seeing now?

We have seen comparable levels of inequality in the US in the past, but they weren't resolved by taxation the last time around and there's no evidence that they could be resolved by taxation this kind around.

Identifying a problem doesn't mean that you've identified the solution.

Slarti and JaneyM, you are both right. Self employed folks will pay more.

My apologies.

The point of reducing the income you're taxed on by 7.65% is so that you won't pay SET on what the employer's portion would be.

You can also apparently deduct half of your SET liability from your remaining income, so that you don't pay income tax on what the employer's FICA payment would have been.

It's pretty confusing.

But net/net, folks who work for themselves pay more into SS and Medicare than folks who work for someone else do.

Sorry about that.

Weren't they solved by a massive world war, a massive worldwide recession, and another massive world war, plus lots of government investment in infrastructure, education, and science, along with high unionization and prosperity brought about by being the only industrialized nation not bombed to crap last time?

I think we might want to try something a little less drastic this time.

Weren't they solved by a massive world war, a massive worldwide recession, and another massive world war, plus lots of government investment in infrastructure, education, and science, along with high unionization and prosperity brought about by being the only industrialized nation not bombed to crap last time?

I think we might want to try something a little less drastic this time.

But the employee still nets $6,480 more than the self-employed worker: $92,350 as compared to $85,870.

But the only reason the employee nets more is that the employer is putting out $7650 more than the self-employed person made. I think it's cleaner if you include the employer portion of SS/Medicare in the compensation of the employee from the beginning when comparing employee compensation to self-employed compensation.

So, let's say they both make $107,650, ignoring the $106K cap to keep it simple, since the number we're picking is arbitrary.

The self-employed pays 15.3% of $100K, equal to $15,300 and is income taxed only on the $100K AGI.

The employee pays $7,650 on the $100K salary and the employer pays an additional $7,650. The employee is also income taxed on $100K.

(I think.)

Russell, in addition to what JamieM points out, there's a cash-flow issue because many (all?) self-employed folks have to make quarterly estimated tax payments, which are generally pegged to 110% of the prior year's income. Given that the self-employed tend to have more variable income than the employed, this creates complexities above and beyond those experienced by the employed.

As soon as I hit post I found my error, assuming the Wiki interpretation is correct. I just took $7,650 off the top for the self-employed rather than taking 7.65% off the top of $107,650. (But wouldn't mine be the more equitable way of doing it?)

But wouldn't mine be the more equitable way of doing it?

Well, at least for this particular income set? (Percentages of percentages again.)

there's a cash-flow issue because many (all?) self-employed folks have to make quarterly estimated tax payments, which are generally pegged to 110% of the prior year's income.

I used to work for myself, and my wife works for herself now and has for most of her career.

I understand that tax issues are a PITA for self-employed people.

My points throughout the thread with regard to your comments about 'fairness' and people who 'pay no taxes' are that (1) everyone who works pays taxes, and (2) the percentage of income tax, per se, paid by a particular income cohort is a really poor representation of the overall fairness of the federal tax system.

What you will want to look at is total, all-in federal tax burden, relative to income.

When you do that, I believe you will find that the overall tax regime we have is very broadly based, and is no more than mildly progressive.

If I can dig up the numbers, I'll put them up here. If Slarti and JaneyM don't mind vetting them, I'll appreciate it.

Hey, I'm not a tax accountant. I'm just a guy who has done his own taxes way too many times, and who also obsessively double-checks TurboTax.

Oddly, to me at least, there are a great many people commenting on the issue of Federal income tax who don't understand the concept of "piecewise-continuous".

The income adjustment that "should" be made (in my estimation) to make this self-employed/employed thing work out is dividing the self-employed income by 1.0765 rather than multiplying it by .9235. The difference ends up being pretty minimal, but still...

hairshirt -- von and others have implied that there is a longstanding debate about this question, and I am totally ignorant about the debate and pretty much everything else that would require having taken an econ class at some point in my life.

Regardless of that, I do think it's enlightening to do something like what you're suggesting, and we can do the math.

The way I would do it is to ask how much gross income the self-employed person would have to generate to net the same amount the employed person nets.

At this point I'm in kind of a hurry but let me take a stab at it.

On a nominal $100,000 gross, the employee nets $92,350. The employer actually has to pay out a total of $107,650 for this to happen ($100,000 to the employee, $7,650 to the gov't.)

To net $92,350, the self-employeed person needs to be paying the employee portion of the tax on $100,000. The $100,000 in turn has to be 92.35% of some other number, which can be arrived at by dividing:

100,000/0.9235 = $108,284.

To turn it around now that got the answer:

Self-employed person...

...generates $108,284

...pays 7.65% x 108.284 = 8,284 as the employer

...leaving $100,000 on which to pay 7.65% as the employee

...leaving $92,350 net, which was our goal (to match the net of an employee employed by someone other than self-).

So even doing it this way, the self-employeed person has to generate a little more income than an employer does in order for the self-employee to net the same amount as the regular employee.

*****

Von is right about cash flow. My income is reasonably stable for a self-employed person, but it does fluctuate, and planning for that in relation to quarterly tax payments can be ... interesting.

No idea how that double posted. Sorry.

No idea how that double posted. Sorry.

Some cross-posting going on here. I wrote my 1:49 without seeing the several comments that precede it in the display.

Russell wrote:

My points throughout the thread with regard to your comments about 'fairness' and people who 'pay no taxes' are that (1) everyone who works pays taxes, and (2) the percentage of income tax, per se, paid by a particular income cohort is a really poor representation of the overall fairness of the federal tax system.

What you will want to look at is total, all-in federal tax burden, relative to income.

When you do that, I believe you will find that the overall tax regime we have is very broadly based, and is no more than mildly progressive.

If I can dig up the numbers, I'll put them up here. If Slarti and JaneyM don't mind vetting them, I'll appreciate it.

I have been thinking all along that what I would really like to see are comparative curves of income vs total tax burden -- comparative within the US across eras, and comparative between the US and elsewhere. Plus some attempt to mark a poverty-level point on the income axis. (Not that the debate will ever stop about how to gauge "poverty.") (And ideally, "total tax burden" would include state and local, not just Federal.)

But I don't have time to follow the links people are already providing, and I really don't have time to go chasing down those curves.

So Russell -- whether that's what you're proposing to look for, or something not quite that comprehensive, I will certainly have a look. Whether my ability to do algebra and remember bits about the tax code as it applies to me will be useful, who knows. Slarti will have to jump in where a familiarity with "piecewise continuous" comes into play. ;)

In any case, I'm in agreement with you about "fairness." And then some....

russell
"How far do you want to take this 'fairness' thing? If you want to take it to the mat, I'll be happy to go there with you. Just let me know."

If you're going all the way to the mat you need to consider who gets the benefit of the spending as well as who the revenues come from.

No matter how far you go, in the end someone will stand up and say "That guy over there has more money left over so it's not fair". There is more than one opinion as to what 'fair' is.

No idea how that double posted. Sorry.

Posted by: Nate | March 10, 2009 at 02:20 PM

No idea how that double posted. Sorry.

Posted by: Nate | March 10, 2009 at 02:20 PM

*snorkle*

Whatever you did when you double-posted and then double-apologized: don't do that.

I have been thinking all along that what I would really like to see are comparative curves of income vs total tax burden -- comparative within the US across eras, and comparative between the US and elsewhere.

While not everything you want, some useful data can be found here

243 -- thanks for the link. I'll see how much time and patience I can apply to it.

While not everything folks have asked for, and not everything we'd probably want to see, here is some information from the CBO that I think might be useful.

What this shows is an all-in federal income tax burden, where "all in" means payroll, income, corporate income, and excise taxes, distributed across income cohorts. Then it shows percentage of total national income distributed across the same cohorts.

For simplicity, the tables I'm looking at are 'Share of total tax liabilities' and 'Share of income'. The numbers here are for the period from 1979 to 2001. The rates are probably slightly less progressive now due to the 2001 tax cuts, but probably not extremely so.

Long story short:

Percentages of total income received by each quintile in 2001, lowest to highest, was 4.2, 9.2, 14.2, 20.7, and 52.4.

Percentages of total tax liability by each in 2001, lowest to highest, was 1.1, 5.0, 10.0, 18.5, and 65.3.

Differences between the two are 3.1, 4.2, 4.2, 2.2, and -12.9.

The wealthiest 20% are paying about 13% more of the total tax burden than they receive in income.

One curious thing to note is that this goes *down* as you go further up the ladder. The top 1% receive 14.8% of the income, and pay 22.7% of taxes, for a difference of -7.9%.

Dave's comment about spending is noted. His comment about 'somebody will always complain', likewise noted with the caveat that that cuts two ways.

Personally, I call this a mildly progressive taxation regime. YMMV.

Russell...Not ignoring you....just trying to get some work done. I'm going to look at the source tables this evening.

"Is there a point where you would draw a line and say citizen A gets no more help? If so where is it?"

Depends what you mean by "help."

Is there a point at which I'd limit direct cash payments to people? Certainly, and of course.

Is there a point at which I'd deny free medical treatment to people? In the sense that not everyone is suitable for a heart transplant, or other immensely expensive treatment, yes, but in the sense of denying them most types of medical care: no.

Is there a point at which I wouldn't make basic food available to the needy? No.

Is there a point at which I'd deny shelter to someone? There's probably some space between making basic shelter available for the non-crazy, and "shelter" in the form of prison for those people who are dangerous, but I'm not prepared to come up with specific rules on the spur of the moment.

We can keep going on the specifics. I wouldn't just keep handing out infinite cash, though, if that's what you're asking.

von is "still waiting for someone to tell me the top marginal rate past which even progressives won't go."

Let me end Von's suspense. Speaking for myself, the answer is 95%.

Notice I did not mention, because von did not ask, the income bracket on which my 95% rate would apply.

Brackets matter. Anybody who talks of rates without talking about the corresponding brackets is giving life to George Carlin's ancient joke:

"And now a partial score: Stanford 42."

--TP

Janie -

No worries.

We can keep going on the specifics. I wouldn't just keep handing out infinite cash, though, if that's what you're asking.

What's the matter, Gary? You can't handle vague, abstract, open-ended questions? Haven't you prepared your Executive Summary of Gary Farber's All-Encompasing Policy for Everything Under the Sun? (What was all that business about 35 versus 39.6, again?)

"I am still waiting for someone to tell me the top marginal rate past which even progressives won't go."

It's a ridiculous question, since people only have individual opinions. Nobody here is appointed to speak for "progressives."

Me, I'll leave it to professional economists.

"GF believes, in good faith, that most people will not take advantage of this."

No, I believe that it doesn't matter much if people "take advantage" of easily available basic minimal subsistance help. Few people with other options want minimal subsistance help. I'm not judgmental about who are "deserving" and who are the "undeserving poor."

See, here's the contradiction in your comment, and stance, McKinneyinTexas. You say both these things:

A sad percentage of humanity is, for reasons I can't fathom, willing to get by at whatever subsistence level they can wrangle out of the system--call them the Jerry Springer set
And:
I know--and have represented--many 'working poor' (a term I don't really like, because it sounds condescending) and the majority of them don't have plans to remain that way for long and they fully intend for their children to do better.
The latter means that most people aren't the former.

And that some people are screwed up, well, I previously discussed that, and we're apparently going to disagree, as I see it as a matter of people with problems, and you see apparently see it as a matter of failed morality.

Brackets matter.
at the OECD site there is a spreadsheet
Top marginal personal income tax rates for employee (Excel file)
which shows our top rate as being 42.7%, which is roughly in the lower third (tied @ 11th place) of the 30 countries shown. These range from Mexico @ 22.6% to Hungary @ 71%.

The threshold where it kicks in is the highest of the thirty countries at 8.7 times the average wage, which at $41,143 works out to $358,449. Of the thirty, only eight have the top bracket over 100K, and 7 have the top bracket set at less than the US average wage.

Self-employed person...

...generates $108,284

...pays 7.65% x 108.284 = 8,284 as the employer

...leaving $100,000 on which to pay 7.65% as the employee

...leaving $92,350 net, which was our goal (to match the net of an employee employed by someone other than self-).

My understanding is that the self-employed would pay %15.3 of 92.35% of $108,284 - a total of $15,300, not $8284 plus $7650, which is $15,934. $108,284 minus $15,300 is $92,984, which is greater than $92,350.

Russell, it seems to this bit of those CBO numbers might be controversial:

Corporate income taxes were assumed to be borne by owners of capital. CBO allocated corporate tax liabilities to households in proportion to their income from interest, dividends, rents, and capital gains.

Isn't the usual conservative argument that taxes on corporations end up being passed along in higher prices and thus hurting the poor?

hairshirt, you are right, I goofed. I forgot that for a self-employed situation I shouldn't split the calculations into 2 phases. It felt odd to me...I'm glad you pointed out why.

I think the right gross amount is $107,545.73.

92.35% of that is $99,318.48.

15.3% of that is $15,195.73.

$107,545.73 - $15,195.73 = $92,350.

So the self-employed person actually has to generate a little less rather than a little more than the employer of an employee, to end up with the same net as the employee.

If you feel like it....check the #'s again.

:)

d'd'd'dave: My bad that I misconstrued what you wrote. Keep in mind that, back when there was a fairly strong debate over whether you were a troll or not, I was one of the commenters who came to your defense. Point being: I wasn't taking apart your words just for the sake of trying to pick on you -- I simply read them the way I read them, rightly or wrongly.

Russell -- I see where you got the #’s and I agree that they suggest an only mildly progressive Federal tax structure.

I want to point to a few other interesting things in the report, supplemented by http://www.cbo.gov/ftpdocs/98xx/doc9884/spreadsheet.xls>another report that updates the #’s to 2005. Unfortunately, the later report breaks down the top quintile into 7 (!!) sublevels. It’s easy enough to deal with the charts that show percents by just adding the 7 to recreate the 5th quintile. But for the charts that show income it would be necessary to weight the incomes of the 7 sublevels by the percentages......and I just don’t have the time. Also, since income amounts are corrected for inflation, the 1979-2001 report shows 2001 dollars and the 1979-2005 report shows 2005 dollars...another complicating factor when trying to just tack the 2002-2005 numbers onto the earlier ones.

One thing to note in passing, given that we’ve talked about it here, is: “CBO assumed, as do most economists, that employers' shares of payroll taxes fall on employees and therefore that the amount of those taxes should be included in employees' income and the taxes counted as part of employees' tax burden.” (This is for hairshirthedonist especially.)

Here are the ratios you get when you divide first the 2001, then the 2005 after-tax income by the 1979 after-tax income for the 5 quintiles:

’79 to ’01
1st quintile 1.085
2nd quintile 1.15
3rd quintile 1.17
4th quintile 1.245
5th quintile 1.55

’79 to ‘05
1st quintile 1.6
2nd quintile 1.16
3rd quintile 1.21
4th quintile 1.3
5th quintile (don't have time to work it out)

The lower levels stagnate while the rich get richer, both in absolute terms (I’ll get to that in a minute) and relatively. Note that the lowest quintile actually declined from ’01 to ’05.

For me this puts an interesting light on Von’s worry that something bad will happen if we don’t get the lower quintiles paying at least something. If they had anything, it might be reasonable to ask them for something (all aside from the fact that, as numerous people have pointed out, they are far from paying no taxes). I would suggest that we will have something differently bad to worry about if we don’t figure out how to slow down, stop, or even reverse the trend of the past 2 or 3 decades of the gap between top and bottom getting wider all the time.

To wit:

The 2005 charts divide the top quintile into 7 sublevels. The highest level of all is “Top 0.01 percentile.” In 1979 there were roughly 9000 households in that group, by 2005 there were about 11000.

In 1979, the after-tax income of the lowest quintile was $14,400; of the top 1% of 1% it was $4,188,300. The top 1% of 1% were taking home (after taxes) 291 times the bottom quintile.

In 2005, the after-tax income of the lowest quintile was $15,300; of the top 1% of 1% it was $24,286,300, or 1587 times the bottom quintile.

Heaven forbid we should ask these top people to kick a little more into the common pot.....

We have seen comparable levels of inequality in the US in the past, but they weren't resolved by taxation the last time around and there's no evidence that they could be resolved by taxation this kind around.

Two more statements that are false.

In 1932 the top tax rate was raised from 25% to 63%. You can guess what happened to inequality going forward.

Second, compared to many European countries the US does not differ much on pre-tax income inequality. It differs on post-tax income inequality.

The decrease in income inequality after the 20s was a result of tax policy, the increase in recent years in inequality to levels that exceed those of the 20s is a result of tax policy.

If the top rates are increased to the levels of the 1960s, inequality will decrease again.

This is simple stuff, unless you spend too much time reading policy briefs from the Cato Institute or something.

JamieM, you should note that the spreadsheet you are using appears to be showing household & not individual incomes. Granted some households are households of one...

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