Everybody Knows the Fight Was Fixed

by Eric Martin

This post from Kevin Drum ties-in nicely to recent conversations on this site:

Sure, you already know this. But it never hurts to post a reminder with a nice graphical memory aid. Nickel summary: the richest of the rich have gotten even richer over the past two decades — 400% richer for the top 400, according to CBPP, in a nice bit of symmetry — and at the same time their federal income tax rates have gone down from 30% to 16%. Needless to say, this is further evidence that America's heirs and Wall Street tycoons, the targets of endless class warfare from liberals and Democrats, deserves to have the estate tax eliminated. They've suffered enough already.

But you come here for more than snark. You want substance. So here's some substance:

The low effective tax rate for the top 400 filers is largely due to the fact that capital gains and qualified dividends are taxed at much lower rates than ordinary income....It is not surprising that two of the largest reductions in effective tax rates for the top 400 filers occurred in two two-year periods (1996-1998 and 2002-2004) that coincided with the capital gains tax cuts enacted in 1997 and 2003.

The graphical aid in question is to the right.

In essence, over the past 15 years (and counting), our government has implemented policies in the pursuit of a massive redistribution of wealth. But it's socialism in reverse - complete with a system of privatized gains and public borne losses when the same millionaires, and the financial institutions they run, that benefit from our upside-down tax system, wreck the economy. The same economy they are paid such insane amounts of money to guide and protect. Which says nothing of the heiress set that doesn't even work, but benefits from the preferred treatment of passive income.

But don't expect a correction. The Obama administration, and its Democratic allies, not to mention its Republican opponents, don't seem inclined in the slightest to right the ship.

Only in America.

Comments

[Bernard Yomtov]

If you want to build a United States governed by a hereditary aristocracy you could:

1. Eliminate or sharply reduce estate taxes.
2. Eliminate or sharply reduce taxes on capital income.
3. Remove as many restrictions on financial support of politicians as possible.
4. Consistently try to reduce government involvement in economic matters, on the grounds that it is unnecessary, counter-productive, wasteful, etc. and that markets solve all problems.

[Eric Martin]

Yahtzee!

[Ugh]

If you want to build a United States governed by a hereditary aristocracy

I thought we were already there??

[chmood]

It's the new face of feudalism!

[Tony P.]

Remember, folks: it wasn't a dictatorship or a foreign occupier that made our tax laws what they are. The government is us.

So the real question, for me, is this: how does the tiny minority of "us" who get all the benefit manage to convince a majority of "us" to elect governments that serve them so well?

I have to think that my fellow Americans vote the same way I do: in their own self-interest as they perceive it. So when the majority of my fellow Americans vote as if they perceive that they are better off when Paris Hilton pays less tax, I have to wonder why they perceive that.

Any guesses?

--TP

[Eric Martin]

Tony,

A few reasons:

1. Propaganda and misinformation - and an immature, possibly hysterical reaction to anything that could be described as even leaning int he direction of socialism.
2. A culture that worships wealth and the wealthy inordinately - and the tendency to want to "relate" to the rich and famous, rather than the hoi polloi.
3. A culture that equates wealth with goodness, thus believing that wealth is a sign of moral character, which should not be interfered with.
4. An unrealistic belief held by far too many that they, too, will one day be a member of the uber-wealthy set, so let's not negatively impact their future wealth.

[someotherdude]

This book gives a cultural history of the fusion of the language of finance with character in the US.

Born Losers: A History of Failure in America

In the epilogue of Born Losers: A History of Failure in America, Scott A. Sandage quotes a pivotal line from Arthur Miller's play, Death of a Salesman, that haunts his entire book: "Attention, attention must be finally paid to such a person" (p. 263). The person is, of course, Willy Loman, the quintessential loser of American dreams. Sandage, an associate professor of history at Carnegie Mellon University, reminds us that Loman represents but a long line of economic "failures" in American history who, for the most part, have been ignored or studied outside of the ever-changing, historical-cultural definitions of success. Thus Sandage pays heed to Linda Loman's injunction to remember and, above all, respect the real-life Willy Lomans on every page of Born Losers.

In this regard, Sandage's first book, winner of the Thomas J. Wilson Prize, succeeds admirably. We are introduced, chapter after chapter, to mainly white businessmen and sometimes their wives, who, from the panics of 1819 to 1893, fell into monetary trouble. Many of these people--mostly nobodies today--left diaries, commonplace books, account books, or sets of correspondence from which Sandage draws his most memorable material. We hear the anguish of Philadelphian Joseph Horner, a hardware dealer, who, after investing in a steamboat, was unable to pay debts during the first panic: "What is to become of us ... I know not" (p. 29). We experience the torment of New Hampshire's John Flagg, who in 1825 wrote he had "gushed into tears many a time," for fear of not securing a stable business (p. 70). Quotes from so-called begging letters of the Gilded Age supplicating wealthy men show just how desperate some "losers" were. The wife of one such man even asked him to write to John D. Rockefeller of her (literal) nightmare in which she "climbed a great hill, 'weak and worn and with clothing torn off,'" in the hopes he would give her husband a place at Standard Oil (p. 226). What Sandage is able to wrest from the numerous collections of personal papers he read at various archives is often astonishing. The liberal deployment of quotations that chew up pages--no easy task when working within editorial constraints about word length, as we well know--is commendable. Sandage, an effective writer himself, allows his long-forgotten informants to have their own say.

[russell]

It's the new face of feudalism!

Except under feudalism and manorialism, there was some concept of reciprocal responsibility.

Peasants work the land and pay rents to the lord, in labor, kind, or coin.

The lord is responsible for the physical defense of the manor, and through his obligations to his lord or the king, the defense of whatever larger political entity it belonged to.

What do the top 400, or folks in general who derive their income from investment, contribute in return for the favorable tax treatment they receive?

[dnfree]

Great reference to Leonard Cohen! (I usually don't get the title references, so I was excited.)

[sanbikinoraion]

Nice gee-whiz graph there that doesn't start at zero so as to distort the scale. If the facts are on your side anyway, don't misrepresent them!

[Slartibartfast]

The horizontal scale needs to start at zero, too, just so we don't all get confused.

8p

[elm]

The horizontal scale needs to start at zero, too, just so we don't all get confused.

[Slartibartfast]

You rock, elm.

[elm]

Thanks, Slarti, but I owe the idea to you.

Additionally, I noticed problems with the original chart: First, the endpoint of the horizontal axis on my original chart is somewhat arbitrary. Second, given the scale of numbers involved, a semi-log plot is more appropriate.

[çiçekçi]

For sharing thank you very much good very beautiful work

[Steve]

elm, Slarti, as a Representative of Arbitrary Awesome, I'm happy to inform you that you win the Internet.

[cleek]

please continue to let me feel your article.

by all means. feel away!