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September 08, 2010

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It seems like common sense to me.

Then again, such a proposal would also likely save me some money on my taxes, so there may be self-interest clouding my view.

So, you're telling me that if I make $370K a year (in my dreams), I'd pay the same amount in taxes as Bill Gates, multi-billionaire? That ain't right.

But our corporate masters will never allow this to happen precisely because they are the ones that will have to pay more in taxes.

I still don't get why we have tax brackets instead of a smooth curve defining marginal tax rates as a function of adjusted gross income. 99% of the work of doing one's taxes is spent calculating the AGR. Most people then punch the AGR into a computer program anyway, so using a slightly more sophisticated program that could integrate a curve seems pretty simple. A smooth curve would be equivalent to an infinite number of brackets.

This would not only be politically popular, but would help to shore up the tax revenue shortfall while preserving the basic, progressive structure that everyone from Adam Smith to Teddy Roosevelt endorsed.

It's kind of hard to argue specifics against this because no one is putting out any numbers. Drum specifically disallows the impact of diminishing returns, which is debatable. Further, he is informed by the view that the gov't should control roughly half the GDP--a bizarre view for most Americans but maybe this seems about right for Progressives--I just don't know. But that aside Eric, why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?

Turb: I believe that the smooth curve/infinite brackets idea is also something Sebastian has proposed here, but he has it topping out at about the current top rate.

Eric: To add to McKinney's question, why do you hate puppies, rainbows, love and The Beatles?

"why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?"

I don't know about a majority of Americans (many of whom believe all sorts of odd things), but I can take a stab at an answer for those who would support the idea of more brackets:

Because those people who have lots of money live in a society that (by virtue of its awesomeness) allowed them to acquire that money. This is a GREAT country for rich people. They have been on a several decades long winning streak, while the rest of the population has roughly broken even.

Also, older folks who remember or younger folks who can read about the past, when high marginal income tax rates were normal and things seemed to work out just fine.

One need not even be a "progressive" to think that the rising wealth disparity is a bad thing. Manzi, IIRC, worries about "social cohesion."

One could support a revenue-neutral version of this idea. It doesn't have to be about raising more money for the government.

But that aside Eric, why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?

I think a majority of Americans recognize that, to have the country that we all want (with a functioning, healthy infrastructure, sound public schools, a social safety net, world's most powerful military, etc) that we need a lot of tax revenue.

In order to generate that revenue, the American people - like Adam Smith (that dirty Commie!/father of modern capitalism) - recognize that the wealthiest are in a position to pay more by virtue of their massive wealth, and the limited utility of a few extra thousand when you have a pile of hundreds of millions.

This, as opposed to those with only a few thousand who would feel the loss of a thousand quite directly and painfully.

That, and I think the American people recognize that the wealthiest among us take advantage - and use - more of the infrastructure and benefits afforded by a healthy society with the aforementioned standard of living.

I think that's why.

Why, do you have a different theory?

To be blunt: should revenue go down, if the federal income tax rate on the top earners (which I do not believe) then this would be a price I'd be willing to pay (yes, yes, I am not a USAnian nor do I intend to become one) for the benefit of reducing inequality.
---
If reinvested money is favored fiscally, should then a higher tax rate not encourage higher rates of investment?

Relevant: Via digby, Tim Noah at Slate is doing a series on US income inequality. From his introduction:

[In 1915] the richest 1 percent accounted for 18 percent of the nation's income. Today, the richest 1 percent account for 24 percent of the nation's income. What caused this to happen? Over the next two weeks, I'll try to answer that question by looking at all potential explanations—race, gender, the computer revolution, immigration, trade, government policies, the decline of labor, compensation policies on Wall Street and in executive suites, and education. Then I'll explain why people who say we don't need to worry about income inequality (there aren't many of them) are wrong.

why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?

who cares. if the obscenely rich don't like it, they can get the fnck out of our country.

As I mention every time this comes up. The median income in the us is just over $51,000. Someone making $250,000 is making five times what the average American makes. And I can maybe see how someone could be five times as productive or useful as the average American. $1,000,000 is 20 times the median income. I have a harder time trying to figure out how someone would be worth 20 times what the rest of us are. $5,000,000 is 100 times the median income, and I really can't see how we can justify that person "earning" 100 times more than the rest of the country, being 100 times more productive or efficient. Beyond that, things get more ridiculous. So, I would ask how McKinneyTexas would justify that, rather than ask how we can justify higher taxes on somebody who makes 20, or 100, or many more times the income of the median worker.

Also, I'll point out again that if it really DID disincentivize (that's an ugly word) people from trying to find new ways to package securities etc to make that extra $5 million bonus on top of the $10 million they're already being paid, that would not entirely be a bad thing. It probably would have helped avoid the financial bubble and crisis, for one.

why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?

Why do you think a majority of Americans favors paying our bills, and collecting the money to do that based on ability to pay?

Why, do you have a different theory?

Why, yes I do. Shocking, I know. My theory, quaint as it may be, is that a majority of Americans are pretty much ok with the fact that others, even if only a few, are off the charts rich. They don't see life as the business of dividing the pie. They expect to pull their own weight and don't look to others to help. If you were to order their priorities in very general terms and what they expect from government, it would be defense first, basic gov't apparatus (courts, roads, clean water) second and social security third. If push came to shove, they'd cut defense some and everything else a lot. They understand intuitively that borrowing is bad and to continue doing so at ever higher rates is worse. Much worse. They aren't wonky because they stay busy doing other things. They don't think of the wealthy as over-consuming infrastructure. They see that as more a function of the elderly and the poor. They have a sense, even if somewhat vague, that the gov't taking money out of the economy doesn't cause the economy to grow. They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn't quite the priority for them that it is for others. They also sense that no matter how much money the gov't takes in, it will never be enough. And, given the above, better to stop the train now, begin the process of cutting back and living within means than to keep borrowing, taxing and stimulating.

if the obscenely rich don't like it, they can get the fnck out of our country.

Some of them are. And taking their money with them. Should we confiscate it? Arrest them?

Why do you think a majority of Americans favors paying our bills, and collecting the money to do that based on ability to pay?

I think they believe in paying their bills, but in cutting costs rather than going after the rich.

"They expect to pull their own weight..."

Not the richest ones, apparently.

I have a harder time trying to figure out how someone would be worth 20 times what the rest of us are. $5,000,000 is 100 times the median income, and I really can't see how we can justify that person "earning" 100 times more than the rest of the country, being 100 times more productive or efficient. Beyond that, things get more ridiculous. So, I would ask how McKinneyTexas would justify that, rather than ask how we can justify higher taxes on somebody who makes 20, or 100, or many more times the income of the median worker.

If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts.

My theory, quaint as it may be, is that a majority of Americans are pretty much ok with the fact that others, even if only a few, are off the charts rich.

How would they feel if they knew that those few off-the-charts rich had collected 80 cents of every single dollar produced by their increases in productivity for the last 30 years?

"Some of them are. And taking their money with them."

Patriots, one and all!

Though that is a legit concern. There is a point, somewhere (hard to say exactly) where progressive taxation becomes self-defeating.

They don't think of the wealthy as over-consuming infrastructure. They see that as more a function of the elderly and the poor.

They are, not to put too fine a point on it, wrong.

They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn't quite the priority for them that it is for others.

But being mad at gays and Muslims sure pays off, right?

Some of them are. And taking their money with them. Should we confiscate it? Arrest them?

Yeah, because raising marginal rates to those that prevailed during the 1970s or 1990s is just like arresting and confiscating!!!!!

If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts.

And if someone runs a hedge fund? Or is an heiress like Paris Hilton?

If you were to order their priorities in very general terms and what they expect from government, it would be defense first, basic gov't apparatus (courts, roads, clean water) second and social security third. If push came to shove, they'd cut defense some and everything else a lot.

Your theory is not based on reams of polling data. Mine is.

Regardless, to do the things you listed requires more revenue.

Although "social security" is fully funded by a separate tax.

They believe the wealthy employ more people than the middle class and so being mad at the wealthy isn't quite the priority for them that it is for others.

Mad? At myself? So I'm a self-hating top bracket guy?

Ha. Thanks for the laugh McTex.

I think they believe in paying their bills, but in cutting costs rather than going after the rich.

They believe in cutting costs in the abstract. Deciding which costs to cut, and how much, is where the politics starts. But I think "ability to pay" is a pretty broadly accepted principle for revenue collection.

Some of them are. And taking their money with them.

cite?

Should we confiscate it? Arrest them?

hand em a bottom of sunscreen (gets pretty toasty in Somalia) and then kick em in the ass on their way up the jetway.

s/bottom/bottle

That's a good point which I had forgotten. In addition to needing a cite from McKT regarding his claim that the rich are moving away, where are they going? What nations are benefitting from this significant influx of wealthy Americans? I think income tax rates in Europe are significantly higher than here. What are some appealing first world countries with lower income taxes than the U.S.?

If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient.

Most businesses do not found new markets- they compete with existing businesses for market share. If I open a restaurant and hire 20 people, Im probably not increasing the total number of meals eaten in restaurants very much- so Im not really adding much to employment. Or, if I start a plumbing business, Im almost certainly not increasing the number of household plumbing emergencies. One would hope so, anyway.
What you've done is create a simplified model where, in the absence of that business, those 1000 people just sit on their hands and the people who used that service or bought that good just set their money on fire instead of going to a competitor or buying something different. And that's not a very good model.
I don't know why this sort of fallacy is so common- it's right up there with employment as a gift that employers offer to employees rather than a free market exchange of value.

I found this chart:

http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg

Are rich Americans moving to Japan, Mexico, NZ, Australia, and Iceland?

Also, I could use someone explaining that chart to me re: Corporate taxes. It seems to be near 40% but I have read repeatedly that the effective rates paid by corporations are significantly smaller than that.

If I were rich I would seriously consider moving to NZ, though not for tax reasons.

why do you think a majority of Americans favor taking even more of someone's money, just because they have a whole lot of it?

I'm not sure that a majority do favor that.

I personally favor it because (a) we need the money and (b) if you're going to get it from income tax, a progressive scheme creates the least overall pain.

I don't have any aversion whatsoever to people making astronomically large amounts of money. What I do have an aversion to are people making personal fortunes by extracting money from the productive economy without creating anything resembling a commensurate amount of value.

As far as I'm concerned, the Bill Gates' and Warren Buffets of the world should be very, very wealthy. Sam Walton, too.

Those guys created a lot of value, not only for themselves but for lots of other people.

The Joe Cassanos of the world, not so much.

Since you are interested in specific numbers, here's my suggestion:

Less than $250K, no change from current rates.

$250K - $400K, 36%.

$400K - $1M, 40%.

$1M - $5M, 45%.

$5M and up, 50%.

Since, for better or worse, nobody's talking about changes to taxes on investment income and capital gains, the impact on the actual day-to-day lives of anybody affected by a tax regime like what I've outlined will be more or less noise.

People who make big money as a result of being, really and truly, highly productive are generally in the game because *they like being highly productive*. These kind of changes in the marginal rates on their top dollars are not going to chase them away.

They do what they do because they enjoy doing what they do. The money is gravy. Lovely, delicious gravy, but gravy.

The only folks who will see this as a disincentive sufficient to get them to pack up their tent and go home are folks who are purely in it for the $$$. As far as I'm concerned, we can't get them out of the picture fast enough.

Seriously, greedy people - by which I mean really greedy people, not people who are successful by virtue of actually creating some kind of value - can go straight to hell as far as I'm concerned. All they do is screw the world up for the rest of us. They're anti-social, destructive parasites.

Also: it's absolutely unclear to me that "the wealthy employ more people than the middle class".

As we are reminded on a daily basis, most job growth comes from small businesses, whose owners are generally not wealthy.

The very large employers are generally public corporations, whose owners either are not wealthy, or are folks whose involvement in the operations of the enterprise consists of making their fungible dollars available for investment and cashing dividend checks. They have little or nothing to do with "creating jobs". They're quite often more than happy to see jobs go away, as long as it improves their ROI.

McKinneyTexas is spot on. I see where Eric suggested a more progressive approach with higher rates at the top tiers would be politically popular. Is this what prompted McK to ask the question about a majority of Americans favoring taking more money from those who earn a lot?

Income taxation, basically, is very un-American. In the early 20th century, while the nation suffered from a severe case of temporary insanity, a Constitutional amendment was adopted that permits this confiscation of individual personal property. A majority of real Americans see it this way and is the reason Eric's proposals for raising income taxes on the very productive is not already in place. Not enough real Americans suffer from this level of sense of entitlement yet.

So if, according to the mythology on the Right, our current income distribution is a result of, (and a reward for), the individual's massive contribution to societal productivity I suppose the only moral thing to do is to tax the crap out of inheritance in order to make sure the consanguineous deadbeats surrounding these paragons pull their own weight. Playing favorites with family members distorts the markets, donchaknow. And while we are at it let's make real estate a single person lifetime lease -- non-transferrable.

New monopoly board every generation. Woot!

Also, regarding this:

If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient.

I'd say the *1,000 people who get up and go to work every day* in the business in question have something to do with the value that is created.

If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts

MS-DOS was not written by Microsoft.
The guy who actually did the innovation and wrote the code (he called it QDOS, for "Quick and Dirty Operating System") was Tim Paterson of Seattle Computer Products. Microsoft bought the rights to QDOS for $50,000, keeping the IBM deal a secret from Seattle Computer Products.

Microsoft founded several industries by
a.) cheating the actual innovator
b.) exploiting ruthless business practices to exploit an early advantage
a pattern the company has followed for decades, with decreasing success.

Bill Gates was one of the best business strategists in the nation, but he was never a particularly good programmer, nor an innovator (Windows is a poor copy of Apple's Lisa). He was incredibly ruthless and focussed on extracting every dime from the customer, even if MS had to beat it out of them.

Technically, the federal government, which issues fiat currency, can spend without borrowing or taxing. Revenue and borrowing perform functions other than what they do for private entities or states. That doesn't mean that the federal government shouldn't ever borrow or tax, or that it should spend without regard to the amount it spends or what it spends it on. Anyway, that's a fundamental understanding that might lead to different conclusions than the traditional ways of thinking about national finances.

To the extent that things work the way they do and will continue to do so because of traditional thinking, once you've accepted the concept of progressive taxation, you need to justify the numbers proposed on something more than what they happen to be right now, as though that somehow makes them ideal by default. So that's where we are. Numbers will have to be crunched, but I'm willing to take a stab at it, just for kicks as a starting point, based on my impressions of life thus far.

For individuals (these are marginal rates for the dollars earned falling in those ranges, not overall rates for individuals based on the total earned):

0 to 15k at -10%

15k to 30k at 0%

30k to 50k at 4%

50k to 80k at 9%

80k to 135k at 16%

135k to 225k at 25%

225k to 450k at 35%

450k to 1M at 47%

1M to 5M at 55%

5M and up at 60%

Oh no, nous. Now you've done it. You're mentioned the DEATH TAX.

Remember, inherited wealth is something that every REAL American holds sacred.

Income taxation, basically, is very un-American.

Let's go back to tariffs, fees, and luxury taxes.

Mortgage exemptions on primary residence only, and in fact a significant federal excise tax on second (and third, etc) homes.

Buy a pleasure boat? Pay 50% sales tax to Uncle.

Expensive wine, good cigar, small-batch bourbon, custom-made dress shirt or bespoke suit? Rolex watch? Nice Italian shoes? 50% to Uncle.

And definitely don't forget tariffs. What's our foreign trade deficit these days?

That's how we used to roll. Want to go back, I'm fine with it, as long as we get the revenue we need.

He was incredibly ruthless and focussed on extracting every dime from the customer, even if MS had to beat it out of them.

You're not just a user, you're a beta tester!

A majority of real Americans see it this way...

something tells me that the truth of this assertion depends on the definition of "real American", and that "real American" is defined in such a way that makes the assertion 100% true.

Do people actually WANT an aristocracy? I'm confused.

I want to know about the minority of "Real Americans" who don't see it that way. I mean (as cleek points out), aren't they disqualified?

Re: "supply side" arguments, keep in mind that at the upper levels, a lot of them fall apart.

The fear is that, if someone is going to get taxed "too much" on a large amount of profit, they might not work "too hard" to get that large amount of profit.

But there's two issues to consider.

One, we're not near that point in marginal tax rates. Our upper rate is 40%, when the tax cuts expire. You're still taking home a nice chunk of change after paying your tax bill.

Two, a great many (most?) big dollar decisions aren't about *work*, they're about use of a pile of money that's already earned. Take it home as salary, or find some way to deduct it - which is more attractive? Tax rates have to go pretty high before the attractiveness of "just take it home" starts to fade.

(I think 50% is a big psychological barrier. At that point, you can double a charitable contribution if it's deductible, and your net take home pay is the same.)

The other side of it is that a marginal rate that discourages "just take it home as profit" isn't necessarily a *bad* thing, depending on how people can deduct the money. They might plow the money back into the business, donate to charity, start other businesses, etc..

If you are taxed at 70%, you might think that paying $60k a year in salary and benefits for a personal assistant is a good deal - it's $18k a year out of pocket to you. If you're taxed at 30%, you're paying 42k, 2.33x as much for that assistant - you'll get your own damn coffee.

In the early 20th century, while the nation suffered from a severe case of temporary insanity, a Constitutional amendment was adopted that permits this confiscation of individual personal property. A majority of real Americans see it this way and is the reason Eric's proposals for raising income taxes on the very productive is not already in place.

As a Real American -- i.e., someone whose maternal ancestors have been residents of these shores since before 1800, plus I'm a straight, white, male property owner, so, you know -- I say you're wrong.

But if you can explain to me how Paris Hilton is "very productive," I'm all ears.

I mean, did someone honestly just use "real Americans," unironically, to refer to a category other than "people who hold American citizenship?" Really? And does that person actually expect to be taken seriously? Like, as a human being?

a Constitutional amendment was adopted that permits this confiscation of individual personal property.

Is there any kind of tax that *is not* a "confiscation" of individual personal property?

Also, what the 16th Amendment did was basically clarify whether tax on income was or was not a direct tax. It's a much narrower issue than what you're alluding to here.

Let's go back to tariffs, fees, and luxury taxes.

And excise taxes on . . . [cue scary music] . . . alcohol, tobacco and firearms! Look out, paw, it's the revenuers!

You're not just a user, you're a beta tester!

"At Microsoft, quality is job 1.1."

It's as if we have a new Internet law in the making: Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation.

It's certainly a constant on this thread.

If it's really a given on the right that progressive taxation is unfair, unjust, and downright un-American, I have to wonder why its elimination isn't given more serious consideration by conservative policy-makers. We had some "flat tax" ballyhoo in the late 80s and early 90s (remember when people actually believed Steve Forbes could be elected as...well, anything? good times, man), but nothing since. And yet there seems to be an awful lot of conservatives who believe very strongly that I, Paris Hilton, and the guy who cleans the bathroom at my gym should all pay exactly the same proportion of our income as tax.

Wha'happun?

s/b "It's certainly a constant on this *blog*."

Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation.

i dub this Kvetch's Law.

And it's always worth remembering that the tragic economic devastation that began with the end of WWII and that lasted through the 50's, 60's, and 70's was the result of tax rates between 70 and 94% on income over $200,000.

@John,

but if those rates were between 25 and 35%, imagine how much more wonderful our lives would be now. why, the innovations would be staggering! we'd have flying cars, jetpacks and robot sex slaves !

i dub this Kvetch's Law.

I am honored.

To be fair, while it's important to note that those higher tax brackets didn't result in DOOM, the USA was just in a really sweet place after WWII. The rest of the industrialized world had just been bombed to all hell. That was simply unsustainable.

McKTX: "If someone starts a business that employs 1000 people, that person is not just 100 times more efficient than the average person (who employs no one), he/she is 1000 times more efficient. If someone invents a product, say an operating system like MS-DOS, and produces an enormous series of industries and satellite industries, the efficiency level is off the charts. Way off the charts."

Joel covered the part about Bill Gates "inventing MS-DOS" already above, and russel got to the point about that the person who starts the business that employs 1000 people not actually doing the work to be 1000 times more productive, unless you assume those 1000 people would do nothing. There are times, yes, when one individual is critically important to history or the economy, but the odds are, a) that any single person isn't that person, and b) if that person hadn't been there, someone else would have been that critical person.

"They understand intuitively that borrowing is bad and to continue doing so at ever higher rates is worse. Much worse."

And borrowing at lower rates is better, then? Like when the rates are near 0, as they are now? Interest rates do not march ever upwards on some unstoppable curve. And most people understand intuitively that borrowing is not bad in every situation, like if you invest in a productive business, or repairs and upgrades to your home, or for college, or for a car or other transportation method, or... You can make the obvious metaphorical parallels yourself, I trust.

I don't have any beef against people being rich. I have a beef against people taking huge incomes for themselves, and confiscating all of the growth the country has had for the past few decades for themselves, and non-productive industries like finance simply skimming off transaction fees and management fees instead of actually investing in productive businesses. And people declaring that they are so much more critical and important than the rest of us to "deserve" 1000-10000 times what the rest of us earn, while they chop up profitable companies, raid the public treasury, and steer their companies into the ground.

Income taxation, basically, is very un-American.... A majority of real Americans see it this way

Given that the second part is merely an instantiation of the No True Scotsman fallacy, is the first part even an argument? I say that shirking one's responsibilities to one's country is un-American, and a majority of real Americans see it *that* way. Also, they don't like pineapple on their pizza cos it's gross.

'Wha'happun?'

With Democrats(Progressives) in power, i.e. controlling the agenda, all we are likely to see is proposals to increase bracket rates. I, for one, have lived my life in a world of progressive income tax rates, so I'm adapted to it. The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity. And once upon a time the total income tax burden was spread over a greater percentage of earners. Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation.

I favor a flat tax over a progressive tax (worked in a way to eliminate most ways to avoid paying and with adjustments for low income situations). But my greatest concern, at the federal level, is to keep the taxation level low in order to reduce the power exercised at the federal level. Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don't know why a number of commenters here seem to see this as illegitimate.

Finally, I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?

A majority of real Americans see it this way and is the reason Eric's proposals for raising income taxes on the very productive is not already in place. Not enough real Americans suffer from this level of sense of entitlement yet.

What the hell do you know about a "real" American? You wouldn't recognize a "real" American if one put a boot up your hindside.

Anyway, real Americans actually overwhelmingly support the idea. See here and here.

The problem is, by golly, really rich people have a disproportionate amount of political power.

Which is bleedingly, blindingly obvious, and it has always been. Really

The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity.

Yeah, I believe that would be the Golden Era of the 1950s and 1960s. Ozzie, Harriet, etc. Rough times, those.

And once upon a time the total income tax burden was spread over a greater percentage of earners.

As was wealth itself! Funny how that works. As wealth has become more narrowly concentrated, there are fewer people that have wealth. Wow.

Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation.

Not true. They pay all sorts of taxes, even on income.

But again, wealth is polarized in the US to a greater extent than at any point since the 1920s.

The rates used to be higher, of course, but that was in an era of less overall wealth and prosperity.

This is complete fantasy. And, to boot, as Tim Noah points out in the Slate series I linked to above, the differential between the top 20% and bottom 20% was only a quarter of what it is today.

I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?

1. Nobody but you is using the word "evil," so, you know.

2. States currently have wildly different levels of income taxes, municipal taxes, sales taxes, real property taxes, personal property taxes, etc., so nothing is stopping you now, Sunny Jim.

I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?

Would there be a US Army? What about highways that travel between states?

With Democrats(Progressives) in power, i.e. controlling the agenda, all we are likely to see is proposals to increase bracket rates.

Not an answer to my question. Republicans have been "in power" plenty of times in the past several decades, and I don't recall any of them so much as proposing a flat tax on income, let alone working to make it happen. Not Reagan, not Bush I or II, not Gingrich's freshman class in 1994. Like I said, it was basically a faddish idea that everybody kicked around for a couple of years, and then it was forgotten.

Why does the GOP support the maintenance of a tax system that's inherently repugnant to Real Americans™?

I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences. Why would it be evil to have such choices?

Let me see if I get this straight. Red-staters tend to build state governments that have very low taxes and provide very little in the way of government services. What services they do provide tend to be done on the cheap and are thus, often substandard (compare schools in MA to MS). As a result, they suffer lots of poverty and economic stagnation, which causes the federal government to transfer tons of cash from blue states to those red states.

Now, if conservative red staters had the guts to simply refuse the massive transfers of federal cash to their states, that might be reasonable: their states would suffer, but that would be their own choice. Instead, they get to have it both ways: they get to have low state taxes AND they get economically productive blue states to send them the cash that keeps their states from collapsing. Brilliant! But not particularly ethical. I wouldn't say it is evil; just unethical, in the way that most welfare cheating is.

"With Democrats(Progressives) in power, i.e. controlling the agenda..."

Yes, because we all know the Republicans have not had any power to drive the agenda and get out their side of the story to prevent the Muslim socialist death panels that will take away your car and guns and give them to illegal immigrants.

Today, if my memory serves me, almost fifty per cent of federal income tax filers have no income tax obligation."

Leaving aside the payroll tax (which comes from income and affects everyone and is thus an income tax), and all the non-income based taxes out there, this is still nonsense. First, even if it was true, the problem here is not that the taxes are set up badly, it's that that many people make so little income that they're in the tax brackets affected by EITC and the like. I find it hard to get outraged by the fact that people who make less than $50K, and have two kids, get income tax credits and deductions. Though I'd prefer a simpler tax system, with less deductions, since deductions make things complicated for unnecessary reasons. Here's the article I got info from. Also note that several of the deductions and credits are temporary parts of the stimulus, like the Making Work Pay tax credit, which is what pushed the hypothetical family in the article over the edge.

"But my greatest concern, at the federal level, is to keep the taxation level low in order to reduce the power exercised at the federal level."

A flat tax is bad for many reasons, fundamentally because of the marginal value of money. But this justification in particular is very weak. Okay, so if we reduce the power at the federal level, what happens? There's a void of power, and more money is concentrated in the hands of wealthy individuals and corporations. So therefore, the power that the federal government's not exercising would be taken over by corporations and individuals who are accountable to no one, and this is better because how?

I have never understood the Libertarians who think that concentrations of government power are the only dangerous concentrations of power. The government, which is at least nominally responsible and accountable to its citizens, needs to be powerful enough to stand up to other concentrations of power that aren't.

" Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don't know why a number of commenters here seem to see this as illegitimate."

Well, for one, many of us have a different definition of "legitimate means", for example, see the way Bill Gates made mucho dinero through unethical business practices and outright law-breaking. Also, I for one am not sure how any legitimate means can justify someone making 1000+ times more than the average person, they certainly do not add that much more to the productive capacity of the country than anyone else in their position would. I also don't see how people's ability to define their lives through wealth and the power it brings justifies the continued concentration of wealth, it seems more of a justification that we should allow MORE people to define their lives the way they choose through wealth (or at least decently well-off-ness).

Would there be a US Army? What about highways that travel between states?

I foresee a lot of this:

I have to wonder why its elimination isn't given more serious consideration by conservative policy-makers.

Social Security first, progressive tax regime after that.

Priorities, dude.

I prefer to pay my taxes at the state level and choose the state to live in that meets my particular preferences.

This more or less goes back to the debate between the Federalists and the folks who preferred the good old Articles of Confederation.

To be perfectly honest, I'd be willing to go this way if it would get conservatives to quit whining.

But I suspect the result would not be quite the paradise of personal freedom you think it would.

You need to ask yourself which of the services you and your state currently receive from the feds you would be willing to give up.

'The problem is, by golly, really rich people have a disproportionate amount of political power.'

And as you said, it has always been that way and, may I add, it will remain so.

There are a couple of possibilities (maybe more) that can occur if marginal tax rates on the highest incomes are increased. Both are bad. I prefer to have the money in the hands of rich people.

One, total federal tax revenue increases, thus increasing the power of the federal government. Bad.

Two, fewer people pay federal income taxes, increasing the sense of entitlement that someone else should pay the bills. Bad.

Government is corrupt. Bigger government is more corrupt.

Eric,

I was just curious, as a top tier self hater, how many people do you sign the paycheck for?

And, how much does your investment banker make when you lose money.

No answer expected, not really any of my business, but let's not conflate having a junior partner salary at a law firm with starting a business that employs 10 people and clears 300k a year.

No answer expected, not really any of my business, but let's not conflate having a junior partner salary at a law firm with starting a business that employs 10 people and clears 300k a year.

No such conflation on MY part Marty. The conflation was all yours.

Read better, or keep the snark in your throat.

McTex suggested that I hate wealthy people.

I pointed out that, by the definition of the tax brackets, I am one.

And, just so you know, the money that I generate for the firm helps to pay many salaries, including the senior partners that don't bill as much as me, but take out more.

I believe that's called: efficiency multiplier!

So, someone who feels like making simplified explanations please explain to me how someone making upwards of $5 million a year is going to be demotivated if his taxes go up.

I mean, if you want that additional money because you are actually going to spend money at that rate, you have to be working essentially full time at spending it -- which means that you aren't doing anything productive. But I expect that those folks are doing something productive. I just doubt that they are working for the extra money. Rather, at that level the motivation is either
a) you love what you are doing, or
b) you are trying to score status points vs others making similar amounts.

(Who knows, maybe someone commenting here is in that income bracket and can give us some first-hand insights into what motivates them. That would be cool.)

I have never understood the Libertarians who think that concentrations of government power are the only dangerous concentrations of power.

Seriously.

Libertarians can have decentralized political power when the rest of us get a decentralized economy and financial markets.

Once upon a time it was common for corporations to not be allowed to operate outside of the state they were chartered in. They couldn't own other corporations. They could only conduct business or other operations they were specifically chartered for. Their charters could be, and often were, time-limited.

Good times.

You give me that, and then we can talk about your state's rights nirvana.

Also:

Everybody wants to rein in the feds, now that there's a national highway system, and electricity across most of the country, and reliable sources of good water and flood control, and navigable rivers and ports, and national air traffic and other transportation management, and a national weather service, and whatever other 1,000 things I could rattle off if I wanted to take the time.

You want the feds off your back? Give all of that back and we can talk.

Valiant attempt to move the goalposts, Marty, as always.

[i]Government is corrupt.[/i]

Yawn. So is the Catholic Church. What's it got to do with the price of tea in China?

Government is corrupt. Bigger government is more corrupt.

So, the least corrupt part of the planet right now is either Somalia or the ungoverned tribal regions between Afghanistan and Pakistan.

Gotcha.

People are corrupt.

That is why the founding fathers set up a government of checks and balances, to spread around the power nodes and veto points so as to check corruption.

This, because Madison et al recognized that humans, individually, are prone to corruption, and thus checks were needed.

The government is the least sucky way of providing those.

Don't believe me? Fly to Mogadishu.

Government is corrupt. Bigger government is more corrupt.

And rich people are awesome.

OK, got it now. Thanks.

Uncle,

the flat tax was only popular because "populist" politicians (what a weird description of Forbes) convinced a lot of people that rich folks were better at taking advantage of tax breaks.

I would guess, just a guess, that if you froze the brackets and reduced the tax breaks for the wealthy you could get a movement for that also.

'Well, for one, many of us have a different definition of "legitimate means", for example, see the way Bill Gates made mucho dinero through unethical business practices and outright law-breaking.'

I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty.

I also don't see how people's ability to define their lives through wealth and the power it brings justifies the continued concentration of wealth, it seems more of a justification that we should allow MORE people to define their lives the way they choose through wealth (or at least decently well-off-ness).

So concentration of wealth through ownership of private property (a defining principle of the American political system) is unjustified, but takings by the federal government from the wealthy for redistribution is OK?

If someone starts a business that employs 1000 people...
... then he likely had to borrow a whole heck of a lot of money to do it. And yet you are feverishly screaming that "borrowing is bad!11!!!!" However, borrowing just gave 1000 people their jobs. Well, McKinney... which is it? I ask you: WHICH IS IT? If you don't want people to borrow money, then you're throwing 1000 people out of work. This sort of hostility to working people is, unfortunately, typical or the right in this day and age.

Uncle Kvetch: Every blog discussion about adjustments in marginal tax rates inevitably devolves into a discussion of the very notion of progressive taxation

I've seen that going on here for a long time, and these days it's safe to say that it is 99% due to exactly four regular commenters here.

I mean, I presume other people must get something out of trying to argue about taxes with McKTX, BB, Marty, and GOB, but for the life of me I can't think what. The only effect is to make every one of these threads exactly the same after a while. Apart from GOB, who I'm pretty sure is insulting on purpose (Marty does it by accident), they're all capable of talking interestingly on other subjects and seem to enjoy being here. But seriously folks, what's the point of engaging the same threadjack every time? Is it just like cat having to scratch on something?

So concentration of wealth through ownership of private property (a defining principle of the American political system) is unjustified

Somebody else eat the straw. I'm full.

But seriously folks, what's the point of engaging the same threadjack every time? Is it just like cat having to scratch on something?

Dude's got a point.

Money is power and money accumulated by individuals, through whatever legitimate means, has a great influence on defining their lives through their exercise of the power it brings. I don't know why a number of commenters here seem to see this as illegitimate.

Because when there are very large concentrations of power outside of democratic control, democracy becomes a meaningless formal exercise. Which is what I would call "un-American" if I were inclined to use that word.

'Let me see if I get this straight. Red-staters tend to build state governments that have very low taxes and provide very little in the way of government services. What services they do provide tend to be done on the cheap and are thus, often substandard (compare schools in MA to MS). As a result, they suffer lots of poverty and economic stagnation, which causes the federal government to transfer tons of cash from blue states to those red states.

Now, if conservative red staters had the guts to simply refuse the massive transfers of federal cash to their states, that might be reasonable: their states would suffer, but that would be their own choice. Instead, they get to have it both ways: they get to have low state taxes AND they get economically productive blue states to send them the cash that keeps their states from collapsing. Brilliant! But not particularly ethical. I wouldn't say it is evil; just unethical, in the way that most welfare cheating is.'

You correct me if I get this wrong. Much of what you describe is facilitated through the concept of revenue sharing legislated under the leadership of Lyndon Johnson and Hubert Humphrey. Your kind of politicians, no? I do not support this concept.

Texas is usually cited here as a big offender along the lines you describe, but it looks as if people are voting with their feet. Recent events in California also show people (productive people) are voting with their feet.

GOB, you still believe that old lie about starving the beast? You really think the government will spend less if you deny it revenue? WHERE HAVE YOU BEEN THE LAST TEN YEARS?

No, the government will spend less if/when the voters demand that it cut programs X, Y and Z and reward candidates who push for said cuts. Of course, when you try and get voters to actually propose spending cuts (to areas of the budget that are actually significant), things suddenly get difficult. Because people tend to like Social Security, Medicare and the Bestest Army in the World (the big expenditures).

Starving the Beast is a myth.

Texas is usually cited here as a big offender along the lines you describe, but it looks as if people are voting with their feet. Recent events in California also show people (productive people) are voting with their feet.

Not Texas. Georgia is up there though.

But yeah, even Rick Perry with all his talk about secession was there demanding every last dollar for Texas. But in terms of taking more than giving, GA is bad, LA and MI, AL, etc.

Texas is usually cited here as a big offender along the lines you describe,
Texas is one of the fewer members of the confederacy that doesn't have a negative balance of payments to the federal government. All that aside, cut it with the "real Americans" crap. Yes, there is a fringe element in the United States that doesn't believe in income taxes, but that's what they are, a fringe element, and no amount of telling themselves that they're the only "real Americans" will make that so. We had a fight about the public safety net, and your side lost. Now stop trying to destroy the United States in the hopes that you can build your low-tax crumbling infrastructure utopia of unpaved roads, 3rd world poverty, and inequity out of the ashes. Trying to say that such a vision is what "real Americans" believe in is a public insult to the people who created the modern world you have the undeserved privilege to live in.

"X is corrupt. Bigger X is more corrupt" is true for just about every value of X.

I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty.

One of the things you can buy with umpteen billion dollars is really good lawyers. Ask any robber baron.

"We had a fight about the public safety net, and your side lost."

But, much like the aforementioned Confederacy - it did not accept that defeat. Thus the seemingly neverending attempt to chip away at the New Deal.

Eric,

Sorry, it wasn't meant as snark. It was meant to point out exactly what you said, there are jobs, and people in them, who make xxx dollars that are NOT wealthy, yet people who are wealthy (10 person company, presumably worth something) that make exactly as much or less annually. The conflation of those two things is evident in every one of these discussions.

To make it less personal, again my apologies, a senior executive in a publicly traded company making 4B dollars a year is perceived to have the multiplier effect for the shareholders that a junior partner has for the senior partners in a law firm.

Hiring Mark Hurd added six billion to Oracles shareholder value in one day, his 20M package may be worth it to those shareholders.

The hedge fund manager that makes his clients 10% in a year the S&P is flat may be worth his 10M bonus to those paying him.

Economic growth is driven by the guys who take that money, or mortgage their houses, to have the working capital to pay a payroll as they build their business. Taxes should be applied differently to those things in two ways.

First, the guys making the multiplier you describe should be treated as income earners, raising their taxes is ok but they do tend to spend the excess or invest in the public markets so it, well, multiplies.

The guy mortgaging his house to create a payroll should get all kinds lower taxes. He may be rich but he is doing exactly what we need him to do. He is the closest thing to a creator of the money to be multiplied that you can get. His effort is explicitly to create more jobs at a risk we should be willing to reward, not just in the short term.

All the discussions of Paris Hilton don't discuss whether Conrad took the risks (maybe he didn't) to create thousands of jobs that ultimately weree the value that Paris lives off.

All that said, between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi, sorry I don't agree.

I think it was taxation without representation that was the "unAmerican" part, goodoleboy.

But while we're parsing "real" Americans from the other type of Americans, let's play a game.

O.K. everyone who considers themselves a real American, line up over here against this wall. Now, the rest of you line up against the other wall.

Well, that's odd, everyone is up against the "real American" wall. Alright, mill around, let's try this again , dum de dmu tuddy do .. alright ... as before .. real Americans over here, and the rest of ya, whatever you think you are, over there on the other side ..

... again, the entire crowd is on the real American side of the room.

... let's do this another way in another venue. How about those who profess themselves to be real Americans and also accuse those who don't agree them of being .... unreal Americans? ... line up over here on that side of the boxing ring or target range, whichever.

... now, those who are real Americans as well, but are tired of being accused of being unreal Americans .. to the other side.

Would anyone like to say anything about this arrangement?

Yes, you ... countme? is it, yes, countme? wants to speak.

Yes, umm, I just want to point out to the folks on the "profess to be real Americans but everyone else is not" side of the boxing ring or shooting range, whatever, that from this date forward if I (not speaking for anyone else) am ever again accused of not being a real American by anyone in any venue (on the street, in a bar, at a dinner party, at your daughter's confirmation, on the Internet, on a bus, during a meeting at your place of business, at a picnic, in a political debate, pick your venue) I will kick the living, effing sh*t out of that individual.

It stops now.

Marty, honey, maybe you don't understand, and I'm pretty sure you don't, but Mr. Hurd receives a LARGER SALARY for the value he creates. It is true that he pays more in taxes, but that is because makes more money.

As for a business owner, he benefits from lower capital gains taxes when he sells his business and from lower taxes on dividends if he chooses stop working. The moral hazard becomes when dishonest brokers attempt to game the system by claiming that their salaries are really "capital gains" for the purpose of tax evasion.

If you want to go into the moral worth of jobs as a determinant of one's taxes, then ultimately we're going to have to decide that hedge fund managers have marginal rates of 90% and teachers 5%.

All that said, between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi, sorry I don't agree.

Well, that was an interesting discussion starter.

However, questioning my patriotic bona fides, or status as a "real" American - a lot less so.

As are sweeping statements about governments being corrupt, with bigger govts being more corrupt, without recognizing that there are places on this planet right now where the "no government" experiment is playing out, and it ain't pretty.

Ditto with regards to suggestions of hating on rich people.

Again, Adam Freakin Smith favored progressive taxation. So did Teddy Roosevelt.

Did Adam Smith simply hate capitalism and rich people? Really?

OK, then, let's take it to level 2 and leave that claptrap behind.

explain to me how someone making upwards of $5 million a year is going to be demotivated if his taxes go up.

Upthread I proposed raising the top marginal rate on incomes above $5M to 50%. At present, they are 36%. So, a 14% increase.

If you go from making $5M a year to $6M a year, under russell-nomics you would thus pay $100K more per year.

To simplify the math, let's say the overall income tax hit on your $6M man is 40%. So, you'd be paying an extra $100K on a take-home of $3.6M.

$100K is 2.7% of $3.6M.

Or, another way to look at it: if our guy goes Galt instead, he's forgoing $500K of additional income to save having to pay $100K.

Just to put some real numbers on it.

concentration of wealth through ownership of private property (a defining principle of the American political system)

Really, I have no idea what planet this comment was beamed in from. This seems borderline delusional to me.

The American political system is about self-government through a representative Republic. It's about the rule of law, and about constraining the power of any individual person or institution through a system of checks and balances.

The Constitution recognizes the right of individuals to own and enjoy private property.

That is not, remotely, the same as what you have said here. In fact, concentrations of private wealth were viewed with great suspicion throughout this nation's entire history, for all of the self-obvious reasons.

I'm not sure what country you think you're living in GOB, but it ain't an America I recognize.

We got a problem bro.

'GOB, you still believe that old lie about starving the beast? You really think the government will spend less if you deny it revenue? WHERE HAVE YOU BEEN THE LAST TEN YEARS'

I've been here and I concur. Tax revenues are still one side of that equation.

'Once upon a time it was common for corporations to not be allowed to operate outside of the state they were chartered in. They couldn't own other corporations. They could only conduct business or other operations they were specifically chartered for. Their charters could be, and often were, time-limited.

Good times.

You give me that, and then we can talk about your state's rights nirvana.'

I tend to agree with Russell on this. I would like to see a solution that reduces corporate influence without infringing individual liberty.

'And rich people are awesome'

No, they are corrupt, as well. This is why size matters so much. I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property.

Eric, I thought I did?

countme: please abstain from physical threats.

While it is repugnant to be insulted with suggestions about real Americans, we must keep it civil, and abstain from threats.

Not acceptable. Thanks.

All that said, between Phil and HOB I get the impression that discussing multiple views on things is getting less desirable on OBWi, sorry I don't agree.
People riding their irrational dead horses about how they don't even believe that progressive taxation should even exist is just troll bait and a waste of our collective time. I get it: some people are irrational doctrinaire libertarians who feed their crazed ideological drug habit with social security checks and life in a parasite state that supports itself with the largesse of the federal government from people like us in productive states with decent infrastructure and modern amenities. I get it: you are high off the libertarian crack. Don't let us know about your addictions in every single thread. I can't stand druggies that have to evangelize for their poison of choice, even if I believe it should be legal.

Eric, I thought I did?

Agreed. I said that was an interesting discussion starter. It was the other stuff, not from you (although I misinterpreted your earlier comment) that was really unproductive.

"People riding their irrational dead horses about how they don't even believe that progressive taxation should even exist is just troll bait and a waste of our collective time."

But this isn't me, I haven't once decried the concept of progressive taxation. Form, level, how to calculate, maybe. So don't throw me in this bucket.

"I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property."

So you recognize the problem, but you object to the proposed solution. Ok, fair enough. I've yet to see a libertarian solution (concrete policy, not airy theory) that made sense to me. If you have one to offer, I'm interested. That would be more interesting than doing the "taxation is theft!" thing again.

"I was never aware that Bill Gates was even indicted for criminal actions, much less found guilty."

United States v. Microsoft, the Findings of Fact, before the Bush Justice Dept dropped the case with a weak-ass settlement include a clear explanation of Microsoft's monopoly position, "and that Microsoft had taken actions to crush threats to that monopoly, including Apple, Java, Netscape, Lotus Notes, Real Networks, Linux, and others" And the conclusions of law said that Microsoft had a monopoly, tied in IE, and repeatedly violated the Sherman Act.

So yes, Microsoft and Bill Gates HAVE been taken to court, and were proved to have repeatedly violated the law.

"One, total federal tax revenue increases, thus increasing the power of the federal government. Bad.

Two, fewer people pay federal income taxes, increasing the sense of entitlement that someone else should pay the bills. Bad.

Government is corrupt. Bigger government is more corrupt."

One: Argument by assertion, with no explanation of why a more powerful federal government is bad.

Two: Argument by assertion, ignores the many other taxes everyone pays, and ignores the points made above.

Three: More opportunities for corruption exist in any organization as it gets larger, how is government uniquely worse in this case than say, Microsoft, GE, BP or any other giant corporation, many of which are larger, in the sense of wealth, than most governments in the world?

I would like to see a solution that reduces corporate influence without infringing individual liberty

I'd also like a talking taco that craps ice cream, while we're at it.

The only way to accomplish the limitation of any kind of negative influence is via the law, and to do that, someone's "liberty" is going to be infringed. That's what the law is.

Cripes, we tried to "limit corporate influence" over elections, and look what happened. Your ideological comrades put the kibbosh on that posthaste.

"I'm not ready to confiscate private property"

Sure you are. Just not at the Federal level so much.

You may refer to me as a True American.

Thank you.

I agree that wealth concentration has serious negative effects, but I am not ready to confiscate private property.

OK, we get it. By your reasoning, all taxation is a confiscation of private property, and therefore theft.

You'll come back in a moment saying that's not what you said.

Unfortunately, it's what you said.

Unless having a 35% maximum marginal tax rate does not constitute confiscating private property, but a 39.5% rate does, which would be patently absurd.

But no, that's not what you said. Even though it's what you said.

And round and round we go.

Now's the part where you complain about liberals shouting you down because they can't tolerate dissenting views.

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