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Must Have Been Those Tax Cuts For the Rich

July 10, 2008, 9:41 pm

From Mark Perry  (a new favorite of mine)

Tax1

In related news, comes this from the WSJ via Evan Coyne Malloney

New data from the IRS will be out in a few weeks on who pays how much
in taxes. My contacts at the Treasury Department tell me that for the
first time in decades, and perhaps ever, the richest 1% of tax filers
will have paid more than 40% of the income tax burden. The top 50% will
account for 97% of all federal income taxes, while the bottom 50% will
have paid just 3%.

Here is the same data from 2005:

Tax

This is really a huge threat to the Republic and the minority protections built into the Constitution.  Our government was most explicitly not meant to be a tyranny of the majority, where 51%+ of the people can legally abuse the rest with impunity, but this tax picture sure seems to be stepping over this line.  A particularly worrisome subset of this problem is the increasing legislative predilection for funding  projects with millionaire's taxes, as discussed here and here.  I discussed more about the implications of 52.6% voting for the other 47.4% to support them here.

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Category: Taxes
  • gj

    Over the past few years, I've really wondered why - if the disparity in taxes is this large - one party or the other hasn't just said, "You know what? Let's just get rid of the income tax, period, for any household making less than... oh, $50K per year."

    On the republican side, I guess there's a the problem you mentioned: why should half the population contribute nothing, and yet exercise influence on spending completely out of proportion with their contributions? On the democrat side, well, they've apparently come to see taxes as a means of social control, so the idea of letting half the population slip out of their grasp must give them the screaming willies.

    I'm a libertarian-leaning republican, a social conservative, a successful professional, and one of the individuals in the top 5% of taxpayers... and frankly, I wouldn't mind continuing to pay the taxes I do if doing so would mean that half the country could be free from the tyranny of the IRS. In fact, I'd hope that the resulting reduction in collection, auditing, accounting, and other costs would both give the economy a boost, and help encourage further simplification of the tax code. OK, yeah. I know the that will happen when pigs fly. But it's a nice dream, isn't it?

  • Yoshidad

    This is some fairly typical right-wing b.s. "It's not fair, dammit!" -- and as far as that goes, it's accurate. It just doesn't go very far.

    By b.s., of course I mean "baloney sandwich"...8^)

    Consider the possibility that lowering progressive/income taxes actually produces bad economic results. To believe that such tax cuts work and produce more revenue) you have to ignore the country's actual economic performance and the trillion-dollar deficits in the wake of these cuts.

    The truth is that as those top brackets have come down overall economic performance has been *worse*. It's common knowledge that the heyday of the American economy was the 1950's (top bracket: 92%) and 1960's (top bracket: 70%).

    Another illustration that "Only the small secrets need to be protected. The big ones are kept secret by public incredulity." -- Marshall McLuhan

    Meanwhile, since the Reagan years, median real wages have been stagnant, while the top 0.01% of income earners have seen a 457% increase in their incomes. Seventy percent of the last decade's increased earnings stemming from increased productivity have gone to that to 0.01% of robber barons. That's not an exaggeration.

    Also not mentioned (again, typical right wing b.s.) in all this discussion is the fact that Social Security taxes quadrupled because those top rates came down. The burden of regressive taxes has skyrocketed, otherwise the deficits would be even *worse*.

    This is very bad for the economy as common sense explains. The following is such a brief explanation taken from "Greenspan's Fraud" by Ravi Batra. Check it out.

    p.170 "...I staged a mock drama in my class to explain why cutting the tax burden of the wealthy is always bad for the U.S. economy. It was a rather difficult task, because Texas [Batra teaches at SMU in Dallas Texas] is Bush country and my students were fond of their president, who has repeatedly lowered the top-bracket tax rates. ...

    "I ... took a ten-dollar bill from my pocket, and handed it to the [demonstration's mock] CEO as his tax cut, and extracted a promise from him to use the tax relief for investment expansion and to provide jobs to new graduates...."

    "'But now [government] revenue has fallen by $10; so what should ...the government do to pay [its] bills?' I asked my class. Someone answered: 'You borrow money or raise other taxes.' 'Very good,' I replied. Then I asked the ... [ten] participants [playing the role of workers plus the 'CEO'] to pay me one dollar each as their new Social Security tax in exchange for future benefits payable upon retirement. I told them this was essentially what Reagan and Congress, following Greenspan's advice, had done from 1981 to 1983. This way I collected ten dollars, just enough to meet the government's deficit. The student CEO now had only $9 left as his tax relief.

    "'Are you now ready to increase your investment by the amount of your tax cut?' I asked the CEO. 'Yes, sir,'came back a confident reply. 'Wait a minute,'I said, 'your sales have now fallen by $9, because your employees, who buy your goods, are that much short of money, while the government has no additional revenue to spend. your shelves are piling up with unsold goods. Would you, in your right mind, expand your business in these circumstances?' The student CEO paused, pondered the question a bit, and then said no.

    "'In fact, you will fire some employees because of declining sales,'I added. The student agreed reluctantly.

    "That year there were more than 100 students in my class. I said to them: 'Assume that you all own your own company; now tell me if you would expand your business and risk more funds in investment in the face of dwindling sales, even if the government substantially cuts your taxes.' Not a single hand went up.

    ... [p.172]

    "'Let's now discuss the other option...Suppose we don't raise other taxes at all [a la Bush 43]; then how does the government pay its bills? Obviously by borrowing money." After a slight pause, I said to my students, 'Remember ... [government] has already handed $10 to the CEO as the tax cut. Now, who has the money to lend...?

    "'Would you expand your business now?' I asked him again. 'No, I just gave the tax relief back to you.' 'Case closed,' I said. 'The CEOs demand tax relief so they would have more money for investment, but if the government borrows it all back from them to pay its bills, then they are back to where they were before the tax cut. So how can investment rise...?

    ...So in any case, the CEO benefits at the expense of ...all."

    This actually describes the "Morning in America" Reagan recovery in the 1980's. Reagan got an average business cycle recovery (no, nothing special because of "Supply Side" b.s., er, I mean "economics") with one exception: capital investment -- the engine of future growth -- was flat because the government's record deficits sucked all the oxygen out of the capital markets. See Paul Krugman's "Peddling Prosperity" for the details.

    Naturally the right-wingers reading this will say "Free Markets" (the *magic* words) or "Reduce government spending!" (Just tell me where, Grasshopper, and we'll do it...this too is b.s.)

    The truth is that because of the deficits run up under the "conservatives" in charge of public policy, the U.S. population finds itself in the same situation as many third world countries whose leaders (Marcos, Duvalier, etc.) ran up large debts that are now coming due as the economy is headed south.

    So welcome to Northern Haiti!

  • Yoshidad

    This is some fairly typical right-wing b.s. "It's not fair, dammit!" -- and as far as that goes, it's accurate. It just doesn't go very far.

    By b.s., of course I mean "baloney sandwich"...8^)

    Consider the possibility that lowering progressive/income taxes actually produces bad economic results. To believe that such tax cuts work and produce more revenue) you have to ignore the country's actual economic performance and the trillion-dollar deficits in the wake of these cuts.

    The truth is that as those top brackets have come down overall economic performance has been *worse*. It's common knowledge that the heyday of the American economy was the 1950's (top bracket: 92%) and 1960's (top bracket: 70%).

    Another illustration that "Only the small secrets need to be protected. The big ones are kept secret by public incredulity." -- Marshall McLuhan

    Meanwhile, since the Reagan years, median real wages have been stagnant, while the top 0.01% of income earners have seen a 457% increase in their incomes. Seventy percent of the last decade's increased earnings stemming from increased productivity have gone to that to 0.01% of robber barons. That's not an exaggeration.

    Also not mentioned (again, typical right wing b.s.) in all this discussion is the fact that Social Security taxes quadrupled because those top rates came down. The burden of regressive taxes has skyrocketed, otherwise the deficits would be even *worse*.

    This is very bad for the economy as common sense explains. The following is such a brief explanation taken from "Greenspan's Fraud" by Ravi Batra. Check it out.

    p.170 "...I staged a mock drama in my class to explain why cutting the tax burden of the wealthy is always bad for the U.S. economy. It was a rather difficult task, because Texas [Batra teaches at SMU in Dallas Texas] is Bush country and my students were fond of their president, who has repeatedly lowered the top-bracket tax rates. ...

    "I ... took a ten-dollar bill from my pocket, and handed it to the [demonstration's mock] CEO as his tax cut, and extracted a promise from him to use the tax relief for investment expansion and to provide jobs to new graduates...."

    "'But now [government] revenue has fallen by $10; so what should ...the government do to pay [its] bills?' I asked my class. Someone answered: 'You borrow money or raise other taxes.' 'Very good,' I replied. Then I asked the ... [ten] participants [playing the role of workers plus the 'CEO'] to pay me one dollar each as their new Social Security tax in exchange for future benefits payable upon retirement. I told them this was essentially what Reagan and Congress, following Greenspan's advice, had done from 1981 to 1983. This way I collected ten dollars, just enough to meet the government's deficit. The student CEO now had only $9 left as his tax relief.

    "'Are you now ready to increase your investment by the amount of your tax cut?' I asked the CEO. 'Yes, sir,'came back a confident reply. 'Wait a minute,'I said, 'your sales have now fallen by $9, because your employees, who buy your goods, are that much short of money, while the government has no additional revenue to spend. your shelves are piling up with unsold goods. Would you, in your right mind, expand your business in these circumstances?' The student CEO paused, pondered the question a bit, and then said no.

    "'In fact, you will fire some employees because of declining sales,'I added. The student agreed reluctantly.

    "That year there were more than 100 students in my class. I said to them: 'Assume that you all own your own company; now tell me if you would expand your business and risk more funds in investment in the face of dwindling sales, even if the government substantially cuts your taxes.' Not a single hand went up.

    ... [p.172]

    "'Let's now discuss the other option...Suppose we don't raise other taxes at all [a la Bush 43]; then how does the government pay its bills? Obviously by borrowing money." After a slight pause, I said to my students, 'Remember ... [government] has already handed $10 to the CEO as the tax cut. Now, who has the money to lend...?

    "'Would you expand your business now?' I asked him again. 'No, I just gave the tax relief back to you.' 'Case closed,' I said. 'The CEOs demand tax relief so they would have more money for investment, but if the government borrows it all back from them to pay its bills, then they are back to where they were before the tax cut. So how can investment rise...?

    ...So in any case, the CEO benefits at the expense of ...all."

    This actually describes the "Morning in America" Reagan recovery in the 1980's. Reagan got an average business cycle recovery (no, nothing special because of "Supply Side" b.s., er, I mean "economics") with one exception: capital investment -- the engine of future growth -- was flat because the government's record deficits sucked all the oxygen out of the capital markets. See Paul Krugman's "Peddling Prosperity" for the details.

    Naturally the right-wingers reading this will say "Free Markets" (the *magic* words) or "Reduce government spending!" (Just tell me where, Grasshopper, and we'll do it...this too is b.s.)

    The truth is that because of the deficits run up under the "conservatives" in charge of public policy, the U.S. population finds itself in the same situation as many third world countries whose leaders (Marcos, Duvalier, etc.) ran up large debts that are now coming due as the economy is headed south.

    So welcome to Northern Haiti!

  • Elliot

    Yoshidad:Consider the possibility that lowering progressive/income taxes actually produces bad economic results.

    You assert that "bad economic results" occur, but you don't specify how you measure this, nor do you specify the most important part of all: for whom are things worse and for whom are things better? Even more important than that, you completely ignore the ethical matter of using force to take away sizable chunks of the lives of each taxpayer, which is morally reprehensible, before the issue of "economic results" even matters.

    To put it bluntly: if your personal economic results depend upon violating the rights of your neighbor, I'd rather you go broke and die in agony than to touch his property. Your need does not, in any way, form any sort of ethical excuse for imposing your demands on another party.

    Yoshidad:To believe that such tax cuts work and produce more revenue) you have to ignore the country's actual economic performance and the trillion-dollar deficits in the wake of these cuts.

    You are doing worse. You are ignoring the crucial fact that the GDP does not rightfully belong to the collective, to be distributed by overseers according to their calculations of "fairness". Each part of that sum belongs to those who produced or honestly received their own values (production not being limited to brute labor, mind you). Nor does the "national debt" belong to anyone who did not explicitly agree to spending the money in the first place. Tax cuts (i.e., a reduction in the amount of theft) does not cause deficits. Spending more stolen loot than one steals causes a deficit.

  • Will

    If it's such a threat to the Republic then why haven't people rebelled? It seems to me that the reason is that it's not a real threat. The people making 300k or more a year are not going to protest or rebel when they can still take 160k or more off the table in a given year. By any measure they have decent buying power compared to someone making 30k a year who only pays $900 in taxes but also has to make ends meet on with the remaining 29K. I suppose we could assume that people who make a lot of money only do so because they are so clever and ingenious to begin with. Or we could assume that they have benefited more than others from the educational and other opportunities available in this country, and from the legal protections afforded, the infrastructure investments made by previous generations (communications, roads, etc) and from the health and safety precedents that allow us to have a good quality of life. Or they could just be narcissistic enough to assume they did it all by themselves. I understand there are great opportunities to make money in the Middle east. Perhaps these rich citizens should try their luck in another country.

    I also refer readers to the other post showing foreign investment in the United States. The reason people invest here is because they know that the country has great prospects for future prosperity and stability. If you made 300K or more and took home half of it, count yourself fortunate to live in a great country that affords you the opportunity to have such success. Or you could spend time trolling the Internet looking for places to rant! It's your life.

  • Mark

    Comments like these should give away the poster "he trillion-dollar deficits in the wake of these cuts."

    The complete demonstration of the lack of understanding of the concept of "deficit" and/or the actual values of these numbers means that such posters should be ignored. For the latest year, FY2007, the federal deficit was 162 billion (billion with a b, not trillion). THis is the nominal figure.

    The better way of understanding deficits is to look at this number as a percentage of GDP. For FY2007 the federal deficit was 1.2% of GDP. In the 46 year period since 1962, there has been only NINE, count them, NINE years with a lower level of deficit spending.

    Even though people like Yoshi and the press try to pretend otherwise, running a deficit is the NORM. In the 46 year period since 1962 the federal government has run a budget surplus exactly five years.

  • Dr. T

    As usual, YoshiTroll distorts the facts or presents only part of the story. I'll tackle only one of his distortions.

    "The truth is that as those top brackets have come down overall economic performance has been *worse*. It's common knowledge that the heyday of the American economy was the 1950's (top bracket: 92%) and 1960's (top bracket: 70%)."

    The truth is that wealthy people in the 1950s, 1960s, and 1970s paid less taxes than today. They lobbied for (and got) a huge smorgasbord of tax breaks, tax shelters, deferments, etc. These tax breaks and tax shelters contributed to an incredibly complex income tax code and gave birth to hundreds of tax advice firms staffed by tax lawyers and tax accountants. The high federal income tax rates did nothing to help the economy (or the government). In fact, the high tax rates harmed the economy by pushing money into stupid (but tax sheltered) investments such as unneeded office buildings, money-losing cattle ranches, and non-productive oil wells. The widespread use of tax dodges resulted in decreased federal tax revenues from the wealthy. Total tax collection was high because of a positive business cycle and because rampant inflation (starting in the late 1960s) pushed upper middle class and middle class tax payers into higher tax brackets.

    I really wish Yoshidad would STFU or play troll at some other site.

  • Mesa Econoguy

    Let me echo Dr. T, and add this, and this.

    Yoshalist is growing tiresome.

  • Mark

    Here is another point. The tax code basically lays out the minimum amount that you owe in taxes to the government. You are perfectly free to pay more if you wish. Since the Democrats and other left wingers constantly state how "terrible" the Bush and Reagan tax reforms were, they can put their money where their mouths are.

    For example, instead of complaining, they can simply pay their taxes using the same tax code under the Clinton Administration. Or even better yet, they can go back to and pay using the pre-Reagan tax code. Remember, one of the major reforms of the tax code under Reagan was the indexing of tax brackets. Before Reagan, the liberals controlling the government did not index brackets with inflation because they preferred to let inflation raise the taxes.

    So, if the Liberals Al Gore/John Kerry voters actually followed what they MORALLY believe is proper and each put up on average a measly $5,000 per voter (measly compared to my tax bill) then this would mean an ADDITIONAL $500 BILLION in tax revenue for the government. If they put up an additional $5000 per capita, assuming an average of 4 members per household, these liberals could raise an addition $1 TRILLION in tax revenue for their favorite cause.

    The question now becomes an ethical one. How would you describe a person who refuses to follow the course of something that they advocate strongly and that opportunity is available to them? I call them immoral. That is, they will not do themselves what they advocate should be done to others.

  • Mesa Econoguy

    I call them clueless economic assholes, but Mark’s definitely on the right track there….

  • Mesa Econoguy

    Just in case I wasn’t clear before, yoshasshole:

    "The truth is that as those top brackets have come down overall economic performance has been *worse*.

    Wrong, wrong, wrong, wrong, wrong.

    By the way, you're an economic fool. Did I mention this?

    It's common knowledge that the heyday of the American economy was the 1950's (top bracket: 92%) and 1960's (top bracket: 70%)."

    It’s also common knowledge that the market performs better under Democrat administrations.

    Yeah, and red cars go faster, because they get the most speeding tickets. This is common Newtonian mechanics. Red = a * t.

    Dude, shut the fuck up, I beg you. Pretty please. Please stop talking about economics. Pretty please.

  • Mesa Econoguy

    By the way, this is breaking news:

    Latest victim of mortgage crisis, IndyMac taken over.

    How much you wanna bet this will be royally fucked up by the regulators, and hyper-inflated by clueless journalists soon to be quoted by Yoshidiot?

    Step up, Yoshi, now's your chance. Call your shot here, genius!

  • Mesa Econoguy

    Just for reference, Yoshi, please name all of your direct references who might be involved in this next predicament.

    I’m quite sure you have many.

    I only know one person who helped craft the RTC legislation.

  • Mesa Econoguy

    Apparently, Chuck Scumba- er, Schumer, is to blame:

    IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure
    By Ari Levy and David Mildenberg
    July 12 (Bloomberg) -- IndyMac Bancorp Inc. became the second- biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.
    The Federal Deposit Insurance Corp. will run a successor institution, IndyMac Federal Bank FSB, starting next week, the Office of Thrift Supervision said in an e-mail yesterday. The regulator blamed U.S. Senator Charles Schumer for creating a ``liquidity crisis'' after a letter on June 26, in which he expressed concern that the bank may fail.

    I’m shocked. This an obvious Dick Cheney hit job, orchestrated by Karl Rove’s dog, kelty, and the odd-Tuesday garbageman/gal/thing.

    How could Fuck Schumer attack a perfectly cholvent instituchion?

  • Mesa Econoguy

    I aplologize deeeeply for the spelling errors above….

  • Bill

    The graph in the original post illustrates that a few larger portions of a lot can be very many times larger than many smaller portions of a little. Also, what that graph does not show is any accounting for disposable income, namely, what percentage are the lower income earners paying in taxes as a percentage of their income that does not go towards food, reasonable clothing, and modest accomodations.

    The concern about the narrow majority ruling the sizeable minority is unfounded in this situation. Sociologists could likely speak more knowledgably on the subject, but the idea that a highly fluid, diverse and de-centralized group of lower-income tax payers would band together to oppress a similary diverse group of higher-income tax payers, when sizable portions of those two groups can expect to be in the other group within a few years, and who have friends and family in the other group, seems highly unlikely. Also, income tax rates have decreased most recenlty. Given the budget deficit, they should have logically increased, if not for everyone then for some. This has not occurred, which provides further evidence that the fear is unfounded.

    One can only imagine how many improbable decisions would have to be aggregated for the threatened oppression to occur. Somewhere in L.A. a son, daughter, and grandmother tell their super-model mother, "even though you pay for everything for us already, we're going to stick with our fellow lower-income tax paying comrades so that you can spend more on the collective and less on us, and we will do this even though we expect to be in your situation soon and even though one of us used to be in your situation. Now get yourself to the photo shoot and earn for all 50.1% of us!"