I will give this idea a more generous read than Will Wilkinson did and assume that Brian Leiter just wants to know why Kennedy-era marginal tax rates should be a nuclear bomb radioactive idea. A seventy five percent top rate on the top point one percent of earners would drastically reduce pressure to enact policies that make life hell for the bottom ninety percent. Since the bottom ninety percent constitutes about ninety percent of the voters, we have what an imagine-a-spherical-cow macroeconomist might call an odd disequilibrium between voters’ interests and their behavior.
I would suggest that it costs a lot less than seventy five percent of the point one percenters’ top-marginal-rate income to buy all the influence they need to keep this stuff under control. Somebody owns the conglomerates that own the media, after all. Compared with those Kennedy tax rates the price (to shareholders) of subsidizing a cushy job on K street, a paid sinecure at some free market think tank or a lifetime of paid speaking gigs for pliant politicos barely justifies a line item on the budget.
We all know most voters are low information voters and vote against their best interest.
Enacting policies that make life hell for the bottom ninety percent is a feature, not a bug.
Seriously. This is not about the deficit or even tax breaks for the rich. Making sure that the undeserving don’t get a free ride is an end, not a means.
Really? How, exactly? And can you show how this top marginal rate is connected to an increase in GDP, jobs and wages?
I don’t have a problem with higher marginal rates, but connect it to economic policy, not political wish fulfillment fantasies.
For the non-spanish speakers:
The People United Will Rarely Defeat Money.
It sounds cooler in spanish – and in the original is
“El pueblo, unido, jamas sera vencido”
and it rhymes..
the headline above is funny, if you know spanish – kinda like the President of Burundi sketch that Eddie Izzard did…
Edited multiple times because I suck.
@joes527: That approach has been finely tailored to take advantage of the Puritanical suffering fetish of American Christianity. That’s how they get the bottom 90% to buy in.
Edited out of grammar shame.
Because you can rarely unite the people.
There will always be those who vote against their interests simply because it’s what an authority tells them to do, or because they hope to be a part of the privileged elite one day, or because they don’t understand the economics and can’t be bothered to learn.
You made me read Sully. I need a shower now.
Amanda in the South Bay
Or get used by the culture wars.
I’d heard Planet Money on NPR quote some research that estimated the return on investment for money spent lobbying was around 20,000%. Plus, the people united don’t have much of an attention span, so it’s hard to get them to care that billionaire hedge fund managers get taxed at the capital gains rate and not the ordinary …. zzzzzz.
@Comrade Dread: I think it’s even simpler: seeing politics as a means of venting, by voting for the guy who promises to stop other people from getting a free ride. It works for rich people who want to stop Those People from taking their stuff, and for non-rich people who think the reason they don’t have more stuff is that Those People already took it.
c u n d gulag
Taxing the rich means that they won’t be able to support all of the Wingnut Welfare ‘think tanks!’
And what will happen to all of the radio hosts with near “0” ratings, or the short-skirted nitwit blond’s on FOX, and the columnists who only a handful of angry old white people even think of reading before they throw the paper out, knowing that to use the Op-ed pages with those writers on them to wrap a fish, would be an insult to the intelligence of the poor, dead fucking fish?
Oh, if, if, if, the Koch Brothers, and the Scaife, and Coors Klan’s, had to pay taxes, who would support the well-paid bunch of cave-person morons who otherwise couldn’t get a job at a urinal-mint factory because they’re too clumsy, or an overnight job stocking the shelves at a way-off the main highway 7-11 because they lack the people-skills not to try to kill and eat the poor lost travelers who come in and ask their obvious moral and intellectual superiors to point to where the bathrooms are.
OH, THE HUMANITIES!!!
@FlipYrWhig: I’d file that under they don’t understand the economics and can’t be bothered to learn.
Which is one of the reasons why instead of focusing exclusively on boosting math and science in public education, I wish economics (both micro and macro) would be deemed mandatory subjects for grades 1-12.
Teaching people just how badly they’re being screwed by the system (and just how bad certain deals, like credit cards, can be) would be a great first step towards ending income inequality and social mobility.
I believe it. A tax loophole, government contract, regulation, etc. can literally be worth billions. That’s well worth the couple thousand you’ve got to throw at our elected
whoresrepresentatives. Hell, most of them are so stupid, they won’t even know what they’re voting for.
Well Tim, you’re WRONG! Because…job creators, and class warfare, and um…shut up! People like me own Congress and you don’t, so there.
@Brachiator: Here’s how higher marginal tax rates connect to economic policy:
Broad prosperity is the best engine for a robust economy, which is necessary for GDP growth, job creation, and good wages. In order to achieve broad prosperity, over-concentration of wealth into too few hands has to be discouraged/avoided.
Government has two ways of slowing down concentration of wealth into very few hands: tax policy and wage policy. Of the two, tax policy is probably the easier one for government to manage and oversee.
The correct wording would be “El pueblo unido raramente vencerá al dinero”
“vincera dinero” is gringospeak :)
If high top marginal rates, including new and higher brackets, indexed to median income, were only about funding the damn government the impact on jobs might be small. The fact is that a 70-90% rate, including capital gains as income, discourages the ripping out of the last possible cent which leaves those cents for wages and etc.
What? Some of you think cigarette taxes are about funding the state, alone?
(edit) I see Jennifer beat me to it, kudos
@Yutsano: Sullivan’s Beard(tm) is aware of your discontent. Sullivan’s Beard(tm) is the one true salvation. The guardian of all human knowledge (or at least The Bell Curve).
One day you will see. Sullivan’s Beard(tm) has spoken.
Actually, Eisenhower/Kennedy era marginal tax rates topped out at 91%, 25% on capital gains. I think you mean Nixon/Ford era rates, which topped out at 77% on income in ’69, and 39.9% on capital gains ’76-’77.
Also, I prefer including the names of Republican presidents when we talk about top marginal tax rates, if only to make conservative heads explode from cognitive dissonance.
@Frodo: I’m in trouble.
I only use the (extra markers) when I go to say Happy New Year to people.
Edited to stave off a potential flame war
Shorter Will Willkinson:
Tax rates that were in place forty years ago could not have been in place ever, because the world would have blown up. Actual demonstrated facts are no match for pulling wild generalizations out of your ass.
This is kinda begging the question. I don’t think even Krugman has made a solid case that high marginal tax rates necessarily drives economic growth, job growth or wage growth.
Sorry, high tax rates do not necessarily slow the concentration of wealth, even with massive income redistribution.
Two million dollars just doesn’t go as far as it did.
Malcolm Gladwell comparing tax rates in the Eisenhower and Kennedy years to today (from 2010):
Taxes Were High and Life Was Just Fine
I’m glad the tax rates favor the super rich. When my numbers hit, I will not want to pay more in taxes.
I cannot listen to this clip at work.
Does Gladwell talk about effective tax rate vs the official marginal tax rate? That is, even when there were high marginal tax rates on paper, not many people actually paid taxes at that rate. This is one of the reasons they came up with the Alternative Minimum Tax.
Excuse me mum, your GOP slip is showing.
Ten cents on the dollar is a bit of a disincentive to getting that dollar and taxes dollars collected would quickly drop. In point of fact you’d most likely see lower bracket taxes actually paid, granted at a low % rate, but numbers of payers does count.
You make a blanket assertion that high rates have little to no impact, despite what tracking multiples of avg wage v CEO pay and other indicators point to. Traking dislocation v tax rates makes the case even stronger. Certainly other factors cannot be dismissed, but you just flatly dismiss.
@brachiator: not exactly a heard argument to make. We do not right now have permanent super-low top marginal rates. We have temporary tax cuts that tilt rich and keep getting renewed. Is renewing those cuts a good policy? Every credible study has shown that tax cuts are the least stimulative way to spend a federal dollar, and tax cuts for the wealthiest are less effective than any other kind. The same studies show that programs to support the most destitute Americans are far and away the most stimulative way to spend a federal dollar, with food stamps on the top of that list. The simple reason is that virtually every dollar of assistance for the poor gets spent right away, in America, on things that are at least distributed and transported locally and by Americans. Each of those dollars also helps to reduce problems related to desperately poor Americans that cost the government far more money when they become acute.
Those temporary tax cuts remain one of the top three or four drags on the deficit, along with war and the recession. If we decided not to extend them yet again then we would have less need to cut things that keep the economy going far better than those tax cuts do. Ergo, what I said above.
You state that as though there wasn’t a preceding mutilation of the tax code that ensured that outcome. You’ll pardon me if my memory is inexact, but don’t you make a living off tax minimization?
If somehow those taxes were raised and any rational calculation of revenues versus deficits indicated a more or completely balanced federal budget coming up, never fear, you can always just lie about it and make up whatever bullshit you need to make it seem like those taxes didn’t affect the deff-sit and so we have to roll ’em back.
If people don’t listen to you, then say it louder and louder and louder through more politicians and talking heads and media networks, and you’ll be heard soon enough. Worth a try, if you’re on that Point-Oh-One side of the income spectrum.
Brach is perfectly aware that the tax code rewards certain behaviors and that economic extraction is one of them. We have all sorts of tax policies that are aimed at behavior and economic ends. Brach would pretend that only extends to some narrow goal, like cigarette smoking – or maybe home ownership.
The Bearded Blogger
El pueblo unido, rara vez vencera al dinero
If you want to keep the rhythm of the chant:
El pueblo unido, por el dinero será vencido
“Vincera” sounds like a cross between spanish and italian.
Sorry. Not me. Not even. Not ever.
Show me some numbers, not just in the US, but in other countries that have high marginal tax rates.
And I am not simply making a blanket assertion. I’m asking a question. I haven’t seen much that shows a consistent positive relationship between high marginal tax rates, jobs, GDP growth and income growth.
Multiples of avg wage v CEO pay is particularly meaningless when you are trying to understand aggregate economic activity.
I see no problem in having 75% tax rate apply to every millionth dollar earned, per individual.
Dollar 500,000, to 999,99? Tax that dollar at 50% rate.
And tax every dollar earned above 1,000,000 per individual, at 75% rate.
What’s the problem?
@Brachiator: I’m a layman, not an economist. But I don’t need to be an economist to figure out that if the government is collecting more in taxes by making it harder to become a multi-billionaire, that money is going to help shore up programs that help the majority of people in this country (like Social Security and Medicare) and that most of those people will spend all that money, which will help shore up jobs. I’m also aware that when government does things like fund infrastructure repairs and improvements, that provides jobs directly, and that when government funds R&D for science & medical research, it helps to spawn new industries and improvements to the lives of the public at large. So I’m not going to go on a wild goose chase of digging up numbers to prove something that is as apparent as the nose on your face.
The problem in our economy is one of demand – there’s not enough of it because fully 40% of the country is living at a subsistence level or below. They make enough money to pay for a place to live, food to eat, clothes to wear, and some form of transportation to get them to and from work. Note that I didn’t include “health care” because currently, a lot of them don’t have any. The economy isn’t going to get better until demand improves, and demand isn’t going to improve until you get more money into the hands of those who currently have zero discretionary income. Whether that money gets into their hands because of government job creation on infrastructure projects or funding of research that leads to new industry doesn’t really matter so much as that something of this nature happens to put more money into regular working people’s pockets. We already know that cutting taxes doesn’t create jobs, because no one is going to hire workers to make things or provide services when there isn’t demand for them.
This is not the same thing as saying that high marginal tax rates will increase jobs and wages. Not by a long shot.
And for the record, I argued early and often here in many Balloon Juice threads that Obama should have sacrificed the unemployment benefits extension to kill the Bush tax cuts. It would have been hard and nasty, but it might have prevented the GOP from coming back with increasingly stupid tax and spending proposals. And I think he would have got the extension anyway.
I don’t think you have a clue about what you are talking about here. I would argue that the Earned Income Tax Credit is more meaningful. It puts money from a tax policy perspective. It puts money in people’s pockets. Food stamps are a vital safety net, but they are not stimulative. To the contrary, they actually help keep poor communities poor. Some people end up trading them at a discount, and grocers pocket the difference.
But the ultimate goal is to help people get jobs and earn money. I get freaking tired of people who are supposedly liberal who seem to want to do little more than make poor people a little more comfortable in their misery. Simply spending money right away does not make a poor community less poor.
And with the continually imploding economy, it does not make sense to just talk about the most destitute Americans. This is one of the reasons that the Tea Party and other disaffected people keep believing the crap tossed out by the GOP. If the middle class unravels, it becomes a nonstarter to talk about a social safety net. And frightened people who see their lives being diminished will more easily believe the lie that the Democrats only care about the supposed undeserving poor.
I’ve probably reviewed data from tens of thousands of tax returns. I have assisted in some way in the preparation of thousands of tax returns, dealing with tax preparers and other tax professionals. A big chunk of this has also been related to tax prep for lower income people. I’ve also dealt with the scams and exploitation, especially unscrupulous employers who cheat employees by paying them in 1099s instead of wages (and other scams that I choose not to talk about).
And I have represented, pro bono, before the IRS, people who got screwed by crappy preparers, venal employers, or their own stupidity when self-filing returns.
How about you?
Within each company it certainly does, it is also listed as an aspect not a determiner, It is broadly symptomatic as well. See tracking of top tax marginal rates and dislocation of wealth along with the truly nasty one, in relationship to cap gains and cap gains hold terms. There certainly are ways to structure cap gains taxes to encourage long term investment, but the current structure rewards short hold short term profit taking – straight up extraction. The way the code sits corporate raiders are rewarded and there is no reward for long term vision.
I’ve had to know something about taxes in order to run an S-Corp and hire someone much more knowlegable than me to take care of all the details. Your average wage earner knows that taxes are a huge game of dodge a bullet, but no idea how gamed the system is.
@Comrade Dread: proposes that maco and micro econ be taught in primary school in place of maths and sciences.
I could not disagree more strongly. The ideological component of these studies is too deeply embedded to be taught to the unsuspecting….they could be indoctrinated into a favoured perspective, but not educated in economics. Not until they know some real math and science and history and political theory. Teaching those subjects for realz would be much more valuable. Teaching dumbed down econ 101 would be a disaster. The real thing is bad enough.
That’s not the only thing I can find either.
Someone sold you a bill of goods, I think.
@Brachiator: explain to me please how increasing the marginal tax rate could fail to slow the rate of wealth accummulation. And if you happen to correct we’ll fix that with estate taxes caculated to level necessary.
Odie Hugh Manatee
Low taxes has allowed TPTB in business, banking and industry to siphon off revenue via excessive pay packages. High tax rates encouraged companies to keep that money in-house rather than hand it over to the government in taxes. This meant better pay and benefits for employees, better and more modern workplace conditions and healthy companies that pay out good dividends to shareholders.
Low taxes on the top earners helped to kill all of that. Why should execs spend that money on making their companies better when they `can just take it home and spend it on themselves?
Taxes serve more than one purpose and people have been made to forget that.
Brachiator, it is silly to answer a straightforward fact, that supplemental assistance to the poor is spent immediately and in a stimulative way, with a vague theory. That’s like arguing that the moon could not possibly cause tides because it would make the sun jealous. Support your argument. If you can’t, and I pity anyone looking hard evidence that supplemental assistance in a recession causes rather than alleviates net job losses, then give it up.
Prove progressive taxation helps build a middle class. Difficulty: the economic history of this country won’t be considered evidence.
Wrong question. I am asking someone to show me that very high marginal tax rates will result in an increase in jobs, GDP growth and income.
Wealth accumulation is not a zero sum game. You can tax the crap out of the wealthy and still not create any jobs anywhere else, or sufficient numbers of jobs to grow the economy.
And as I stated before, high marginal tax rates is not the same thing as high effective tax rates.
I love this “we” stuff. What do you know about the estate tax, or the crappy compromise that lets people fiddle with the computation of the basis of assets?
And yeah, some serious adjustments to the estate tax will be waiting for Obama when he gets re-elected. This is why he needs more good Democrats elected to Congress.
Actally, the current law rewards someone who keeps a business for a while, pushes employee wages down to the lowest levels possible, and then sells the business at a profit. Much less rewarding to run a business for years and grow it, even though some of the small business tax breaks were supposed to encourage investment in business, not divestiture.
You people need to dig a little deeper. Hell, the super generous rules for bonus depreciation lets businesses create huge Net Operating Losses, and take them back and get a refund on prior year taxes, and take losses forward to offset income for years. Meanwhile, some breaks that kept home owners from being crushed by cancellation of debt income when they lost their homes in foreclosure are set to expire in 2012. And if the Republicans keep the House, it will be much harder for any kind of reasonable tax policy to be crafted and passed.
Talking about high marginal tax rates is fun, because it is seemingly easy to understand. It ain’t even a piece of the tip of the tax policy iceberg.
@Brachiator: I thought the original point was that — and clearly the empirical relation between some particular tax policy / rate change and collection is its own question — if you did such a tax increase on the most wealthy, then that would increase revenues to the federal government (assuming that empirical link), and therefore the higher revenues would make it politically more difficult / unnecessary to use the lack of such revenues to cut important social programs.
The relationship between tax rates (and of course actually collected taxes) from the most wealthy and the dynamics of the U.S. economy, including investment patterns and job number and type changes, has been studied by many economists and social scientists, and therefore is a valid and important related question.
But I was convinced that the point was that “higher taxes” collected from the wealthy would have the salutary effect of (via increased revenues to federal general funds) reducing the likelihood of cuts to desirable government- and government-supported programs which primarily help the non-wealthiest.
That too is a political assumption, which my snark related to, anyway: it’s also plausible that even with sufficient revenue increases such that “deficit spending” in no direct way logically necessitated any social program cuts, the political environment could still be such that enormous pressures would be continued by leading political and other powerful figures to cut them anyway. Whether because of moral or fiscal reasons, however true or entirely made-up.
There ain’t nothing vague about the value of the Earned Income Tax Credit. How could you not be better informed about this? And some of the “studies” you mention are weak on looking at the total impact various social programs and tax credits on reducing poverty. I think you need to look into this more you write about what is maintenance, and what is stimulative.
Food stamps are a poor substitute for currency. You can’t take food stamps and use them as collateral for a loan. You can’t put excess food stamps in the bank. And I note that in California, and who knows where else, food stamp equivalents can be used at fast food franchises, so you don’t even get good nutrition out of them.
And again, the question is how do you best get people out of poverty, not how you make their poverty more bearable.
I am obviously not arguing against food stamps. But they ain’t stimulative.
OK. What you say is clearly stated.
Increasing taxes to save “important social programs” while the middle class is collapsing is political suicide, especially when the middle class perceive that they are getting less for their money, and unreasonably fear losing what they have.
What they hear is “when you are reduced to abject poverty, we will have a nifty social safety net for you.”
I am tired of the idle rich, who are totally getting a free ride in a fucking Gulfstream, carping about the lowest echelons of society getting a free WALK to the corner grocery that accepts food stamps.
Seriously, what the fuck.
“That is, even when there were high marginal tax rates on paper, not many people actually paid taxes at that rate.”
This is not the first time I’ve heard this argument made. It’s a lot less of a devastating slam dunk against high marginal rates as you think it is
“broaden the base and lower the rates” may be the consensus among the sabbath gasbags, but there is no reason to assume that it is an improvement. Any just tax system would have to have a lot of deductions to account for the fact that 2 people with equal incomes can be in radically different economic circumstances
The fact remains that in the era where we had “high marginal tax rates on paper, not many people actually paid taxes at that rate” we built the interstates and went to the moon
Where as now we are actually debating whether or not we can afford to deliver the mail
@Brachiator: I’ll agree that food stamps aren’t “stimulative”. Rather, what they do is establish a floor on falling demand in one particular area of the market. Say you’re in a town with 20% unemployment (and yes, there are towns with unemployment rates this high) and another 20% of the people in town make so little that they qualify for, and receive, food stamps.
Food stamps aren’t overly generous, but let’s say for the sake of argument that because that 40% of people in town are getting them, that instead of sales at the Piggly Wiggly falling by 40%, they’re only depressed by 20%. Without the food stamps, in other words, Piggly Wiggly would sell 20% less…which would result in some combination of cost-cutting which will likely include cutting workers’ hours by 20% or laying off 20% of the workforce. Who now will have to rely on food stamps themselves.
Upstream, the 20% lower sales at Piggly Wiggly result in 20% smaller orders from suppliers, 20% reduction in freight going to the store and the labor required to deliver it, and so on and so forth.
So while food stamps might not STIMULATE job creation, they certainly help put a floor under job losses.
…thus explaining why food stamps have more of a stimulative effect. The rest of your point is hand waving. I could argue that food stamps help poor people to escape poverty by helping them to afford child are while they try to make regular work hours. To afford basic health insurance (and therefore become more reliable workers where it is not offered). To find enough spare money and time for vocational and community college courses. That making poor people poorer just makes them less presentable for interviews, less able to keep regular work hours, less healthy and more desperate. And so on. I bet that I can find real studies that back up my made up on the spot argument. Can you?
While perhaps a little exaggerated, it’s pretty much true—the top rates aren’t that meaningful if the wealthy can use the tax code to game their income.
But tax brackets are pretty much meaningless if we leave out the definition of taxable income that the brackets apply to.
It’s not clear to me that Brachiator is arguing for lowering the rates. AFAICT (he?)’s saying that the definition of the taxable base is at least as important as the rates.
My preferred reading is that most of the complexity of the tax code isn’t a rational response to variations in economic circumstances but rather the doling out of favors.
@Tim F.: I already sent him a link =) Even moody’s agrees with you and I
@Brachiator: ducks and covers anmd prevaricates.
In the posting to which I first responded you stated:
First of all, starting a claim with “Sorry” is the mark of a jackass with nothing but bluster to marshall. I suggest you drop that lame rhetorical ploy. It only works against total morons.
Second of all, I challenged you to explain to me how high tax rates could fail to slow the accumulation of wealth. You respond by changing the subject.
You got nothing.
@liberal: “But tax brackets are pretty much meaningless if we leave out the definition of taxable income that the brackets apply to.”
no they are not
if your tax shelter requires you to keep money in the buisness rather then taking it out, it matters
and even if you dont pay the full top rate on all your possible income in the top margin, you are still paying it on some, usualy most of it
This could very well be true, but I’m not familiar with the evidence I should use to rely on it.
“Important social programs” like Medicare and Social Security are programs that they, the middle class, regularly cite as being important to themselves “right now”, whenever that survey is underway.
And whether or not they see raising taxes on, say, the top 0.1 or 0.01% of the income distribution as “increasing taxes” which has to do with they themselves isn’t anything to be presumed — it’s something which (a) currently the largest numbers of people indicate on surveys that they support, and (b) could be made to be true by the political environment.
Currently there’s not a lot of evidence I’ve seen that the wider public would see higher tax rates — particularly at the paltry rises actually being discussed, irrespective of the likely collection rates — on the most wealthy earners as objectionable, much less outrageously insulting.
I’m not convinced either that there’s some widely held convention — such that you could in even the roundest fashion portray it as the view of ‘the middle class’ — that higher tax rates paid at the very highest ends of the income etc. scale would be directly correlated with their fall into ‘abject poverty’.
Though I agree that plenty of times I hear pundits and politicians dismissing any talk of the long-term economic and employment harms of some economic policy (i.e., certain trade agreements) by emphasizing that, oh well, we should have a stronger ‘safety net’, even if we haven’t really planned for where people will stand once they crawl out of the net.
I only want fairness–a flat tax. The majority of my wealth is in my home (CA), and I pay one percent a year based on the wealth in my home. We call it property tax, but same thing. I also pay income taxes. All I ask is that billionaires pay one percent a year tax on the majority of their wealth. Just like I do.