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You are here: Home / Economics / C.R.E.A.M. / Because that’s where the money is

Because that’s where the money is

by DougJ|  October 16, 20151:23 pm| 85 Comments

This post is in: C.R.E.A.M.

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I realize that in a world where ideology trumps practicality at the ballot box every time this makes for a politically ineffective argument, but my belief in increasing taxes on the rich isn’t based on a concept of fairness or communalism, it’s because that’s the where the money is:

[T]he top 1 percent includes about 1.13 million households earning an average income of $2.1 million.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion. Even taking account of state and local taxes, the average household in this group would still take home at least $1 million a year.

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Reader Interactions

85Comments

  1. 1.

    pat

    October 16, 2015 at 1:29 pm

    you might like to proof-read that title.

  2. 2.

    Not That Guy

    October 16, 2015 at 1:31 pm

    @pat:

    Funnily enough, I didn’t even notice that until you pointed it out.

  3. 3.

    Mathguy

    October 16, 2015 at 1:33 pm

    Even your worst student in the core non science math course you might have to teach would know that the reasoning in the excerpt is full of holes. That distribution is skewed strongly towards the 0.1%.

  4. 4.

    Germy Shoemangler

    October 16, 2015 at 1:36 pm

    My mind has this weird auto-correct feature that automatically fixes whatever I see. I didn’t notice the typo until Pat pointed it out.

    Odd, because I started my career (as I laughingly call it) as a proofreader back in the ’70s, and up until very recently typos always jumped out at me like fleas.

    But no more.

  5. 5.

    trollhattan

    October 16, 2015 at 1:37 pm

    The fevered demands of “Take mah country bak!!!” should necessarily include Eisenhower-era tax rates. Go ahead and adjust them for inflation, they’ll still work fine. Pile the pie, higher!

  6. 6.

    srv

    October 16, 2015 at 1:38 pm

    @Mathguy: gliberal math – it’s truthy enough.

  7. 7.

    Amir Khalid

    October 16, 2015 at 1:38 pm

    @Not That Guy:
    Not so surprising. People who are asked to quickly read a sentence like “Paris in the the spring” usually miss the second “the”.

  8. 8.

    Cacti

    October 16, 2015 at 1:42 pm

    Seems like accidental truth-telling has become contagious on the right wing.

    The Director of Citizens for a Pro-Life Society acknowledges that her organization’s goal is policing sex, rather than protecting fetal life:

    And I say even if Planned Parenthood didn’t perform one single abortion, just the mere fact that its sexual ethic is corrupted means right there, should be the reason right there, that they should not receive any federal money. The kind of sexual ethic that Planned Parenthood promotes is sex for recreation, sex for mere pleasure.

    Oops.

  9. 9.

    Not That Guy

    October 16, 2015 at 1:43 pm

    @Amir Khalid:

    And now I see that his text is also borked:

    it’s because that’s the where the money is:

  10. 10.

    Avery Greynold

    October 16, 2015 at 1:43 pm

    You’re missing the elephant in the room if you are talking taxing income. The person making 2 million a year is likely accumulating another 2 million in capital appreciation on their wealth. And our current system has enough loopholes to make this tax free into their next generation. And for those who cringe on “wealth tax”, remember that the middle class has been paying annual wealth taxes on homes for generations.

  11. 11.

    Amir Khalid

    October 16, 2015 at 1:45 pm

    How did the right-wing myth arise that cutting taxes leads to increasing tax revenue?

  12. 12.

    Jim, Foolish Literalist

    October 16, 2015 at 1:47 pm

    @Avery Greynold: Trump has tweeted a picture of him signing his four-foot high tax return. I’m sure he’ll be turning that stack over to David Cay Johnston (Johnson?) any day now so that he and a team can explain all the unfair loopholes the short-fingered vulgarian is burdened with in all that paper.

    @pat: I like it the way it is, Willie Sutton meets Gabby Hayes.

  13. 13.

    SatanicPanic

    October 16, 2015 at 1:47 pm

    @Mathguy: hmmm, not getting what you’re getting at, care to elaborate?

  14. 14.

    pat

    October 16, 2015 at 1:51 pm

    @Not That Guy:

    I noticed that too but didn’t think it stood out quite so obviously.

  15. 15.

    schrodinger's cat

    October 16, 2015 at 1:51 pm

    @Amir Khalid: Its based on the so called Laffer curve.

  16. 16.

    catclub

    October 16, 2015 at 1:51 pm

    The opponents of a progressive tax system have already won as soon as you can convince people there are too many tax brackets.

    There should be a new tax bracket every $500,000 in income as high as income goes up.

    They do not have to be big jumps,
    but telling the surgeon whose income is $600k/year that the guy with $300M/yr pays the same tax rate SHOULD be cause for outrage.

  17. 17.

    trollhattan

    October 16, 2015 at 1:52 pm

    @Amir Khalid:
    I believe it began with Arthur Laffer, a cocktail napkin and a fictitious curve. Helloooo, Ronny Reagan, spokesperson and carnival barker to make the transition from fable to policy.

    HW Bush kept the paddle in the water, so to speak, with his “rising tide lifts all boats” nonsense.

    ETA Even David Stockman, co-conspirator at the time, admits it’s dangerous nonsense. Of course liberals are “wrong too” because both sides.

  18. 18.

    schrodinger's cat

    October 16, 2015 at 1:53 pm

    @Mathguy: Then why don’t you explain the math, since you call yourself the math guy.

  19. 19.

    srv

    October 16, 2015 at 1:53 pm

    @Amir Khalid: The truth hurts:

    Since most of the Reagan tax cuts applied to lower- and middle-income earners, there was close to a dollar lost in tax revenue for each “dollar” of tax cut for these groups. Still, CBO figures show that total tax revenue only fell from 19.2% of gross domestic product (GDP) in 1982, before most of Reagan’s tax-rate reductions were put in place, to 18.4% of GDP in 1989, the year he left office. This happened because the U.S. economy grew by more than one-third in real terms (34.3%), much faster than the 24.3% rate expected even by economists within the Reagan administration. Thus, by the time President Reagan left office, the economy was generating more tax revenue at a maximum 28% rate than many on the left forecast it to generate at a maximum 70% rate.

  20. 20.

    TG Chicago

    October 16, 2015 at 1:54 pm

    Of course we all know that when Dan Rather and 60 Minutes released a Bush-negative story that contained fabricated evidence, that was proof that the lie-beral media was lying and liberal as always.

    Now it appears that when Lara Logan and 60 Minutes released a Hillary/Obama-negative story that contained fabricated evidence, that is proof that… the lie-beral media is lying and liberal as always.

    The idea they’re pushing is that Hillary’s people got Logan to focus on the phony story in order to distract from the real Benghazi scandal (whatever that’s supposed to be). This requires you to believe that HRC pushed a phony story that’s negative about her because once the truth came out, it would be a net positive.

    But everybody knows how media organizations trumpet the original story then bury the later corrections. It would never work. Plus HRC is so risk-averse, she would never go for any strategy that involves pushing out a negative story about her.

  21. 21.

    trollhattan

    October 16, 2015 at 1:55 pm

    @schrodinger’s cat:
    Am guessing because “we just wouldn’t understand!”

    Accompanied with size 8 foot-stamping.

  22. 22.

    Benw

    October 16, 2015 at 1:55 pm

    So the NYT finally figured out that we can raise a lot of money by increasing the top level tax rate AND that the people paying those extra taxes will still take home shitloads of sweet sweet cheddar? Whoa.

    Doug, you whiffed on the title by not using C.R.E.A.M.

  23. 23.

    catclub

    October 16, 2015 at 1:56 pm

    @SatanicPanic: I suspect that 1) the phrase ‘all other things being equal’ should be inserted before the estimates of how much the new tax rates will bring in. People might change behavior dramatically base don the new rates – like giving huge amounts to PETA and Greenpeace to avoid the tax man. ;)

    2)The computation of what the average takehome would be after the tax (Still more than $1M on average) takes advantage of the long tail of the affected distribution of incomes. Median would be more informative.

    Those are my guesses.

  24. 24.

    Calouste

    October 16, 2015 at 2:01 pm

    @Mathguy: The bottom of the 1% is approximately where me and my wife are (we’re fairly close, but not actually there), two college educated professionals in a major city with decent, but far from outstanding careers. Better of, but not significantly closer to the Masters of the Universe than Joe Sixpack. There is a massive difference between Upper Middle Class and the real Upper Class.

  25. 25.

    singfoom

    October 16, 2015 at 2:01 pm

    I think one of the best changes would be to stop caring about the source of the income. While normal people pay 25% on labor based income, hedge fund billionaries pay a lower rate on their earnings because they’re covered by the capital gains tax rate of 15% or 20% based on their normal tax bracket.

    I don’t see why they get taxed at a lower rate than normal people just because they’re not getting their money from W-2 income.

  26. 26.

    Anoniminous

    October 16, 2015 at 2:03 pm

    @Amir Khalid:

    Because two dumbasses sat in a bar and one dumbass drew a bullshit data-free graph on a napkin.

  27. 27.

    singfoom

    October 16, 2015 at 2:05 pm

    It’s not even the 1%, but the .01% and the .001% where the real money is. David Cay Johnston lays it out incredibly well in his book from 2005:

    http://www.amazon.com/Perfectly-Legal-Campaign-Rich-verybody/dp/1591840694

  28. 28.

    SatanicPanic

    October 16, 2015 at 2:06 pm

    @catclub: 2) is kind of what I figure. Yeah, not all that informative, but then again, it’s just an average. If you’re making $500K a year and because of taxes you’re making $300K, you’re still doing pretty well. Unless it’s something else I am missing, which is totally possible.

  29. 29.

    NonyNony

    October 16, 2015 at 2:07 pm

    @srv: Where’s the copypasta from srv? Blockquoting text is meaningless without a link to the source.

  30. 30.

    kdaug

    October 16, 2015 at 2:10 pm

    @Amir Khalid: Faith, my friend. Unfailing, unadulterated faith.

  31. 31.

    SatanicPanic

    October 16, 2015 at 2:13 pm

    @srv: I’m not convinced that tells us anything.

  32. 32.

    Roger Moore

    October 16, 2015 at 2:16 pm

    @Amir Khalid:

    How did the right-wing myth arise that cutting taxes leads to increasing tax revenue?

    AFAIK, Art Laffer came up with the idea that an excessively high marginal tax rate would reduce total revenues by eliminating the incentive for people at the top to work hard. The story is that he drew the famous Laffer Curve on a napkin. The big thing is that they’ve convinced themselves that we’re always on the side of the Laffer curve where reducing taxes increases revenues.

  33. 33.

    SatanicPanic

    October 16, 2015 at 2:17 pm

    @Amir Khalid: It could. I don’t think it was a great insight that the optimal tax rate is somewhere between 0 and 100 percent and that sometimes taxes could be so high that they’re inhibiting growth. But the right isn’t arguing in good faith- they think it should be zero in all cases anyway.

  34. 34.

    Moslerfan

    October 16, 2015 at 2:17 pm

    To me, the point of taxing the crap out of rich people is preventing them from using their money to subvert democracy.

    How about we make them an offer: quit using your money to buy the government, and we’ll let you keep a little more of it.

  35. 35.

    Jeffro

    October 16, 2015 at 2:20 pm

    @Avery Greynold: The article covers how the wealthy really get away with it, through loopholes like you described, and (in a big way) by having much of their income being considered as capital gains

  36. 36.

    catclub

    October 16, 2015 at 2:20 pm

    @singfoom:

    I think one of the best changes would be to stop caring about the source of the income.

    I agree. And that is why they don’t do it.

    As a paraphrase, Keynes (I think) said that all of conservatism is coming up with excuses for self interest. The ‘capital gains income is different’ excuse is used to tax capital gains differently.

  37. 37.

    Seanly

    October 16, 2015 at 2:22 pm

    @Amir Khalid:

    Arthur Laffer and a stupid sketch on a napkin

  38. 38.

    singfoom

    October 16, 2015 at 2:22 pm

    @Moslerfan: I don’t think they’re going to take that offer. The Koch brothers are EACH worth $41 billion dollars. They’re going to keep funding an entire ecosystem of bullshit anti-tax think tanks forever.

    It doesn’t make sense to me since you could tax them at 90% and they’d still be filthy filthy rich, but they’re never ever going to stop trying to keep just a penny more….because…..reasons.

  39. 39.

    trollhattan

    October 16, 2015 at 2:23 pm

    @NonyNony:
    1. Hilight srv cloaca.
    2. ctrl+C
    3. ctrl+V
    4. PROFIT

  40. 40.

    Anoniminous

    October 16, 2015 at 2:23 pm

    @srv:

    Speaking of dumbassess …

    That’s because RayGuns blew a hole in the budget by massive deficit spending and artificially jacked-up micro-economic activity for a couple of years.

    Dumbass

  41. 41.

    Jeffro

    October 16, 2015 at 2:24 pm

    @Moslerfan:

    To me, the point of taxing the crap out of rich people is preventing them from using their money to subvert democracy.

    That is an excellent point to add on to all the other good ones: If you have enough money to keep someone’s super PAC afloat, you have too much money. When 158 families are in control of the process well before the actual presidential campaign even starts, Houston we have a problem.

  42. 42.

    Roger Moore

    October 16, 2015 at 2:25 pm

    I would actually be willing to give up tax increases on the ultra-rich at the federal level in exchange for progressive taxation at the state and local level. Right now, we have a reasonably progressive federal tax system, but many states have taxes that are so regressive that the very poorest people pay a higher percentage of their income in taxes than the 80th percentile. That’s horribly wrong, and fixing it would do more to create a fair tax system than any tweaking of federal tax rules.

  43. 43.

    Daulnay

    October 16, 2015 at 2:25 pm

    It’s not just the rich, it’s the largest multinationals.

    The share of total taxes paid by corporations has dropped substantially over the last 35 years. Much of this is because multinational corporations have largely evaded their taxes, as <a href="http://ctj.org/ctjreports/2015/10/offshore_shell_games_2015.php&quot; documented by Citizens for Tax Justice.

    Tax evasion by multinationals adds almost 10% to the annual U.S. budget deficit, and the total profits spirited out untaxed amounts to nearly 7% of the total U.S. debt. Keep that in mind when people propose a ‘tax holiday’ for overseas ‘earnings’.

    The applicable law requires that sales between subsidiaries be at ‘fair market value’, but in practice that part of the law has gone unenforced. It is difficult to estimate a ‘fair market value’, and even more difficult for a Republican or conservative Democratic government to prosecute them. Imagine what it would do to campaign donations! As a result, Fortune 500 multinationals are shifting nearly all of their profits to tax havens.

    I propose a solution: a new top tax tier for employees of multinational corporations, 95% on any income or capital gains over $1 million.

    —
    Daulnay

  44. 44.

    Iowa Old Lady

    October 16, 2015 at 2:26 pm

    @Jim, Foolish Literalist: People like Trump carp about how complicated the tax code it, but for most people it’s not. If you have a 4 foot tall tax return, it’s because the code has been written to protect you from paying taxes.

    Then they propose “simplifying” by reducing the number of brackets, which always coincidentally reduces what the wealthy pay.

  45. 45.

    Seanly

    October 16, 2015 at 2:27 pm

    @srv:

    One time impacts doesn’t doesn’t mean it is always true. Plus the Republicans keep making the argument that the tax rate should always be lower. There are going to be some times when the tax rate is too low.
    Also, the Laffer curve doesn’t have anything to do with what is the correct apportionment of taxes to what income.

  46. 46.

    Not That Guy

    October 16, 2015 at 2:27 pm

    @catclub:

    It was Galbraith:

    The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

  47. 47.

    Brachiator

    October 16, 2015 at 2:28 pm

    @trollhattan:

    The fevered demands of “Take mah country bak!!!” should necessarily include Eisenhower-era tax rates.

    The data just does not show the Eisenhower era as some golden age of income equity. And I think you may be confusing the idea of high marginal tax rates with effective tax rates on what the top tier actually paid in taxes.

    @Avery Greynold

    You’re missing the elephant in the room if you are talking taxing income. The person making 2 million a year is likely accumulating another 2 million in capital appreciation on their wealth.

    I’m not sure how “likely” this is, but you raise a good point. It is interesting that even “man of the people Trump” would eliminate estate taxes.

  48. 48.

    schrodinger's cat

    October 16, 2015 at 2:29 pm

    @Iowa Old Lady: Exactly. 1040 EZ is a piece of cake. The more money you make the more schedules you have to file, to qualify for deductions.

  49. 49.

    Pogonip

    October 16, 2015 at 2:30 pm

    @Germy Shoemangler: Stop using the “F” word!

  50. 50.

    Jeffro

    October 16, 2015 at 2:31 pm

    @singfoom:

    It doesn’t make sense to me since you could tax them at 90% and they’d still be filthy filthy rich, but they’re never ever going to stop trying to keep just a penny more….because…..reasons.

    They’ll still be filthy filthy rich, but that beats filthy filthy, filthy filthy filthy, filthy rich.

  51. 51.

    Germy Shoemangler

    October 16, 2015 at 2:31 pm

  52. 52.

    Germy Shoemangler

    October 16, 2015 at 2:33 pm

    @Pogonip: Our little girl had a bout with fleas. She’s over it, and they’re gone, but now I’m concerned about tapeworm.

    It never ends. (the worry, not the tapeworm)

  53. 53.

    trollhattan

    October 16, 2015 at 2:37 pm

    @Germy Shoemangler:
    Uh, your little girl has fleas and possible tapeworm? Time for a different preschool?

  54. 54.

    schrodinger's cat

    October 16, 2015 at 2:38 pm

    @trollhattan: Little girl is probably a kitteh. I know little kids can be a bit a grubby but this is too much!

  55. 55.

    Anoniminous

    October 16, 2015 at 2:42 pm

    Right now the global Super-Duper Richy-Rich have ~$65 trillion in cash and cash equivalents that is essentially doing nothing, has no hope of doing anything, and is financially and economically pointless because they can’t get any return because they aren’t investing in anything because the economic policies that made them Super-Duper Richy-Rich have – in the jargon – fucked the global economy. [Source: that Pinko-Commie rag The Economist.]

    ‘Bout the only thing they can do with it all is buy plein aire French Impressionists at increasingly absurd prices and fund Yet Another SillyCon Valley Tech Bubble.

  56. 56.

    Germy Shoemangler

    October 16, 2015 at 2:42 pm

    @trollhattan: I blame a stupid appliance store for the fleas. They delivered a large microwave that apparently sat outside in their truck for three days, in a parking lot next to some woods. I think the fleas hitchhiked in the box, because not long after delivery she was scratching up a storm.

    No pre-school for her. She knows everything she needs to know (litterbox location, how to make me open cans for her, sunniest spots in the house).

  57. 57.

    Lurking Canadian

    October 16, 2015 at 2:45 pm

    @srv: That is just word salad. The fraction of GDP going to government revenue is the tax rate. If the government is collecting 18% of GDP, then the “tax rate” is 18%. If you accomplished that by reducing the marginal rate on some people, you must simultaneously have raised it on some other people.

    The Laffer curve is an argument about the government’s total revenue. If the Laffer curve means anything it means the economy’s excess growth due to the tax rate cut is sufficient to overwhelm the lost revenue from the tax cut. In other words, we cut our tax rate in half, and it caused an immediate more than doubling of economic activity, so the government didn’t lose any money.

    That is utter horseshit, of course, but that’s what it claims. It might be possible for a small (say 1%) rate cut to lead to an excess growth of 1.1%, over and above the growth that would have happened anyway, in some cases. It is NEVER possible for a large tax rate cut to pay for itself, except over the very long term. Even if your 50% cut in the tax rate causes your economy to grow 7% above what it would have done anyway, you’re running deficits for more than ten years before you catch up.

  58. 58.

    Villago Delenda Est

    October 16, 2015 at 2:48 pm

    @Cacti: Well, we knew it was always about fucking. Now they’ve confirmed it.

    And, yes, it is where the money is, but the greatest group of freeloader parasites in this country are the 1%. The invisible infrastructure of society is what makes their accumulation of ill-gotten gains possible, and they refuse to pay for it. Which is why the French Solution for this dysfunction looks better all the time.

  59. 59.

    Villago Delenda Est

    October 16, 2015 at 2:51 pm

    @Moslerfan: That was one of Jefferson’s reasons for an estate tax. The accumulation of wealth over centuries increased the misery of those who didn’t fall out of the right uterus, and led to things like the French Solution.

  60. 60.

    catclub

    October 16, 2015 at 2:52 pm

    @Jeffro:

    When 158 families are in control of the process well before the actual presidential campaign even starts, Houston we have a problem.

    They aren’t. They are just the ones supplying money to be burned.

  61. 61.

    Eric U.

    October 16, 2015 at 2:58 pm

    I think the Laffer curve is nominally correct. The only thing is, we are really far over the inflection point the wrong way. We could raise taxes significantly and still increase tax revenue. I swear Aurthur Laffer has said so. But just as surely, there is a tax rate that is too low, and causes economic harm to a country that actually reduces economic activity. I believe we have reached this point. Just look at Kansas, as one good example. I always figured that Clinton’s tax increases actually were a significant cause of the good economy during his administration.

  62. 62.

    Roger Moore

    October 16, 2015 at 2:58 pm

    @Lurking Canadian:
    Where tax cuts can really work in the short term is when you make a temporary cut in the capital gains tax rate. In that case, you can goose short-term revenues by encouraging people who were thinking of cashing out sometime to decide to do it now instead of later. It hurts revenue in the long term, of course, but that doesn’t keep Republicans from claiming it proves that lowering capital gains taxes increases revenue.

  63. 63.

    trollhattan

    October 16, 2015 at 2:58 pm

    @schrodinger’s cat: @Germy Shoemangler:
    Ahhh, that’s not as dire as what I was envisioning. Sucks that you imported fleas; did they charge extra or was that some kind of “wow” service I keep hearing about in the new economy?

  64. 64.

    Germy Shoemangler

    October 16, 2015 at 3:02 pm

    @trollhattan: No extra charge for the flea infestation.

  65. 65.

    liberal

    October 16, 2015 at 3:09 pm

    “Because that’s where the money is”: I thought “ability to pay” is a fundamental concept in taxation.

  66. 66.

    Marc

    October 16, 2015 at 3:10 pm

    Some fun math:
    To be in the top 1% nationally you’d be at household income of 380K+. The top 0.1% would be ~1.2 million.
    So, an average of 2.1 million indicates that the large majority of the money is not in the top 1%; it’s in the top 0.1% or the top 0.01%.

    So, let’s recast it:
    The minimum income of the people between 0.1 and 1 percent is 380K each. The maximum is 1.2 million each. Subtract each from the average for the top 1 percent to get an average for the top 0.1 percent.

    You then still have 50-80% of the money in the 0.1%, with an average income between 10 and 16.5 million. Removing half would leave them with five to 8 million each. That’s even harder to defend and it affects ten times fewer people.

  67. 67.

    liberal

    October 16, 2015 at 3:11 pm

    @trollhattan:
    Rates alone don’t tell much of the story; you have to know how taxable income is defined.

    If you tax high income near 100%, but define “income” so as to exclude capital gains, the truly wealthy will pay next to nothing.

  68. 68.

    Gene108

    October 16, 2015 at 3:26 pm

    @Amir Khalid:

    There was some reporting on this a few years ago. If tax rates are ridiculously high, like 80% of your income goes to the government, people will work hard to hide money from the government.

    If taxes are lowered, fewer people will work to avoid paying taxes, so revenue will go up.

    The USA has never really been at an inflection point, where cutting taxes will impact people’s behavior from what they currently are. Same for the small tax increases proposed.

  69. 69.

    catclub

    October 16, 2015 at 3:26 pm

    @Not That Guy: Thanks!

  70. 70.

    catclub

    October 16, 2015 at 3:27 pm

    @Anoniminous:

    [Source: that Pinko-Commie rag The Economist.]

    I laughed.

  71. 71.

    Doug!

    October 16, 2015 at 3:28 pm

    @Benw:

    I’ll add it!

  72. 72.

    bystander

    October 16, 2015 at 3:33 pm

    Is it just me or does anyone else find it strange that mathguy disappeared after saying he disagreed with the premise of the thread and then failed to provide any reasoning to support his denial?

  73. 73.

    Jeffro

    October 16, 2015 at 3:36 pm

    @catclub:

    They aren’t. They are just the ones supplying money to be burned.

    Oh ok, silly me. 5/6 of them are funding the GOP side…do those look like unbiased champions of the people over there?

  74. 74.

    patrick II

    October 16, 2015 at 3:42 pm

    Aside from “that’s where the money is” the very rich need to be taxed more to keep our current capitalistic system in balance. Because money at 7% interest (the average stock market increase) doubles every ten years capital grows much faster than wage increases. After not too long a time (in this country, since taxes were lowered fifty years ago) too high of a percentage of money is kept as capital and not enough is spent on consumer needs, which means there is not enough of a consumer market to invest the capital in which leads to market balloons and speculation and an attempt by the capitalists to buy up our public schools, fire departments, water, and anything else that have traditionally been non-profit centers built for the common good.

    People, including many economist, think free market capitalism is a kind of God designed infinity machine that will stay in balance forever. It is not. It is a kluge of different effective practices cobbled together that will break down if not properly maintained, and maintaining the proper balance between capital and wages is an important part of that maintenance.

  75. 75.

    Dmbeaster

    October 16, 2015 at 4:08 pm

    @Amir Khalid: Google Laffer Curve. Ronald Reagan gets credit for making this myth part of GOP dogma. In the GOP primaries for the 1980 presidential campaign while Reagan was championing this idea, Bush Sr famously called it voodoo economics. But thereafter it has been TRUTH for the GOP despite three decades now of real-life evidence showing that it is a canard.

  76. 76.

    Mathguy

    October 16, 2015 at 4:11 pm

    @schrodinger’s cat: What I was referring to is covered nicely by Marc in comment 66. I hate it when people use averages without some explanation of the distribution. In this case, it is well known that the 2.1m average is warped by the top of the distribution.

  77. 77.

    PurpleGirl

    October 16, 2015 at 4:27 pm

    @singfoom:

    I don’t see why they get taxed at a lower rate than normal people just because they’re not getting their money from W-2 income.

    Because they have better lawyers and lobbyists to write the tax code to their benefit.

  78. 78.

    Lurking Canadian

    October 16, 2015 at 5:01 pm

    @Mathguy: yes, but that is irrelevant. The people at the bottom who are well below the average are also not paying the umpty-billion and thus much less affected by the tax.

    If Dr. Hard Worker is making $400000 and Mr Hedge Fund is making $4000000 and you increase both of their marginal tax rate on income above $300000 to…say 50%, it is still the case that:

    1) The tax raises a total of $1.9M
    2) The average after tax income of our candidates is $1.25M

    The facts that Mr Fund is paying almost all the tax, and Dr Worker takes home way less than $1.25M don’t change the calculus.

    As it happens, I like the suggestion above that we should keep adding new tax brackets, so Mr Fund’s paying more like 75% on his fourth million, but that doesn’t detract from the original post.

  79. 79.

    benw

    October 16, 2015 at 5:04 pm

    @Doug!: dollar dollar bill y’all!

  80. 80.

    Brachiator

    October 16, 2015 at 5:28 pm

    @patrick II:

    People, including many economist, think free market capitalism is a kind of God designed infinity machine that will stay in balance forever. It is not. It is a kluge of different effective practices cobbled together that will break down if not properly maintained, and maintaining the proper balance between capital and wages is an important part of that maintenance.

    I agree with you that much of the “invisible hand” stuff and magic self-calibration of free market capitalism is a fairy tale, but the discussion and possible solutions here does little to maintain any balance between capital and wages.

    Even the NYT article mainly talks about all the potentially socially useful stuff could be done with tax increases on the rich. But taxation is not a zero sum gain. An increase in tax on the wealthiest individuals does not increase the wages of lower income people, nor does it do much to meaningfully decrease income inequality.

    The other part of the Laffer Curve nonsense was the insistence that lower tax would result in more investment and job creation. Even though the promises here were tremendously overblown, the question of how best to stimulate the economy still has to be answered. Lower taxes on the rich is demonstrably wrong. Economic stimulus packages may help, but they are not the whole story.

    And here’s the rub: neither party has done much to move beyond old solutions. The Democrats have been better with at least offering stimulus packages, but wage stagnation is still a worrisome problem.

  81. 81.

    D58826

    October 16, 2015 at 5:45 pm

    You heartless cad. Making these poor families live on just 1 million dollars per year. They might have to timeshare a private jet rather than having their very own. Heartless I say Heartless.

  82. 82.

    A guy

    October 16, 2015 at 8:20 pm

    Lots of folks don’t deserve the money taken from the rich.

  83. 83.

    rikyrah

    October 16, 2015 at 10:04 pm

    @Cacti:
    We already knew that

  84. 84.

    Mathguy

    October 16, 2015 at 10:33 pm

    @Lurking Canadian: Duh. The point I was making that the real money comes from the upper end of the 1%. The quoted paragraph in the original post implies something other than that by only using an average.

  85. 85.

    patrick II

    October 17, 2015 at 3:05 am

    @Brachiator:

    In Denmark, a land of high taxes and worker sympathetic laws, McDonald workers are paid $22 an hour while college and health care are free. Taxes are higher there, especially on the very rich. The mean personal income is close to ours, but there aren’t many of the desperately poor that we have here.

    Can we do that in the U.S.? Probably not. Or not at least until we get a Supreme Court that makes decisions favoring a more participatory voting system.

    I guess that my main addition, if anything, to the discussion which you accurately state is not exactly about what I am talking about, is that higher taxes, hopefully used wisely to redistribute income, is not only a good thing but a necessary one. If not, the system breaks down.

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