Soak The Very, Very Rich

A sensible suggestion from the capable mind of The New Yorker‘s James Surowiecki, but what are the chances that our government will implement it, one wonders (whilst thinking of all those campaign contributions made by the very rich):

The fight on Capitol Hill over whether to extend the Bush tax cuts is about many things: deficit reduction, economic stimulus, supply-side ideology. But at its core is a simple question: who counts as rich? The Obama Administration’s answer is that you’re rich if you make more than two hundred thousand dollars a year as an individual or two hundred and fifty thousand dollars a year as a household, and therefore you should have your taxes raised. Conservatives suggest that this threshold is far too low, and argue that Obama would be taxing mostly small-business owners, or the people a Fox News host has referred to as “the so-called rich,” rather than fat plutocrats. You might think this isn’t really much of a debate. An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You’re rich, and a small tax increase isn’t going to rock your world…

At the moment, we have a system of tax brackets well suited to nineteenth-century New Zealand. Our system sets the top bracket at three hundred and seventy-five thousand dollars, with a tax rate of thirty-five per cent. (People in the second-highest bracket, starting at a hundred and seventy-two thousand dollars for individuals, pay thirty-three per cent.) This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James’s dentist: same difference.

This makes no sense—there’s a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that. A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there’s no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue…

[continues in The New Yorker]

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  • Liam_McGonagle

    Oh, Amen to yourself there, brother! If one is inclined to actually do the homework, and study the stats at the IRS and OMB sites you'll notice some very disturbing things:

    1. In 1965, when the highest tax incremental tax bracket on the wealthy was 70%, unemployment was 4.5%. I need not mention to you what today's figure is.

    2. Also in 1965, individuals paid under 2 times the amount of federal tax that corps paid, as a % of GDP. Today individuals pay nearly SIX (600%) times as much as corps do.

    Oh, I could go on, and on, and on. And probably will at some point. But I'm a little fatigued by the inability of the Tea Partiers to understsand these simple things.

    Thanks for posting this one, Majestic!

    • Andrew

      “Also in 1965, individuals paid under 2 times the amount of federal tax that corps paid, as a % of GDP. Today individuals pay nearly SIX (600%) times as much as corps do.”

      Private sector collectivism.

      • Liam_McGonagle

        Not sure I get your point at all. It's kind of ambiguous. Here's what I mean:

        1. Just how “collective” can a “private” sector be? It's an oxymoron. Maybe that's intended to highlight the deviousness of corporate behaviour. That makes sense, and I could enjoy that kind of reading.

        2. One possible reading (you give little elaboration to exclude the possibility) is that you intend to say that you support the destruction of America through defunding its shared institutions like government. That was Grover Norquist's bag. But he's widely regarded as a loathesome creep, and even old friends like Frank Gaffney are likely to shoot first and ask questions later if Grover shows up at their door these days.

        3. It could be construed to falsely conflate the “business community” with the corporate community. That is utterly false. As a recent Ewing Marion Kauffman report points out, 2/3 of all new net job creation comes from small companies (less than 500 employees) which is NOT the typical profile of the large corporations I am clearly addressing in my post. http://www.kauffman.org/research-and-policy/whe

        So could you clarify a little? It'd be unfair if the lack of precision in your comment was unfairly read against itself.

        • Andrew

          Your first reading is closest to my point, but I disagree that “private sector” and “collectivism” are at all mutually exclusive or oxymoronic. My point is that taxing corporations, which are capitalist collectives in the “private sector,” less than individuals is a form of collectivism. Republican Party policy is not libertarian, it is corporatist and plutocratic.

          • Liam_McGonagle

            Now I get you. Right on.

          • 5by5

            It's corporate welfare. They make the American public bear all the burdens, socialize all the risks, while privatizing all the profit.

            Like take BP. They used a gov't subsidy to pay for fully 70% of the rent on that piece of crap oil rig. Then the company that built the well, moved their incorporating first to the Cayman Islands, then to Switzerland all to avoid paying their fair share of American taxes, while simultaneously profiting off the hard labor of the American people.

    • Your Mom

      Regarding your second point:

      “As with all taxes, a distinction must be made between tax rates and tax revenues. Tax revenues went up while tax rates went down in the 1980s. Similarly in the 1960s and the 1920s. That is because incomes rose more than tax rates fell. But still it will be claimed that we cannot “afford” to cut tax rates because it would create deficits. Spending creates deficits — and it is big spenders who fight hardest against cutting tax rates.” Economist Thomas Sowell http://www.capitalismmagazine.com/index.php?new

      • Liam_McGonagle

        Uh, “Your Mom”, you've gotten yourself a little lost again. Read carefully my post again. Tax Rates AND Tax Revenues went down. Today's 35% highest marginal tax rate is LESS than 1965's 70%, and today's federal revenue from corp/individual sources of 7.5% GDP is LESS than 1965's 10.8%.

        Of course, the precise level of abuse perpetrated by the corps is EVEN WORSE, because during the last 30 years the corps have been shoving their medical benefits and retirement obligations onto the public sector as well.

        It seems you have fallen over the edge one of the favourite punji pits of the Frank Luntz / Grover Norquist crowd: The “Laugher” Curve. And it's easy to do if you don't actually think about what you're reading. You need to make sure that you're comparing apples to apples, and not getting confused by the turds that crowd throw in. Thomas Sowell is deliberately misleading you by using an ABSOLUTE measure of revenue in comparison to RELATIVE tax rates.

        C'mon there, “Your Mom”. Surely such amateurishness is beneath you, no?

      • 5by5

        Yeah. And the “big spenders” are the moronic Republicans who took America from a 3 billion dollar surplus to a $10 TRILLION dollar deficit in a mere 8 years by following a drunken frat boy off a cliff.

        Drown American government in a bathtub — Just like NeoCon guru Grover Norquist wanted. Now we're having trouble digging ourselves out, because the way you get out of a Depression IS BY GOV'T SPENDING — namely on infrastructure projects that create jobs. All of which are desperately needed. Those jobs then fuel the economy until the private sector can come back into it's own — and meanwhile you get roads and bridges rebuilt to replace our crumbling infrastructure.

  • oman28

    Some five hundred years ago Rothschild said that it was best for a bank to lend money to a government because the interest was secured against the nations taxes.

    Higher taxes = more profit for the private banks and their evil system of fractional reserve banking.

    • emperorreagan

      Way to make a fallacious argument, champ! More government borrowing = more profits for banks & other debt holders. More profits do not necessarily follow from raising tax rates.

      The implication of the quote isn't that every dollar the government takes in is profit for banks. The implication of the quote is that the risk of default on the part of a government is slim, as compared to corporations or individuals. A government would typically raise taxes before they risk defaulting on their debt, whereas there is a much harder cap on how much money an individual or corporation can raise.

      • oman28

        Thanks but I do understand the implication of the quote. The fact that governments can secure borrowings because “the risk of default on the part of a government is slim” means that governments can (irresponsibly) borrow money to pay back interest on previous borrowings.

        Now if interest is pure profit and “a government would typically raise taxes before they risk defaulting on their debt” then yes in this case the higher tax revenue would equate to more profit.

        And “More government borrowing = more profits for banks & other debt holders”
        Yes it does.

        • emperorreagan

          Let me put it more simply:

          If we increase tax revenue, then banks will get more profits, is a fallacious argument, unless you are suggesting that the following is also true: If we do not increase tax revenue, then the US government will default on its debt obligations. In the context of this article, no such statement is being made.

          Without some sort of imminent threat of default and restriction on financing to the US government, increased tax revenue would reduce potential profits. The gap between expenditures and revenue that the US government has to finance would be smaller and therefore would yield less interest for investors.

    • Liam_McGonagle

      Um . . . Your statement makes no sense.

      1. Your quote there actually implies that the public sector is MORE responsible not less, because it is a better credit risk.

      2. How do you conclude that having the money necessary to conduct its affairs makes a government irresponsible?

      3. Mayer Amschel Rothschild, founder of the banking family, wasn't even born until 1744. So no Rothschild ever said any such thing 500 years ago.

      • oman28

        1. Yes it does.
        2. I don't. Part of “conducting it's affairs' is repaying debt (if required). It is irresponsible to borrow to pay back debt if this means increased taxation.
        3. Whoops. My bad

  • Gemmarama

    EAT the very, very rich. mmmm, tastes like veal…

  • Your Mom

    'After Ronald Reagan's tax rate cuts in the 1980s first brought out anguished cries of “tax cuts for the rich,” it turned out that the federal government collected more tax revenue than ever and that people in upper income brackets not only paid a larger amount of taxes than before, but even paid a higher share of all taxes than before.'

    Economist Thomas Sowell, http://www.jewishworldreview.com/cols/sowell102

    “You're saying to poor people, 'let's tax those rich gits' and I understand that. You slice up the cake, give everyone a chance, but don't destroy the people that are making the bloody cake! I really believe about taking care of people, I don't mind paying tax. It's how the government spends my tax that I detest, really detest, because I see the waste. More money than all our income tax is spent on benefits. Now you tell me there is nothing wrong with that system.”

    Michael Caine, who has vowed to leave England (again) if the income tax rate goes above 50%. http://news.sky.com/skynews/Home/Showbiz-News/M

    • E.B. Wolf

      A fundamental talking point among so-called fiscal conservatives is to reduce government spending [particularly deficit spending].
      U'S. national deficit before Reagan- $994 billion
      After Reaganomics- $2.867 Trillion

      U.S. deficit in 1980- $85 billion
      After Reaganomics- $283 billion, Include the Bush I years and the deficit hit $432 billion in 1991.

      There has been only one administration that has cut the Federal Deficit since Saint Ronald.[Hint: his name is not Bush] So anyone claiming to stand for fiscal responsibility who does not invoke Slick Willie as their patron saint is either a bald-faced liar or a complete fucking retard.

      Note: while Clinton certainly enacted or supported many disastrous policies during his presidency, the reduction in the Federal deficit during his presidency is the closest any president has come to fiscally responsible gub'mint that the free-market crusaders CLAIM to support.

      • emperorreagan

        It's pretty amazing that post-WWII, US federal debt continued to decline while we fought wars in Korea and Vietnam…while also being at the height of the Cold War tensions.

        It makes the Reagan years all the more inexplicable. Why did we need to run up that debt? Ultimately, it amounted to a wealth transfer between the future and the oligarch class. History will look back on Reaganomics as a foolish experiment that resulted directly in the bankrupting of the United States for the momentary fiscal gain of a small subset of people.

        • E.B. Wolf

          Unless that same small subset of people determine who's version of history becomes the “definitive” account.

          • emperorreagan

            I'm betting against the American masters making it through with the influence to write history.

          • Gemmarama

            well considering most of them lack the mental aptitude to even READ history, i'd agree…

    • Gemmarama

      i think you'll find more of your tax is getting spent on illegal wars than benefits, mother…

    • Liam_McGonagle

      Whoa, there “Your Mom”! Please limit yourself to one horribly amateurish misreading of economic data at a time!

      But first a pause. Read again my earlier caution to you against misinterpreting ABSOLUTE data against RELATIVE measures. In this case again your comparing revenue DOLLARS against tax RATES–big mistake. But I'll wait for you. Say another 5 minutes . . . .

      Okay, you back? Finish reading? Good. Here's a specific example of why you can't compare absolute figures against rates: MONEY SUPPLY IS NOT CONSTANT. In fact, the most aggregious example relates to the comical mis-regulation of financial markets that Uncle Dutch initiated.

      The M3 measure of money supply includes marketable securities. In 1980 the figure was $2 trillion. In 2008 the figure was $15 trillion. http://nowandfutures.com/key_stats.html

      Yep, you got it–that's an annual inflation rate of nearly 7.5% (SEVEN-PERNT-FIVE PCT). At least.

      And again, your analysis utterly fails to address the issue of corps shoving their costs onto the public sector.

    • 5by5

      “After Ronald Reagan's tax rate cuts in the 1980s first brought out anguished cries of “tax cuts for the rich,” it turned out that the federal government collected more tax revenue than ever…”

      That's because when it helped tank the economy, Reagan reversed himself, and initiated one of the largest tax INCREASEs in American history. The Difference was instead of corporations paying their fair share, that little douche transferred all the tax burden onto average American workers. See, they didn't have the benefit of all the loopholes that rich people got that made their “higher tax burden” evaporate into irrelevancy.

      Moreover, whenever some goober comes out and says “The rich pay a higher percentage of their income in taxes,” not only is it manifestly untrue, but even if they did, 50% of $250,000 is RIDICULOUSLY easy to “survive” on, compared to 20% of $40,000.

      The fact is that the percentage has less of a real IMPACT on their lives. If they pay a higher tax rate, the decision is “Do we summer in Antigua, or go to Aspen next winter?” Whereas for the regular worker the decision becomes, “Do we pay rent this month, or take junior to the doctor, or buy food? We can't have all three.”

  • Haystack

    I would feel rich if I made even $50,000, sans family. In my mind, if you have to question whether $250,000/year is rich, you have too much money.

  • Liam_McGonagle

    Wow! I knew there was little chance that “Your Mom” or Oman could themselves be persuaded of the fundamental incoherence of their positions. In die hard cases like these what you observe is the “escalation of commitment problem”, i.e., seeing no clear way for themselves to disavow loupy ideas AND maintain face, they cling all the more tenaciously to the loupy ideas. Classic sign of “nowhere to go”.

    But I am confident that readers otherwise uncommitted will be greatly impressed by what you've written. I refer to emperoreagan, E.B. Wolf, Haystack, 5by5 and Andrew. I am deeply impressed by your education and good, old fashioned-common sense. It does this old man's heart good to know that there are such well-educated, vicious young thugs roaming the streets at night! Onward, Statist'cian Soldiers!

    “Go forth and give Challenge to thy Rivals! Let not thy Hand waver nor thy Spirits sink; for though Thine Enemy's Volume be mighty, his Wits be less so. And mind always the Righteousness of thy Cause, for Thou Strivest against The Kingdom of Fraud!”

  • EdHiero

    There’s nothing wrong with taxing those that make $250,000 a year 10 to 15 % more so others in our society can either have better opportunities or more humance services available to them.

    Let’s say someone is working at McDonald’s making $15,000.00 a year, and after taxes, they’re left with $10,000. Someone that is making $250,000 a year and taxed $50,000 a year is still going to be able to afford many times better goods and services than the first person. And do they really deserve to do so? Why shoould they be allowed to live like kings and the other people as virtual slaves? Our country was set up to ensure we didn’t hav kings here.

    I’ve been told before that I have no right to say what the top earners in society make. However, do they really have a right to set what the lower paid workers make at a level that is so insignificant to their own wealth?

  • EdHiero

    There's nothing wrong with taxing those that make $250,000 a year 10 to 15 % more so others in our society can either have better opportunities or more humance services available to them.

    Let's say someone is working at McDonald's making $15,000.00 a year, and after taxes, they're left with $10,000. Someone that is making $250,000 a year and taxed $50,000 a year is still going to be able to afford many times better goods and services than the first person. And do they really deserve to do so? Why shoould they be allowed to live like kings and the other people as virtual slaves? Our country was set up to ensure we didn't hav kings here.

    I've been told before that I have no right to say what the top earners in society make. However, do they really have a right to set what the lower paid workers make at a level that is so insignificant to their own wealth?