Sticking it to the Man

Lefty doesn’t do well with big numbers when it comes to taxes. Or maybe he understands but lets ideology color the analysis. Figures from the U.S. and other industrial countries, including recently released IRS
data, show that if you really want the rich to pay a higher share of total taxes, LOWER marginal tax rates.

The rich, you understand, are different from you and me. Not only do they have more money, but they are (or hire people who are) better at taking advantage of the complexities of the tax system and the higher the rates the more complexity is required.

In 2003 the top 1% of taxpayers paid 34.3% of Federal taxes. (The top 25% pay nearly 90% and the lower half pays almost nothing, BTW). You may recall that Ronald Reagan lowered marginal rates in the 1980s. Before that when taxes were much more progressive and the top rate was nearly double what it is today, the top 1% paid only 19.3%.

The story if you don't feel like crunching the numbers yourself.

So if your goal is to make the rich pay a bigger share of the total taxes, liberal practices work only in theory while conservative theories work only in practice.

Can't lefty figure this out? I think most of them can, but they refuse to see it for two reasons. The first is political. Class warfare is important to lefty as an offensive political weapon. (As much as they claim to love Bill Clinton, his lack of class warrior instinct always bothered the left wing of the party.) The second reason is more personal. It is simple envy. They just don't like it that rich guys have it too easy. They don't want to let the rich off the hook. These two factors in tandem mean that lefty is often willing to sacrifice efficiency for the chance to stick it to the man. - in theory at least.

I can understand being jealous of people who have more. I can understand the joy of thinking you are sticking it to man. But isn’t it better if you can really get the man to pay more?

Posted by Jack at December 8, 2005 10:10 PM
Comments
Comment #100375

Hey, I’ve got an idea. Let’s make it so that the top 25% pay ALL of the taxes. Let’s cut their taxes by whatever you want, and cut my taxes by 100%. I’m sure that by cutting my taxes, the revenues will go up so high that we will never have to borrow money again.

Posted by: Loren at December 8, 2005 10:32 PM
Comment #100382

Can anyone name any VERY wealthy lefties that know AND use all means possible to avoid paying taxes to the U.S. government???
I’m sure their are plenty of righties who do the same BUT the BIG difference seems to be the righties don’t call for raising taxes on those who don’t know how to game the system.

Posted by: bugcrazy at December 8, 2005 11:07 PM
Comment #100384

Loren

That is essentially what happened to the very low income levels. Cut got so far down that they effectively pay zero tax. Many things having to do incentives and taxes are counter intuitive.

Posted by: Jack at December 8, 2005 11:14 PM
Comment #100388

Hi Jack,

“So if your goal is to make the rich pay a bigger share of the total taxes, liberal practices work in theory while conservative policies work in practice.”

You’re asserting that Bush’s tax cuts didn’t benifit wealthy people?

If so that’s a very odd thing to assert.

Do you agree with the Republicans that the debt should be bigger? We’re paying 352 billion/year in interest on the debt and the Republicans want it to go up….do you agree with them?

Posted by: LouisXIV at December 8, 2005 11:31 PM
Comment #100389

The tax cuts benefit the wealthy and eventually all Americans because the lower rates are simpler. The Reagan cuts were better because they were more elegantly simple.

The only way to increase wealth for a society is to increase efficiency and productivity. All taxes will distort efficiency. We should strive to use those that do the least harm.

Posted by: Jack at December 8, 2005 11:37 PM
Comment #100391

In the U.S., the wealthiest 1% of the population holds more wealth than the entire bottom 90%, according to U.S. Federal Reserve research. If there were a wealth tax, they’d theoretically pay most of the taxes in the nation rather than only the third they pay today.

It makes sense, of course, that they pay a higher percentage of taxes for the nation as a whole as they become wealthier (as they are at a quick rate) and as average U.S. wages stagnate after inflation. The wealthy’s slice of the pie (which is nearly the whole pie) continues to grow while other people’s shrinks after inflation. The Gini coefficient continues to rise in the U.S. (as it did under Clinton), where it is considerably higher than in other developed nations.

But the rich getting richer isn’t the real problem. The real problem? The nation’s unwillingness to address massive debt on a historic scale and a corrosively corrupt and inept political system. Even as many a distracted and partisan dimwit chatters about “left” and “right” (what this even means in an era of big-government deficit spending, I don’t know), the U.S. is fast becoming a giant Argentina.

Posted by: Reed Sanders at December 8, 2005 11:42 PM
Comment #100396

Hi Jack,

The tax cuts have, and are, contributing to massive debt.

Do you see rapidly rising interest payments of 352 billion/year to be a problem?

Posted by: LouisXIV at December 9, 2005 12:01 AM
Comment #100398

I am in favor of reversing a few of the Bush tax cuts. Number one on my list is the inheritance tax. I can’t see how we will produce good human beings if we allow inheritance to go from generation to generation with little taxation.

On the other hand, I agree with your premise that you don’t “stick it to the man”. Money flows to where it is treated best. High tax rates mean the rich take their money elsewhere, which helps no one. It’s better to get a small slice of big pie, than no slice at all.

I am far more concerned about the spending side than I am the tax side. I think Bush needs a bit of spine.

Craig

Posted by: Craig Holmes at December 9, 2005 12:03 AM
Comment #100400

LouisXIV

Do you agree with the Republicans that the debt should be bigger? We’re paying 352 billion/year in interest on the debt and the Republicans want it to go up….do you agree with them?

That sounds like a big number, but it is peanuts in a 12 Trillion dollar economy. It’s only three percent of GDP. Also, it is about the same amount as 10 years ago in current dollars. In otherwords because of lower interest rates, we are spending less on interest now, than we were in the nineties when adjusted for inflation and the size of the economny.

Craig

Posted by: Craig Holmes at December 9, 2005 12:07 AM
Comment #100401

Hi Craig,

Our debt is out of control and it’s going up very quickly. We need spending cuts and increased revenue.

Rapidly rising interest payments of 352 billion/year aren’t sustainable.

If an individual was carrying that kind of debt (proportionally I mean) they’d be headed for bankruptcy.

Unfortunately too many were stupid enough to think we were going to grow out of our debt which hasn’t been the case.

Posted by: LouisXIV at December 9, 2005 12:09 AM
Comment #100403

Reed

I am glad you noticed that the top 1% did unusually well under Clinton, but let me back you up with some numbers.

The year Clinton took office the top 1% earned 13.79% of all the income. By 2000 they had upped their share to 20.81%. After the first round of Bush tax cuts and in the year the tax cut on dividends took effect, they were back down to 16.77%.

Louis

Revenues surged in 2004 and 2005. We will take in more money this year than we did in 2005. We need to control spending.

http://www.whitehouse.gov/omb/budget/fy2006/pdf/hist.pdf

Posted by: Jack at December 9, 2005 12:15 AM
Comment #100405

Hi Jack,

Revenues are down relative to GNP.

You’re not trying to spin the fact that the debt has been going up extremely quickly as a result of Bush’s economic policies are you?

The tax cut voted on yesterday involves increasing the debt by some 90 billion dollars over the next five years.

Posted by: LouisXIV at December 9, 2005 12:20 AM
Comment #100406

Jack,
“The only way to increase wealth for a society is to increase efficiency and productivity. All taxes will distort efficiency.”

First, there are many ways to increase wealth besides efficiency & productivity. That is only one way. For example, a country could invest large amounts on R&D. I don’t think it’s necessary to belabor this point.

Second, all taxes distort efficiency? That makes no sense. Money paid in taxes does not simply disappear. It is spent, one way or another. Who determines efficiency? Money is printed by the government in the first place. If you really want to get right down to it, the concept of money depends on a mutually agreed upon illusion. The same can be said for efficiency.

Efficiency? I’m anticipating you believe the individual is a more efficient spender than the government. Let’s take a problem like Global Warming. Government can make a conscious decision to regulate & redirect wealth towards reduction of CO2 and other greenhouse emissions. This is efficient, in that it helps in a basic mattter of survival one century away. An individual may not come to the conclusion that it is necessary to do anything until decades pass. At that point the efficiency of an individual’s market driven decision is pointless, since the temperatures could enter a self-perpetuating spiral, or at any rate be so high, and so slow to come back down, that disastrous consequences would be unavoidable.

Posted by: phx8 at December 9, 2005 12:38 AM
Comment #100436

Jack,
Great way to represent the smoking mirror argument of the Republicans on taxes. Yes, the top 1% of population’s income earners pay the most taxes. And while some of these people may belong to the top 10% of the wealthiest, I would bet that most citizens of extreme wealth in America has much if not all their income taxes defered through what and how they are invested.

However, this brings up a larger debate in society. Are these citizens complaining that they are paying more than their equal and fair share? If so and the amount of taxes due is based on yearly income than all they have to do is not accept the money.

There you go, have the people who don’t want to pay high taxes allow the company to keep their paycheck. In this manner they could be even with those citizens that are so worried about fiscal responiblity that the opposition tells them to just give the government money. Fair is Fair and in this manner nothing gets done. Perfect right?

Maybe the Democrats and Republicans was wrong a 135 years ago when they decided to start this insane tax system without giving anyone the opportunity to invest in America.

Posted by: Henry Schlatman at December 9, 2005 4:01 AM
Comment #100438

LouisXIV and Reed, some very good points.
phx8, nice post. I always like to see you argue with Jack over the economy because I’ve noticed that you’re as sharp as a tack when it comes to this type of debate.

Since you guys have done so well, I’d rather make a generalized statement.

Jack,
Trickle down DOES NOT work. It has NEVER worked, and everyone with half a brain in their heads knows this with certainty. Taxing the rich at a higher rate has been proven to grow the economy and the gdp, which makes everyone live better, and in turn they buy more, which means nobody gets “stuck” — most especially “the man”.
Neocon Republican’s, beginning with Reagan have been more irresponsible in their spending than Democrats EVER were.
We want all our boats to rise, but with these Neocon’s at the helm, it’s always been their yachts that manage to stay afloat while the majority of us are left to founder in their wake. To get back on an even keel, we need a balance of power. We currently have none — just look at the result.
And yes, it is most definitely CLASS WARFARE — and well you know this — which is exactly why you’ve rushed to make that particular disclaimer before anyone even said a word.
If anyone who reads this bothers to take a long look at our history, they’ll note that when the majority of power lies in the hands of rich Republican’s, everyone below their extremely wealthy social class has suffered as a result.

Uh, sorry if I went overboard with all the nautical terms (groan). Carry on, gents — very interesting reading.

Posted by: Adrienne at December 9, 2005 5:11 AM
Comment #100453

Jack, it is your article that understand or refuses to acknowledge actual numbers. The amount of revenue lost as a result of tax cuts is greater than the amount of revenue gained by increased economic activity. Just one of many reasons why every Republican president since Reagan has stimulated the economy by vastly increasing national debt through deficits. The tax cuts never equal the revenues gained from increased economic stimulus. But of course, Republicans try to hide that fact from the public with “smoke and mirrors”!!!

Posted by: David R. Remer at December 9, 2005 5:39 AM
Comment #100480

Jack sticking it to the man isn’t what it’s all about. And for a site that espouses an ethic of no personal insults, we sure do throw terms like neocon and leftie around quite liberally?

So why can’t “leftie” just reward the rich and give them tax cuts which make things in the middle classes more expensive, right? Why shouldn’t the rich make the poor and middle classes pay off the deficits alone? Why shouldn’t wealth be rewarded because they deserve rewards just for being rich people, right? Why punish them by making them pay their fair share? The rich shouldn’t have to pay anything it should be those dummies in the middle classes? Why do they want things less expensive at the grocery store or at the pump, they should be so happy to reward the wealthy?

Jack you make this too easy.

Posted by: Novenge at December 9, 2005 7:54 AM
Comment #100488

See Jack,

What you fail to take into consideration is that ALL MONEY IS MONEY BORROWED, it’s called the Federal Reserve banking system. When you learn a little something about fiat and levels of fiat then you are prompted for this debate but without knowledge of the Federal Reserve thinking it is only a banking establishment that raises or lowers interest rates, then upon garnering that knowledge you may have this debate. Until then I have to go against the by-rules of Watchblog and accuse you of crankery.

You know you need dollars but unfortunately you seem to know little about transactionally what they are. We have to pay back the value any slowing of that decreases it’s value. WE tax to pay down the federal reserve then congressional spending AFTER THE RECALL OF DOLLARS when the dollar is at a higher value. The more dollars we have floating about in the market by way of slowing the payback the less they are worth. It does decrease interest rates but it also raises costs on everything being that they are at a lower value due to an overabundance floating around in the world market. That’s what tax time is, not to support the state BUT REINFORCE THE DOLLAR. Believe it or not. then after the recall of our dollars manaing it’s monetary value THEN congress does it’s spending. So in other words they don’t use your money to do any social spending they use the new value after tax time and then at the end of that fiscal year you pay the debt at that set amount back to the federal reserve. But if the top aren’t paying back to the fed, well then it slows the payback on the fiat and hence the dollar still remains low. Read up on the Federal Reserve it’s an eye opener! You’ll never see those green paper rectangles the same way again, beyond the jargon it’s fascinating.

A dollar is a body of transactions not a tangible thing even with a paper scrip, writ or note. And summarily it’s actually not a bad system.

Posted by: Novenge at December 9, 2005 8:34 AM
Comment #100497

bugcrazy

Can anyone name any VERY wealthy lefties that know AND use all means possible to avoid paying taxes to the U.S. government???Can anyone name any VERY wealthy lefties that know AND use all means possible to avoid paying taxes to the U.S. government???

Does the name Ted Kennedy ring a bell?

Posted by: Ron Brown at December 9, 2005 8:54 AM
Comment #100500

Lets raise the tax rate on the rich to 100%. That way they can live the same way that we have too.
Of course there won’t be anyone left to hire us so we won’t be able to pay our bills. Which means that the mortgage company will take our houses. But that’s ok. The government will get them in taxes. Then it can rent them to us. And senese we don’t have any money we all can qualify for free Government housing.
Of course the Government won’t have any money, because none of us are working, so it would have to shut down. Then there goes our homes to some forgien country.
But let’s raise the tax rate for the wealthy to 100%.

Posted by: Ron Brown at December 9, 2005 9:07 AM
Comment #100501

Hi Ron,

“Does the name Ted Kennedy ring a bell?”

I’m fairly certain that Kennedy has voted to raise taxes for himself. You’re spinning out of control here.

“Lets raise the tax rate on the rich to 100%. That way they can live the same way that we have too.”

Why not try for clear thought here Ron? Right wing spin seems to have prevented you from thinking clearly.


Posted by: LouisXIV at December 9, 2005 9:15 AM
Comment #100506

Jack,

Just a question. The change in rates of taxation payed by the rich has also occurred over the course of changes in wealth distribution (i.e., income is skewed even more heavily towards the very wealthiest individuals now vs. 20 years ago). If so, isn’t it possible that the rate of taxation payed by the wealthy is simply a reflection of the fact that they have more wealth now? Isn’t it possible that this statistic actually reflects some very problematic trends (e.g., a declining middle class)?

Posted by: Steve Westby at December 9, 2005 9:34 AM
Comment #100509

Question:

Why do people want to punish the rich? Why are they forced to pay the majority of the tax burden, while poor people sit around and collect checks? Now, I realize that all poor people don’t do that; however, why should a hard-working, rich successful person be punished for succeeding in life? Not all rich people are greedy and unscrupulous; hell, there are poor and middle class people that are like that as well, does that mean they should get taxed out the wazzoo?

Posted by: rahdigly at December 9, 2005 9:49 AM
Comment #100511

The government could receive more revenues if they simply fixed the stupid tax code, so that everyone (except the very poor) pay a fair amount. No one would have a huge objection to taxation if it was more simple and fair.

A FLAT INCOME TAX RATE PERCENTAGE with a low-income-level exemption (and no tax paid by anyone until that low-income-level-exemption is exceeded), with all deductions and loop holes eliminated would be a better tax system that is fair, simple, and least disruptive, and requiring the least changes (only simplifications) to the current system, while still allowing accounting for Social Security and Medicare (since we are forced to drag that along with us).

EXAMPLE:
GIVEN:
(1) a flat income tax of 17% ,
(2) and a poverty level of $12K ,
(3) and an N factor (multiplier) of 1.5
(4) therefore, low-income-exemption-level is 1.5 x $12K = $18K
(5) and five persons with different gross incomes:
A earned $15,000 per year.
B earned $50,000 per year.
C earned $90,000 per year.
D earned $200,000 per year.
E earned $900,000 per year.
F earned $9,000,000 per year.

Therefore, the income tax for each person (after subtracting the $18K exemption) is:
A’s tax = $0 since $15K is less than $18K; that is 0% of $15K ;
B’s tax = $5,440=0.17 x ($50K-$18K); that’s 10.9% of $50K ; and 17% of $32K
C’s tax = $12,240=0.17 x ($90K-$18K); that’s 13.6% of $90K ; and 17% of $72K
D’s tax = $30,940=0.17 x ($200K-$18K); that’s 15.5% of $200K ; and 17% of $182K
E’s tax = $149,940=0.17 x ($900K-$18K); that’s 16.7% of $900K ; and 17% of $882K
F’s tax = $1,526,940=0.17 x ($9,000K-$18K); that’s 16.97% of $9,000K ; and 17% of $9,982K

That’s a linear tax scale (income versus tax), which is most fair, avoids the common argument that plague the graduated (progressive) tax systems as being unfair by taxing higher income at increasingly higher tax rate percentages, and does not punish the poor, due to the low-income-exemption-level exemption. Everyone pays the same 17% on all income above the low-income-exemption-level.

Yes, I am suspicious of those that think those with larger incomes should have to pay a larger income tax rate percentage by favoring a hideous progressive (graduated) income tax rate percentage (that increases with income).
Why? Because the fact that 17% of $1 million is much more than 17% of $50K is progressive enough, by virtue of the flat rate income tax percentage. 17% of $1 million is $170K of tax. 17% of $100K is $17K. That is a whopping 10 times more tax paid. That’s fair enough don’t you think ? That’s progressive enough, don’t you think ? But, NOoooo. Some, fueld by jealousy, envy, resentment, and greed want to stick it to ‘em. They try to disguise their jealousy and envy with false claims of equality. They believe they have that right. They make me sick.

So, why not do the most simple, logical, safe, least disruptive, no-brainer, and fair thing. Simplify the Tax System so that it is fair, and doesn’t hammer the poor.

NOTE: The 17% flat tax rate was arrived at by dividing the total current federal tax revenues (about $2 trillion in 2004) by the U.S. GDP (about $11 trillion in 2004), and subtracting 1% (i.e. 18% - 1% = 17%). The federal government should be able to reduce spending by 5.6% which accounts for that 1% reduction for the 17% Flat Income Tax Percentage Rate. This is very doable. It’s mostly simplifications, instead of huge, vast alterations. It still allows for accounting for Social Security and Medicare. It eliminates all loop-holes. It would save billion$ by eliminating the complex tax accounting.

However, this simple no-brainer request, and many like it are all pipe-dreams, until the voters first peacefully force the government to be responible and accountable. Government will never reform itself.
The nation is facing many pressing problems, now culminating simultaneously. But incumbents within government are ignoring the voters and these many serious problems as they grow in number and severity. A fundamental change in government must take place first, because:

[1] Incumbents are too entrenched in petty partisan warfare, and also fuel the partisan warfare by seducing voters into the circular pattern of thought and action, which (by design) serves as a perfect distraction from the many pressing problems facing the nation.

[2] Bought-and-Paid-For Incumbents are too consumed with raising big-money for their campaign war-chests, and too loyal to their big-money donors that abuse vast wealth and power to control them and control government. It’s not difficult to understand why incumbents so highly prize their cu$hy, coveted seats.

[3] Incumbents have an unfair advantage. Incumbents are very difficult to replace, because of their big-money donors and the predictability that it provides. Hence, 90% of elections are won by the candidate (mostly incumbents) that spends the most money. And over 90% of incumbents can not be beat because their big-money donors guarantee it. Thus, it is nearly impossible to unseat incumbents from their cu$hy, coveted, and highly prized offices. Also, how can the average person have a voice in government when 60% of all wealth is owned by only 5% of the population, and 60% of the population only has 5% of all wealth? I don’t envy the wealthy. I just don’t think government should be controlled by a few that abuse their vast wealth to manipulate government. That’s why we badly need campaign finance reform. Government should not be FOR SALE.

Posted by: d.a.n at December 9, 2005 9:55 AM
Comment #100512

rahdigly asked:

Why do people want to punish the rich? Why are they forced to pay the majority of the tax burden, while poor people sit around and collect checks?

With respect, I do not feel that most people wish to “punish” anyone. If you don’t believe this, how about we do a survey and ask people on the left a simple question: “Do you have a deep desire to punish people for being wealthy?” Honestly, how many do you really think would say “YES”?

On the other hand, I think there is a great deal of interest in making sure that our system of taxation is FAIR. When the very wealthy end up paying a lower proportion of their income towards taxes than, say, individuals in the midle class — that strikes many as being unfair.

Posted by: Steve Westby at December 9, 2005 9:55 AM
Comment #100514

Hi rahdigly,

The important questions have nothing to do with your spin on the matter.

The important questions have to do with getting out from under mountains of debt.

Our country is in serious trouble and the neocons are trying to spin their way out of this one.

If those in Congress who vote to increase our debt had a shread of patriotism they would be very ashamed.

Posted by: LouisXIV at December 9, 2005 10:06 AM
Comment #100517

LouisXIV,

You are so right about the debt problem.
Did you know the debt now, adjusted for inflation, is 4 times what is was after World War II , in which we had huge debt?

Look at this graph. I think you may well be justified to be concerned about it. The problem started 25 years ago, and people (government too) underestimate the long term effect this will have. Then, include our many serious problems all culminating simultaneously, and you have a recipe for disaster. I hope not, but even some respected economists are starting to raise some red flags.

Posted by: d.a.n at December 9, 2005 10:17 AM
Comment #100519

I’m fairly certain that Kennedy has voted to raise taxes for himself. You’re spinning out of control here.

Posted by: LouisXIV at December 9, 2005 09:15 AM

It’s easy to vote for tax increases when you know you’ll never have to pay those taxes.

As far as my second post goes. I reckon you didn’t pickup the fact that I was being sarcastic.

Posted by: Ron Brown at December 9, 2005 10:27 AM
Comment #100521

The reason it’s called trickle down economics is because it really does TRICKLE…barely. The thirsty below might be lucky to catch a drop eventually.

Posted by: chantico at December 9, 2005 10:29 AM
Comment #100527

Steve,
“With respect, I do not feel that most people wish to “punish” anyone. If you don’t believe this, how about we do a survey and ask people on the left a simple question: “Do you have a deep desire to punish people for being wealthy?” Honestly, how many do you really think would say “YES”? On the other hand, I think there is a great deal of interest in making sure that our system of taxation is FAIR. When the very wealthy end up paying a lower proportion of their income towards taxes than, say, individuals in the midle class — that strikes many as being unfair.”

Some people would call the top 50% paying 95% of the taxes, with the top 1% paying 1/3 of it, “punishment”. Taxing the rich and giving it to the poor is most certainly punishing those who succeed. And, nobody (particularly on the left) is going to admit that they want to punish the wealthy; however, that’s what you do when you raise taxes or not allow tax cuts.

Right now, too many people (rich & poor) abuse the system with the current tax system and that is wrong. The tax codes are completely unfair to everyone; that’s why we need to restructure the tax code.

Posted by: rahdigly at December 9, 2005 10:53 AM
Comment #100529

All of these schemes (trickle down, graduated/progressive tax scales, etc.) are all over-complications with one goal in mind: to legally plunder others

How about we all try looking at everything government does with the goal of simplifying it? Many, many things need attention now. But, none of these ideas and improvments will ever materialize without first forcing government to reform. That can be peacefully, or we can wait for history to repeat itself, and do it the hard, painful way (again).

All of these many thing we endless debate on the blogs and elsewhere are all futile until the voters do the very simple thing that they should have been doing all along, to get the attention of government, and peacefully force a restoration of the balance of power between government and the people (not merely shift it, or stip it of all power to accomplish anything).
How? There’s really only one option left. Simply do what each voter is supposed to do. Just do the right thing. Fire them. Vote out incumbents. They are to blame, and voters are to blame for allowing them to grow so corrupt. But the voters need to be educated to realize that government always grows corrupt, if allowed. So, start voting out incumbents. That’s the only way to get their attention. Then follow through with a simple test to prove they deserve to keep their seats. Give Congress a To-Do-List of simple, no-brainer, common sense items to do that will simplify over-complicated procedures (designed to permit abuses) to yield more transparency, that will discourage corruption.

Sadly, that’s what is required. It’s got to be simple, and justified. Does anyone have a better approach? The big question is, will people ever do it? Maybe not. But, that doesn’t diminish the justification to simply do the right thing, or justify doing nothing, and resigning to despair and futility. What we’ve been doing doesn’t work, because voters failed to realize the human trait to seek security and prosperity with the least effort and pain. When will such legal plunder end? Only when legal plunder is more painful than honesty and responsibility, which can only be derived from transparency and accountability (i.e. the chanes of getting caught and punished).

Do enough people really realize the level of corruption and irresponsibility in Congress? The bar is set so low, it is amazing what is now considered acceptable. The longer this corruption and dysfunction is allowed to grow, the harder and more painful it will become to fix it.

Posted by: d.a.n at December 9, 2005 10:55 AM
Comment #100530

I know I’m not the only person skeptical that by giving a handout to the rich you help the middleclass and poor. Wasn’t it Bush’s father that called trickle down “voodoo economics”?

You guys are pretty miserly when it comes to giving people that are out of work enough money to live on. Why all the support for giving welfare to our nation’s richest individuals and businesses? Don’t you believe in capitalism?

Posted by: Max at December 9, 2005 11:00 AM
Comment #100532

Phx8

You are not wrong about R&D, but what does R&D do? It increases efficiency and productivity.

I should not have used the word efficiency in “taxes distort”. Taxes distort choices. Firms and people who have money to invest make choices based on AFTER TAX income. If tax rates are high, you may choose a different investment. For example, you might choose to invest in gold (a retrograde an economically useless investment) as a way to avoid and maybe even evade taxes, rather than in a transparent fund that will be taxed each year.

You anticipate right about individuals. Over time interdependent but autonomous decision making works better than anything else. This has been shown by many years of history. Smart guys always try to beat the market. Some succeed for a while. The vast majority fails.

If the government wants to limit CO2 their course is very simple. Let the price of oil and gas rise and encourage nuclear power. The higher price will (as we have seen just months ago) encourage conservation and the development of alternatives. When the price of gas was up, car dealers couldn’t keep hybrids on the lots and they could not give away big SUVs.

Henry

You are attacking in the wrong problem. My point is not that the rich should pay more or less. That is a normative argument. My point is that if you lower the rates they actually pay more. It is just descriptive. So if you believe the rich should pay LESS increase the rates. It is a kind of game theory where the action you take will not always produce the result you want because others will change their behavior in response.

Adrienne
Same as I told Henry and Phx8. It is a game theory problem. You don’t achieve the result you want by raising the rates. I am not rich and given my age and personal habits it doesn’t look like I ever will be. I would not care if you tax the crap out of them if I thought it would be good for the rest of us, but it’s not.

Novenge

You can’t punish them even if you want to. The higher rates shift the burden more onto the poor and middle class. They paid a higher percentage of the tax when the top rate was 70% than they do now. And the pattern holds for countries besides the U.S. So the question is whether you want to actually do something or look like you are.

Re the Federal Reserve I am familiar with how it works. I couldn’t exactly follow your argument, but if I read correctly you believe that if the money supply increases interest rates decline. And when you are talking about the value of the dollar declining are you referring to inflation (which is fairly low) or the value of the dollar against foreign currency (which actually increased this year)? I think Greenspan would be surprised by your analysis.

Louis

Kennedy can raise taxes on himself all he wants because he knows that he can avoid paying them.

I heard a partisan but funny talk about rich liberals. Listen if you have time and pay attention to how the Kennedy’s manage to pay taxes at a lower rate than you do.

Steve

Yes. But if you look at the figures you see that while their percentage of the total income has grown (under Clinton more than ever with a slight decline under Bush) their percentage of the total tax has grown faster.

Dan

You also have to adjust for GDP growth. My own debt is higher than when I was 18 (much higher) but I am not less secure today.

Posted by: Jack at December 9, 2005 11:03 AM
Comment #100536
rahdigly wrote: I think there is a great deal of interest in making sure that our system of taxation is FAIR.

Yes, you’d certainly hope so !
Seems simple enough doesn’t it?
But, not to some, unfortunately. Some secretly want to stick-it to the wealthy, and disguise their envy and jealousy as claims of equality. Jealousy and envy is a terrible monster within. It destroys the soul.

Also, what these individuals that press for a graduated/progressive income tax rate percentage are accomplishing is to prevent any potential for reform at all. They are sabotaging the possibility for any tax reform, because the premise of their strategy is already defective, and corrupt as what we have now. Their sense of fairness is to stick it to them. Hence, no progress can occur. It’s a stalemate. But, it’s unlikely any sort of reform is possible anyway, due to a larger issue. Irresponsible and unaccountable government, and voters that haven yet figured out how to use their vote wisely to have the most impact. Too many voters, unfortunately, have been seduced into the circular pattern of petty partisan warfare that distracts them from simple solutions. Thus, our pressing problems continue to grow in number and serverity.

Posted by: d.a.n at December 9, 2005 11:13 AM
Comment #100537

Jack,
Why is there perpetual GDP growth?
What many see as GDP growth is really inflation.

Posted by: d.a.n at December 9, 2005 11:16 AM
Comment #100542

Jack,
Are you saying the National Debt is nothing to be concerned about ? Currently, if we stopped borrowing $1 billion per day, and started also paying down the debt by $1 billion per day, it would take 127 years to pay down the debt.
Look at the graph. It is cost adjusted for inflation. GDP in 2004 was about 11 Trillion. The National Debt is currently $8.1 Trillion. Taxes are 19% of GDP. And, we have many other pressing issues, that have the potential to make the debt worse in the following 5 years. And, a generational storm is coming too. 77 million baby boomers making less money, spending less, saving less, paying less tax, and drawing on Social Security and Medicare. Not to mention other many pressing problems that will exacerbate all of this. Also, regarding GDP, when has the National Debt-to-GDP ratio been as large as it is now, coupled with the limited growth we are now facing, as more manufacturing moves abroad, income for most is stagnant, and we face increasing foreign competition? I don’t know. I’m having a hard time painting a rosy picture from all of that?

Posted by: d.a.n at December 9, 2005 11:26 AM
Comment #100544

Dan

Only people who don’t understand economics and don’t make successful investments. We adjust for inflation in GDP growth figures. We are much richer than we were in 1970, for example. People like to imagine it differently.

My working class friends and neighbors back in Milwaukee where I was born have been to Las Vegas or Hawaii. They all have cars. Many have boats. My fathers generation was lucky to take a vacation up to Sheboygan to get a fish fry. They often didn’t have cars. Some had boats, but you had to row them.

Posted by: Jack at December 9, 2005 11:28 AM
Comment #100545

Not to mention Americans with $32 trillion of personal debt.

Posted by: d.a.n at December 9, 2005 11:28 AM
Comment #100546

rahdigly wrote:

Some people would call the top 50% paying 95% of the taxes, with the top 1% paying 1/3 of it, “punishment”. Taxing the rich and giving it to the poor is most certainly punishing those who succeed. And, nobody (particularly on the left) is going to admit that they want to punish the wealthy; however, that’s what you do when you raise taxes or not allow tax cuts.

First of all, I appreciate hearing your perspective. I would have a couple of concerns, however. First, I would disagree with your characerization of the motives behind liberals’ desire for a progressive system of taxation. Agree with it or disagree with it, the motive they have is one of fairness (or a desire to protect the poor). Casting insults or insinuations about liberals having a deep underlying desire to “punish” the wealthy is unhelpful and, IMHO, utterly false.

Second, the question of what percentage of taxation is paid by the rich. It seems to me that this is only unfair if the rich are paying a greater percentage of tax than they have for income. So if the very wealthy OWN 95% of the wealth in the country, of course they should PAY 95% of the taxes (as an example). That reflects a disparity in the distribution of wealth in our country, not unfairness in the tax system.

What’s more, studies have shown that the wealthy end up paying much less tax (as a percentage of income) relative to those in the middle class.

In any case, I would agree that we need a better system of taxation in this country, though we might disagree on precisely what that would look like.

Posted by: Steve Westby at December 9, 2005 11:30 AM
Comment #100548

Jack,
Travel is much cheaper now than then.
But, I’m not convinced, because it’s easy to look like you’re doing great, while you’re maxing out all of your credit cards, and deep into debt. Like I said, the debt level in this nation is at record highs. Not just public debt, but personal debt too. And the National Debt represents about $38 Trillion (in 2005 dollars) in interest payments owed. The National Debt is about to make some drastic upward jumps too, because of Medicare and massive fiscal irresponsibility that started in 1980. And, GDP isn’t as high as reported, because it doesn’t subtract out inflation first.

Posted by: d.a.n at December 9, 2005 11:33 AM
Comment #100550

And, if you factor in inflation, rising cost of housing, etc., the people, in general, aren’t getting more wealthy. They middle-class is actually shrinking.

Posted by: d.a.n at December 9, 2005 11:36 AM
Comment #100554

And, even though home ownership has increased, those homes are not owned free-and-clear. Most of those people are deep into debt. And, if the economy turns bad, there will be massive foreclosures. This whole path will likely reach a dead-end about 2005. That’s my guess, anyway. It’s getting harder and harder to see how it will be avoided. Especially if the federal government continues to spend, borrow, print money, and grow the government ever larger to nightmare proportions.

Posted by: d.a.n at December 9, 2005 11:41 AM
Comment #100556
This whole path will likely reach a dead-end about 2005. That’s my guess, anyway.
I meant 2010. Posted by: d.a.n at December 9, 2005 11:42 AM
Comment #100562

Hi Dan,

“Did you know the debt now, adjusted for inflation, is 4 times what is was after World War II , in which we had huge debt?”

I didn’t know that.

I do know that we’re spending some 17% more than we’re taking which on top of an 8 trillion dollar debt is really scary.

I also know that the interest on the debt is 352 billion/year and is rapidly increasing.

It may be too late to do much to fix the problem but for the sake of the country it needs to be tried…….we’re going bankrupt at this rate.



Posted by: LouisXIV at December 9, 2005 11:56 AM
Comment #100563

Hi Ron,

“It’s easy to vote for tax increases when you know you’ll never have to pay those taxes.”

Bush’s tax policies involve Kennedy paying less taxes.

Warren Buffet said of a tax cut that he should be paying more in taxes….under the tax cut plan his tax rate was going to be 3% while his secretary was paying 30%.

Are you concerned about the fact that interest on the debt is 352 billion/year and going up quickly?



Posted by: LouisXIV at December 9, 2005 11:58 AM
Comment #100564

Dan,
“rahdigly wrote: I think there is a great deal of interest in making sure that our system of taxation is FAIR.”

Check that post again (Posted by: Steve Westby at December 9, 2005 09:55 AM), it was steve that you quoted, not me.


I’m for changing the tax code entirely.

Posted by: rahdigly at December 9, 2005 12:03 PM
Comment #100565

Jack,
I don’t think most (in general) are all that significantly more wealthy than 1970, but there is data to show that middle-income-class is shrinking or stagnant at best.
___________________________________________
Distribution of net worth and financial wealth in the United States, 1983-2001:

Top 1% __________ Next 19% _______ Bottom 80%
1983 33.8% ________ 47.5% ________ 18.7%
1989 37.4% ________ 46.2% ________ 16.4%
1992 37.2% ________ 46.6% ________ 16.3%
1995 38.5% ________ 45.4% ________ 16.1%
1998 38.1% ________ 45.3% ________ 16.6%
2001 33.4% ________ 51.0% ________ 15.5%
___________________________________________

Financial Wealth:
Top 1% __________ Next 19% _______ Bottom 80%
1983 42.9% ________ 48.4% ________ 8.7%
1989 46.9% ________ 46.5% ________ 6.6%
1992 45.6% ________ 46.7% ________ 7.7%
1995 47.2% ________ 45.9% ________ 7.0%
1998 47.3% ________ 43.6% ________ 9.1%
2001 39.7% ________ 51.5% ________ 8.8%
_____________________________________________
And, from this Wealth Distribution graph, I don’t see the average American growing wealthier. In fact, it’s been in a downward trend for a while.
Interestlingly, it’s been in a dowward trend ever since the Congress started growing increasingly fiscally irresponsible, starting in 1980 (which coincides with the other chart and it’s steep jump in debt starting in 1980).


Posted by: d.a.n at December 9, 2005 12:03 PM
Comment #100572

Oh…I see. Sorry rahdigly.
It’s easy to get confused when …


blockquotes

… are not used around quotations. Sometimes, I don’t even see double-quotes ( ” ” )around quotations. My apologies. Still, I also want a major simplification of the tax system too. But, I think it is futile until we do the prerequisite step first to get the attention of our corrupt government.


Posted by: d.a.n at December 9, 2005 12:12 PM
Comment #100573

Dan

You proved my point. Travel is much cheaper now. Lots of things are much cheaper now in relation to what we earn. Most people now own DVD players. Almost everyone has a color television. The square footage of median American homes is now higher than that of well off a couple generations ago. Working families own several cars. This has become natural so we no longer notice.

The middle class is shrinking as some people move into the wealthier groups. There are not more poor people except in the case that we define poverty up when the general prosperity rises. Remember half of all Americans always and everywhere make less than the average income and twenty percentage of all Americans always and everywhere fall into the lowest income quintile. That will never change.

Louis

Fix the problem but diagnose it correctly first. The tax cuts on capital gains and dividends have stimulated the economy and helped eliminate inefficient distortions.

The 900lb gorilla anyway is entitlements. We can handle the current deficit. It was a much higher percetage of GNP in the early 1990s than it is today. What we can’t handle is the fantastic growth of entitlements (SS, Medicare, Medicaid etc) That will soon break the bank and the problem clearly cannot be solved on the revenue side.

Posted by: Jack at December 9, 2005 12:15 PM
Comment #100576

Dan,

I understand. I’m looking at a “fair” tax to replace the current tax system:
http://usgovinfo.about.com/cs/taxes/a/aafairtax.htm

What do you think?

Posted by: rahdigly at December 9, 2005 12:19 PM
Comment #100579

The tax cuts benefit the wealthy and eventually all Americans because the lower rates are simpler. The Reagan cuts were better because they were more elegantly simple.
Posted by: Jack at December 8, 2005 11:37 PM
++++++++++++++++++++++++++++++++++++++++++++++
I love this fallacy being promulgated by the right. The year after the Reagan tax cuts, when the deficit projections showed how bad an idea the cuts were, he signed the largest tax increase ever. Too bad Bush43 doesn’t have the brain or morals to see what he hath wrought.

Posted by: Dave at December 9, 2005 12:26 PM
Comment #100580

Hi Jack,

“Fix the problem but diagnose it correctly first. The tax cuts on capital gains and dividends have stimulated the economy and helped eliminate inefficient distortions.”

I did diagnose it correctly. Bush has borrowed trillions of dollars in order to stimulate the economy. This is not a sustainable economic policy as it’s resulted in 352 billion/year interest payments.

Warren Buffet indicated that a proposed Capital gains tax cut would result in him paying 3% in taxes which he says is “a bit light”. Do you agree with Warren Buffet that he should pay more than 3% in taxes?

Medicare/Medicaid is indeed becoming a seriuos budget problem.

How do you propose we pay for the war in Iraq?

Posted by: LouisXIV at December 9, 2005 12:27 PM
Comment #100587

The 900lb gorilla anyway is entitlements. We can handle the current deficit. It was a much higher percetage of GNP in the early 1990s than it is today. What we can’t handle is the fantastic growth of entitlements (SS, Medicare, Medicaid etc) That will soon break the bank and the problem clearly cannot be solved on the revenue side.

Posted by: Jack at December 9, 2005 12:15 PM
================================================
Man oh man, and the world is flat.

Posted by: Dave at December 9, 2005 12:43 PM
Comment #100588

Jack,
OK, true. Some things are cheaper.
But, what about health care?
Health care costs are bankrupting many.
Millions of children don’t get good health care.
What about health care insurance?
What about food. It’s not that much cheaper.
And incomes are now growing.
I’m looking at a graph where they are flat.

The point is jack, looking at the big picture, are you saying we’re all that much better off now? Also, what do you think 2010-to-2020 will be like? If you look at the trend, you’ll see that the wealth distributions are approaching those of the Great Depression in 1929. See the chart. Also, check this out. Are things as rosy as some try to paint it? Personally, after much research, I think there is at least, justifiable reason to be concerned?
________________________

rahdigly,
I’m a member of the FairTax.org .
It’s OK.
But, I prefer this Flat Income Tax Rate Percentage With Low-Income-Level exemption for several reasons listed on that web-page. But, the main reason is because the Flat Income Tax Rate Percentage Plan would require the least changes, because all changes would be simplifications only, and not vast changes of the way things are done. And it essentially would accomplish the same thing.

Also, here’s a very interesting point. One question about any tax system that is continually asked is:

Will everyone (excluding the poor) pay their fair
(or equal) percentage of tax related to income ?
Interesting isn’t it? What does that tell you? It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax).

Posted by: d.a.n at December 9, 2005 12:43 PM
Comment #100589

Pardon me if I am wrong, but I thought the main idea of the tickle down theory was that the rich would help create new jobs for the poor.

Supposedly these jobs would allow poor people to also pay taxes.

At the time I thought it was a stupid idea, and as I have not seen any extra gains from these so-called new jobs, I still think it is a stupid idea.

It would seem to me that what should have been done years ago, auditing the government for waste would still be a good idea. I’ve mentioned this before, but how many of you know that there is NO budget for the White House and it’s staff? No one has the foggiest idea how much is spent, saved or otherwise wasted. NO ONE. That’s like handing our a blank check to to teenager and having no idea who (benefits) or how much is being spent.

How can we expect our government to manage money if it doesn’t know what it spends?

A full audit just might find enough money to handle our taxation problems and not “punish the rich” or the poor.

Rah,
As for the rich being punished, if they accumulate the most stuff, then let them pay for it. Several big mansions with tons of bedrooms stripes me as a waste. Especially when they aren’t in the USA., where presumably they made their money. It appears from the news that too much of a good thing can be bad.

Personally I think a flat tax might be closer to being fair than what we have now.
Linda H.

Posted by: Linda H. at December 9, 2005 12:44 PM
Comment #100590

Jack, Just curious. You sound knowledgable about financial matters. Are you a financial analyst, advisor, or similar?

Posted by: d.a.n at December 9, 2005 12:46 PM
Comment #100592

Jack,

In your post @ 12:15, can you back up your assessments of the current economy? It sounds a little bit off or highly glossed over.

And in my earlier post I was trying to illustrate that paying taxes aren’t just about giving to social programs but the inner workings of your money as it get’s absorbed into the system. We recall dollars (taxation) from the marketplace to reinforce the value of the dollar. And monetary values don’t “inflate” prices do. The trading of the dollar in the world market obviously plays a factor but the more there are in the marketplace (that are slow to recall now) the less they are worth. Nevermind but the value of the dollar plays a large part in the higher fuel prices (which subsequently effects everything related) being that now it takes more to purchase said barrel of oil with our exchange rate on the dollar. Again nevermind.

Posted by: Novenge at December 9, 2005 12:48 PM
Comment #100593

Jack,

Who wants to stick it to the wealthy? We just want them to pay the same percentage of taxes everyone else does. This is “sticking it to them?” Please.

Posted by: Max at December 9, 2005 12:51 PM
Comment #100594

I don’t think the bottom 99% are getting richer.
Check this out (below). Look at the wealth distribution. This downward trend since 1980 is largely due to the fiscal irresponsibility of the federal government.

And, we shouldn’t try to blame the wealthy for anything. Only those that try to use vast wealth and power to control bought-and-paid-for politicians, who are too beholding to their big-money-donor puppeteers. But, none of that will change until the people peacefully force governemnt to be irresponsible. They’ll never do it voluntarily. The longer it goes on, the worse it will get, and the harder and more painful it will be to fix it.

Posted by: d.a.n at December 9, 2005 12:51 PM
Comment #100595

Louis

Buffet uses a buy and hold strategy that does not expose him to high taxes no matter what the tax regime. Many people can’t afford to ride out the ups and downs like that.

Buffet is a good example of how someone with resources can set up his affairs in such as way to minimize his taxes at all times.

I am not Warren Buffet, but I bought Starbucks some years ago. So far the value of the investment has risen almost 800%. You know how much tax I had to pay on that so far? Zero, since I still have not sold it. This would be the case under any tax system. But now I am not enthusiastic about selling, even if I think I could find a better investment because of taxes. If I sell it an roll every penny into another investment I will just be losing money. So I keep it. That is how the tax system distorts investments. Now if I was Warren Buffet, I probably could take a paper loss on something else to compensate for the gain on the Starbucks. Rich guys can always do things like that. If you give them even more incentive, they figure out better ways.

Look at that link I sent about Kennedy. It doesn’t really matter what the rate is. He will not be paying it.

Posted by: Jack at December 9, 2005 12:51 PM
Comment #100596

Max,
Exactly. And a flat 17% income tax rate with a low-income-level exemption, with all tax loop holes eliminated would solve that.

Posted by: d.a.n at December 9, 2005 12:53 PM
Comment #100605

Dan

Thanks again.

Look at what your graph shows. The top 1% started to get better off in he the middle 1970s. Before the rate cuts. It was also higher than it is today in 1960 and 1950,when rates were really high. The richest 1% share of the income peaked in 2000 and has been going down under Bush.

So if you are arguing that the richest 1% has too much money, I agree. But the solution is not what you think.

BTW the big decrease in wealth came in the 1970s when the economy was bad for everyone. The improvement in the graph comes not from the little guys getting richer, but from even the rich losing their money a little faster while everyone slid down. That is not a good thing.

Posted by: Jack at December 9, 2005 1:02 PM
Comment #100609

Hi Jack,

My point is that by Buffet’s own account cutting capital gains causes him to pay too much in taxes.

You’re of course right about not paying taxes on stock profits until one sells the stock. It hasn’t stopped me from trying (and sometimes succeeding) to sell stocks higher than what I bought them for.

Why would you want to sell Starbucks? Any business that has lines wrapped around the building to spend $2.50 for a cup of coffee has to be a good one……..Don’t get me wrong…I LOVE the stuff…..A Latte and the NYT is my idea of how to start a morning.

If I was smart enough to make all my money on Capital gains I would feel the obligation to pay taxes.

Posted by: LouisXIV at December 9, 2005 1:08 PM
Comment #100624

“Bush’s tax policies involve Kennedy paying less taxes.

Warren Buffet said of a tax cut that he should be paying more in taxes”

Why should these rich liberals be forced to support what they “say” they believe?
If they really believed in what they say, would they not do it anyway?
They want everbody else to pay for their beliefs.
Hypocrites.

Posted by: kctim at December 9, 2005 2:03 PM
Comment #100626

Louis

Warren Buffet doesn’t need it, but if you are trying to build wealth, capital gains is a problem. A rebalancing of your portfolio with no money taken out for spending will cause you to pay a tax. In fact, you could end up owing tax even in a year you lost money on your overall holdings. This doesn’t make particular sense and it is not efficient.

Starbucks is a good stock still. But if I could sell it without penalty, I would try Energy Conversion Devices (ENER)

Posted by: Jack at December 9, 2005 2:11 PM
Comment #100631

d.a.n.

Some questions about your chart. Does it represent individuals or families? Is it domestic owners only or include international ownerships? Do you have a 5% and 10% chart?

Posted by: Dave at December 9, 2005 2:36 PM
Comment #100632
Jack wrote: d.a.n, Thanks again. Look at what your graph shows. The top 1% started to get better off in he the middle 1970s. Before the rate cuts. It was also higher than it is today in 1960 and 1950,when rates were really high. The richest 1% share of the income peaked in 2000 and has been going down under Bush.
Thanks for what? The graph doesn’t show 99% of the people getting wealthier since 1970. Didn’t you say most people were much wealthier now than 1970? Could go to Hawaii, and such? Also, observe that 99% of the population’s wealth is almost as low as it was in the Great Depression.

As for real wealth, adjusted for inflation, it hasn’t grown since 1980, but the national debt, and personal debt has sky rocketed.

So if you are arguing that the richest 1% has too much money, I agree. But the solution is not what you think.

Nope, I’ve never said that in my whole life.
I’m not jealous or envious of the rich at all.

What I have consistently been saying is that irresponsible government (starting about 1980) has caused the imbalance by running up huge debt on us and our children and our childrens’ children…
I don’t begrudge the wealthy for that.
I only believe that some abuse vast wealth to control government, and that is unfair. That is the fault of government, and the people for allowing it.
I’ve consistently been saying irresponsible government is threatening the future and security of this nation. And fiscal irresponsibility is a major part of if.
Don’t you think it’s reason for some concern?
I certainly don’t see any reason to celebrate yet?

BTW the big decrease in wealth came in the 1970s when the economy was bad for everyone. The improvement in the graph comes not from the little guys getting richer, but from even the rich losing their money a little faster while everyone slid down. That is not a good thing.
I agree with that. And, that was due to some very studid thing government was doing (i.e. price controls, Vietnam, ) But, I’d add that it’s still not getting better now for most Americans. The graph above doesn’t show them growing wealthier. Real wealth has been declining for decades. In most families, two workers are only making a little more than one bread-winner used to make.

Also, what do you think 2010 to 2020 will be like? The bill on so much debt will eventually come due. It’s approaching the same amount of our GDP and taxes are already 19% of GDP. That by itself may not be much reason for concern, but when you include all of this, I think it is a reason for concern…some caution at the very least. But, what does our Congress do. Spend and spend and spend some more. Factor that out-of-control fiscal irresponsibility into everything and see where it leads.

Posted by: d.a.n at December 9, 2005 2:37 PM
Comment #100635

Hey you guys, check this out.
The poor pay 12.9% of their income, while the super rich are only paying only .2%:
Tax Policy Center Releases Revenue and Distributional Impacts of Current Tax Law

Posted by: Adrienne at December 9, 2005 2:40 PM
Comment #100637

Dan

The median inflation adjusted income has risen. The top 1% has no real effect on the median. Also people have much more buying power, as we all know.

The rich got richer during good times and they got poorer during bad times (1970s). In other words, they got a greater proportion of the newly created wealth. That may not be fair, but it doesn’t mean that others also did not benefit.

If we both have ten dollar and you double your wealth while I only have a 50% gain it doesn’t make me worse off.

Posted by: Jack at December 9, 2005 2:48 PM
Comment #100644

Jack,
Great post and excellent ongoing commentary. In fact very good discussion overall.

Novenge,
You say (if I read correctly) that a weak dollar (on foreign exchange markets) adversely affects the price of oil we pay, which subsequently has an inflationary impact throughout the economy.

If I’m not mistaken, global oil trade is denominated in dollars, so we are alone in not having to exchange our currency in order to pay for oil. A $50 barrel costs us $50, regardless of the dollar’s value vs the Euro, Yen, whatever.

Oil prices rise or fall irrespective of the dollar’s value, but rather in response to supply and demand and machinations of OPEC. Recent price increases have been attributed to a fast increase in demand as developing countries (China, India, etc.) industrialize, and a lack of a concomitant increase in supply (mostly due to lack of production capacity). Political uncertainty in the Middle East, Hurrican Katrina have exacerbated this.

If you think I’m incorrect, Novenge, please explain.

Jack, you are correct that our debt (outside of the recent recession years) is not abnormally large as a percentage of GDP. But, precisely for the reason you cite—looming fiscal crises over entitlements—I am concerned by the lack of fiscal discipline exhibited by both parties. Even if it were not for entitlements, I would like to see a lower deficit purely because it’s smarter, pro-growth economics. A higher deficit puts upward pressure on interest rates (in order to attract foreign capital) and therefore increases the price of domestic borrowing for businesses and individuals.

Cheers,
B

Posted by: boojum at December 9, 2005 3:01 PM
Comment #100645

Jack,
Can you provide some data showing real income has risen? Say, a graph since 1950 and later?
Because, I don’t see it anywhere.
This graph shows wages to be pretty flat:

Dave,
I think it is individual wealth. Here’s the article: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

Posted by: d.a.n at December 9, 2005 3:02 PM
Comment #100647

Hi Jack,

“In fact, you could end up owing tax even in a year you lost money on your overall holdings.”

I’m aware of that.

I still assert that anyone who makes their living off Capital gains should pay taxes like the rest of us.

“I would try Energy Conversion Devices (ENER)”

You don’t say….


Posted by: LouisXIV at December 9, 2005 3:11 PM
Comment #100649

Hi Boojum,

“our debt (outside of the recent recession years) is not abnormally large as a percentage of GDP.”

Do you see rapidly rising interest payments of 352 billion/year as a problem?


Posted by: LouisXIV at December 9, 2005 3:26 PM
Comment #100654

Louis,
Yes I do, as my post should have made clear. My point was that relative to GDP, our current debt level is not historically anomalous.

I said (perhaps unclearly) that I am uncomfortable with current debt levels because they signal a lack of fiscal discipline by both parties, which is especially alarming as we see huge entitlement payments on the horizon.

I also think running smaller deficits (or, gasp, having a budget in near balance) is usually smarter macroeconomic policy. High debt pressures interest rates upward to attract foreign capital, and makes the cost of borrowing (for capital purchases, housing, student loans, etc) higher.

It is gratifying to see people who are left of center on the political spectrum embrace tighter fiscal policy. Republicans are undergoing an identity crisis—they used to be the party of fiscal sanity and limited government. Now, in McCain’s words, they’re “spending like drunken sailors.” As a right-leaning independent, their traditional fiscal approach was appealing to me. Now they seem to have abdicated that position, though there seems to be little likelihood that liberal Dems will pick up that mantle.

I worked briefly in the 104th Congress (Gingrich, Contract w/ America, firebrand Republicans vowing to shove a balanced budget down Clinton’s throat, etc.). What the heck happened? If they’ve abandoned it, what’s a jingoist like me to do if I can’t cast aspersions on “tax and spend liberals.”

Sigh ;-)

Posted by: boojum at December 9, 2005 3:45 PM
Comment #100656

If the portion of taxes paid by the rich goes up while their tax rate stays the same or goes down, then certainly the portion of total income recieved by the rich is also going up. So a “lefty” might interpret all this as just another way of saying that the rich are getting rich faster than the rest of us.

Of course, there’s no cause-effect relationship implied by any of these numbers. The rich might be getting richer regardness of government tax policy, in which case the portion of taxes paid by the rich would have gone up even more if we “stuck it to the man” and raised (or even just stopped cutting) their tax rates.

Posted by: William Cohen at December 9, 2005 3:50 PM
Comment #100658

Dan

Your chart again says enough.

Production workers gained 4.5% AFTER inflation. You have a chart effect. If you plotted that same data out on a chart with different reference points, it would look very different. It is an old trick. Try plotting it against real wage growth in other industrial countries and let’s see that chart.

But let’s look at a general picture over a longer time. Let’s go back to 1980 just before the Reagan revolution.

Median (again not average) household income in 2004 was $60,528.00. So half of all American families made more and half made less. Median income in 1980 was $21,063. If you adjust for inflation is was $45,733. So the median American family makes $15,000 and that is in real money. That is $15,000 in today’s dollars. With that money you could buy a small car and pay cash. You could take a dream vacation. You could pay a year’s tuition plus room and board and spending money at the University of Virginia. It is real money no matter how you look at it.

If you made a chart it the roughly 1/3 increase would look good.

The MEDIAN means that the rich getting richer argument doesn’t fly, BTW. The median is the guy standing right at the middle, no matter how much the rich guy makes or how desperate the poor guy has become.

Posted by: Jack at December 9, 2005 3:57 PM
Comment #100661

OK, a rise occurred based on median income per household (since 1970 according to the following U.S. Census Bureau study):
found at http://www.census.gov/hhes/www/income/incxrace.html

But, that is household income, and it ignores the fact that many household may now have more workers than in the 1970s, which lends credence to my assertion that income really didn’t rise? I’ll have to research it more, because all the studies I’ve seen assert the same conclusion (that working mothers resulted in that rise in household income). Personally, it doesn’t look like a big rise for two people working. I think it unfortunately (I’m not saying mothers shouldn’t work) drove down salaries and wages by increasing the worker pool. That’s what this article says too. So, we’ll have to find a chart showing individual income rising before I’ll believe it.

Posted by: d.a.n at December 9, 2005 4:19 PM
Comment #100667

This article shows that the rise in household income was linked to working wives, which started about 1970.

It’s hard to find data on and individual basis. Most is organized around households. Still, it looks to me like the increase was largely due to two incomes. But, that doesn’t seem like a big jump at all for a two income household.

Posted by: d.a.n at December 9, 2005 4:31 PM
Comment #100675

And there are fewer people per household, so more income per person. We can go around on this statistically.

I don’t know how old you are. I was a young adult in 1970. I think back on those time fondly, but when I think of all the things my family and I didn’t have that almost everyone has today or the dump of a house we lived in etc. I know that we are a lot better off.

I don’t know if you bought a house recently, but if you are shopping for a house, you notice that (except for the real luxury places) the housing stock has improved a lot. A house built in 1970 just is not as nice as one built in 2000. It is much smaller for one thing. It is drafty. The furnace technology is primitive. Sometimes they have only one bathroom. AND the house that a childless couple now thinks is just the right size used to house a family of six.

We have enjoyed great technolgical and economic growth. If you had the choice to permanently go back to 1970 to live. Would you? That was not that long ago, but if we made people live at those average standard of living, it would be cruel.

Posted by: Jack at December 9, 2005 4:50 PM
Comment #100679

Hi Bajoom,

“My point was that relative to GDP, our current debt level is not historically anomalous.”

I assume that rapidly rising interest payments as one of the largest items on the budget is unprecedented?

“Now they seem to have abdicated that position, though there seems to be little likelihood that liberal Dems will pick up that mantle.”

Congress is working to increase the debt. There are a few Dems and a few Republicans who seem to be seriously concerned but most are unconcerned about the future of our country.

“What the heck happened?”

For a long time Republicans have been hell bent on increasing debt. The debt tripled under Reagan and Gingrich was louder and quite hypocritical about increasing debt.

Republicans go in for massive debt increase and a lot of screaming about fiscal irresponsibility on the part of Democrats.


Posted by: LouisXIV at December 9, 2005 4:59 PM
Comment #100725

OK. I agree that some things are better.
But, some important things are worse.
OK. The standard of living rose a little.
But, Not a lot, considering two workers per household.
OK. Some people have more things and go more places.
But, they are borrowing a lot on credit to do it.
OK. Some houses are bigger.
But, many are not built better. Some are truly flimsy, and the appliances don’t last long at all. Not like they used to.
OK. Travel is cheaper.
But, that may change soon with rising fuel and energy costs.

All the data and graphs tell me increases in the standard of living are not really that significiant, if you also consider the National and personal debt, and the fact that the many households really have two workers.

With all things considered, I don’t believe real income has increased much (if any) since 1970. All things considered, I think it’s been pretty flat really. It’s a hard thing to measure acurately because of all these numerous factors and things that change each year. I wish I could find a study on an individual basis, because it would probably show a very flat, or slightly downward trend.

But, really, that’s not the main thing to be concerned about.

The real concern is the future. The following will have consequences, that we may start seeing as soon as 2009, if we don’t stop the irresponsible spending, borrowing, and waste in the federal government, now.

It’s not just one of these that could wreak havoc. It’s the combination of all these pressing problems:
___________________________________________
We have a National huge debt. $8.1 trillion now, and still growing quickly.
We have $32 trillion in personal debt nation-wide.
We have looming shortfalls in Social Security, Medicare, and Medicaid.
The GPBGC and pensions are $1.6 trillion in the hole.
…more pressing problems…

The following trend is reason for concern.

_________________
It would take 127 years to pay this off.
It represents $38 trillion in interest (in 2005 dollars).

_________________
That concerns me. I don’t understand those that say “we are doing OK”, “incomes are up” (which is questionable…not much really with all things considered”), “the debt isn’t too high”, “Social Security is just fine” (even though it is still being plundered), and ignore the many other problems with Social Security, Medicare, Pensions, 77 million baby boomers, etc., and some respected economists that say this is a recipe for disaster.

I’m not knocking any particular profession, but I’m wondering if particular professions have different opinions about all this? Do some have different motives for wanting to always paint a rosy picture of what others paint as a growing problem? Even if some are chicken-littles, wouldn’t caution be recommended? Doesn’t saying things like “the debt isn’t too large” just asking for trouble? Especially since none of can know for certain? One thing is certain though. The past 25 years of fiscal irresponsibility will eventually have consequences. All of that debt, spending, borrowing, and growing government ever larger will have consequences. Just like Social Security and Medicare are having consequences. Just like wars have consequences. There is cause and effect. The tricky part about all this that many don’t grasp is the long time between the action and reaction. Consequences sometimes take a very long time to be felt (decades usually), but if you crap in your own nest long enough, you will fill it up eventually, and finally snap the branch it rest upon.

Posted by: d.a.n at December 9, 2005 8:06 PM
Comment #100739

If I read your post right, you worry about entitlements eating up the budget. I agree. That’s the danger. The president tried to address it. He was stopped dead. We will have to address it again soon at a higher cost.

Posted by: Jack at December 9, 2005 9:15 PM
Comment #100754

Dear God! If THIS is the best the ‘Right” can come up with? then they have obviously joined the Left” in being brain-dead! Mind you? a few lessons in Proof-reading prior to submission will help………………….maybe!!

Posted by: John Williams at December 9, 2005 10:24 PM
Comment #100918

I have heard these tired arguements for years. They seem to recycle. It is all based on speculation.
To examine another person’s income and then determining how much you want to take away seems immoral to me.(stealing)
How about eliminating the income based system and tax what people buy? This would tax the wealthy more and the poor less.
It would also make our elections less corrupt.

Posted by: Kruser at December 10, 2005 12:59 PM
Comment #101695

Jack,
While I agree that tax incentives and disincentives should be used by our government to influence social behavoir, I do believe that the Old World Thinking of the Democrats and Republicans over taxes is the wrong argument and debate to be having on raising the money our federal government needs and wants. My solution attacks the right part of the problem.

In fact, our Founding Fathers thought so strongly about the issue of taxing people for the sake of taxing that as they formed and grew the Nation no taxes on personal income were collected. Instead, they used their political status to sell investment opportunities in America through the sell of Treasury Notes. Even our Grandparents who lived through the Great Depression recognized the importance of investing in our Nation and by the end of WWII America owned about 75% of the gold in the world. No, Americans deserve and need to be made aware of the fact that almost all payroll taxes (ie social insurance program taxes) could be used in a smarter and more constructive manner than they are being done today.

The old argument of taxing the Rich or sticking it to the Poor so that a few can have it all has been proven to do nothing to move our society toward our common goal of a Self-Sufficient Society. Instead, Congress has the constitutional authority to instruct the Federal Reserve to issue U.S. Federal Reserve “Special” Treasury Notes to Individual Citizens in exchange for money invested in their common defense and general welfare.

By creating a program that allows even a minimum wage earner to grow personal wealth over time in this manner, Congress can not only work on creating a real social insurance program for its citizens, but lower the need for such taxes in the future. Although we can debate over the dollar amount, the fact still remains that our society is held to a standard that every American has the ability and opportunity to live a Self-Suffient Life (ie economically viable and financially independent). Thus, in creating a Tax Policy for the 21st Century, the American public deserves to have a debate over how we can eliminate the need for such taxes not follow policies that we know do not function to solve the problem. Because can you tell me any better Social Insurance Program and Tax System that encourages every American to become a Millionaire as well as give them the tools to do so?

PS. Sorry for the delay, but I lost the piece that I was writing to answer you earlier.

Posted by: Henry Schlatman at December 12, 2005 9:02 PM
Comment #217102

hi this is maggie i was wondering how you write the numbers in trillions using zeros

Posted by: maggie at April 17, 2007 4:28 PM
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