Especially when we were fighting for our survival in global conflicts.
2.
Morbo
But if we cut taxes to zero, there will be infinite revenue!
3.
Joe Buck
In those days, since the marginal rate was so high, corporate execs had the company pay for everything: they got to live in a company-owned mansion, drive a company car, have the company pay the country club dues, and fly to vacation spots in a corporate jet, and none of this counted as their income (I think that this is how employer-paid health care got started; first it was for the bosses, then organized labor demanded that the workers get the same deal). There were plenty of loopholes to exploit, like the famous oil depletion allowance, so they all had their own oil wells. The only people actually paying those high rates were those who suddenly found themselves rich without an army of accountants to arrange their taxes for them, like rock stars (the Beatles really did experience “that’s one for you, nineteen for me” one year, though they probably got that fixed after that).
It would probably be better just to have a top rate around 50% and very few loopholes, and make it so even people living off capital gains contributed their share. Some European countries have a wealth tax instead of a capital gains tax, which works somewhat like a property tax.
4.
ominira
@Morbo: Exactly! Just think how much wealth from the rich would trickle down.
5.
Proper Gander
However, one must realize that if there had not been such high taxes on the rich, it would have been that much less likely that Ayn Rand would have written Atlas Shrugged.
Wouldn’t a world without the phrase “going Galt” have been worth it? Sure we probably would be living in a “Man in the High Castle” scenario- East US to the Nazis, West Coast to the Japanese… but ask yourself, how much would a world without the worst novel in human history be worth?
6.
FormerSwingVoter
You liar! Nothing happened between 1780 and 1980! That’s science fact.
7.
rob!
The Country Ran Fine With A 90% Top Marginal Tax Rate
Yeah, but that was under the commie simp Eisenhower. What a RINO!
Can someone explain to me why exactly capital gains should be treated differently than other income? “I was thinking of just stuffing all of this money under my mattress, but those capital gains taxes are so low so I might as well invest some of it.”
That was then and this is now. Once good thing that the high rates did was keep executive pay at a reasonable level. As you stated, there were ways around this but I don’t think that would fly with the communication we have today. I would love to see a return to rates of at least 75% at the top. You would see executive compensation drop fast and they would try to revert to the practices of the high-tax past to make up the difference.
Stockholders would be far better informed today than they were back then and you can bet that they would start screaming about it. As they should.
But that’s so unfair to think the folk making millions should pay a higher rate than those of us in the very low 6 figures. Besides, our nation would be devastated without all that trickle-down.
_______________________
Dave Paulson http://www.thinkersjam.com
I think, therefore I jam
14.
FlipYrWhig
I know I don’t need to remind this crowd, but, FWIW, there were also more brackets.
15.
Brian J
Would most of those here be comfortable with keeping the Bush tax cuts or not rolling them back completely if they were replaced with other types of taxes, like stock transaction taxes or sin taxes? I would be, depending on the details. I can’t imagine why anyone would really object. It’d make things easier at the federal level, but also at the state level, which might prevent such massive cuts.
But in order to broker a compromise like that, we’d have to deal with opponents who were interested in actually giving something up. When more than, what, five Republicans consider voting for tax increases (and even that is pushing it), we could talk. Until then, it’s almost pointless to speculate.
16.
Brick Oven Bill
Tim F.;
Do you think that this government has the capacity to tax the financial industry at 90%?
Or would that rate would just apply to the guy in the garage?
The impression I’ve gotten is that it’s good to lower capital gains taxes or even get rid of them entirely, as long as they don’t lead to deficits. So if we lower or get rid of those taxes, we’d either need to cut spending or replace them with different taxes.
If only we had the sort of political system where we could have an honest discussion of this stuff.
18.
AnotherBruce
Rob, I swear I did not read your comment first, honest, really.
19.
Joe Buck
I’d have no problem with going higher than 50% for the truly astronomical salaries; Japan and Europe don’t pay their CEOs 500x or more of what the median worker makes.
@Brick Oven Bill: Interesting question. Get back to me when you find a garage guy making over $3 mil, the top tax bracket under Eisenhower in inflation-adjusted dollars.
Can’t you just hear everyone screaming bloody murder only getting to keep 10% of their earnings?
You know it would happen.
23.
BR
I wonder how much of the problem is that media talking heads these days make hundreds of thousands or even millions per year, putting them solidly in the top 1% whereas 70 years ago I’m not so sure they were making all that much more than average folks.
(I always think back to Charlie Gibson’s obsession with cutting capital gains taxes during the 2008 debates.)
24.
Brick Oven Bill
Obama (Rahm) named Mark Patterson, Goldman Sachs lobbyist, to be Tim Geithner’s Chief of Staff.
Tim Geithner’s best man at his wedding was his dad.
25.
Nylund
If we said that anyone who made more than $50 million a year had to pay 50% in taxes (no exceptions even if its legally “capital gains”), who would really object?!
Would even the staunchest of Teabaggers really go out of their way defending people that’d still be taking home $25 million a year?
Would even the staunchest of Teabaggers really go out of their way defending people that’d still be taking home $25 million a year?
They’d be scared to death that one day they would qualify for that rate and their $$$ would go to young bucks buying steaks.
28.
PeakVT
@Brian J: The problem is that rich people can afford tax accountants and lawyers who can make one type of income look like another. Once different types of income are treated differently, a lot of effort is put into avoidance, which has no benefit for society as a whole.
@Comrade Luke: “Marginal” means that they only pay 90% on what they make over the bracket limit. Everything below that gets taxed at a lower rate. If the top bracket is set at a bajillion dollars, someone making a bajillion dollars and one will pay an extra $0.90 in taxes.
30.
Jim, Foolish Literalist
@Brick Oven Bill: Oh yeah? Well Mark Thiessen’s mother was his prom date.
Exactly! Just think how much wealth from the rich would trickle down
Trickle down to who? How? Maybe you meant this ironically.
The trickle down theory of conservatives (cut taxes and the rich will rain down prosperity) is just as dumb as the trickle down theory of liberals (tax wealth at huge rates and you will have oodles of money to distribute to the worthy poor and middle class).
Here’s the key issue from the linked story”
Drop-offs in revenue and in expected state aid are forcing officials in Montgomery and Prince George’s counties, home to nearly a third of the state’s population, to confront some of the same unforgiving math that has caused governments across the Washington region to propose cuts to popular programs and safety-net services.
Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
Can someone explain to me why exactly capital gains should be treated differently than other income?
Risk.
Because poor people don’t get paid with compensation like stock so they don’t deserve the low tax rates.
What about the middle class? If a household taxed at the 15% rate had sold shares of Nike at a gain in 2009, their tax on the gain would be Zero.
Capital gains ain’t just for rich people. But I am amazed at the number of people I talk to who think it fine to blow wads of cash in Vegas or Atlantic City who somehow have become conditioned to believe that they aren’t supposed to buy a stock or a mutual fund.
On the other hand, I know a brother and sister who recently inherited some land and sold it. With the step up in basis and zero capital gains on a portion of the sale, their net gain on the sale was negligible. The LOVE them some capital gains.
In those days, since the marginal rate was so high, corporate execs had the company pay for everything: they got to live in a company-owned mansion, drive a company car, have the company pay the country club dues, and fly to vacation spots in a corporate jet, and none of this counted as their income.
That’s still the case for executives at a lot of companies, though, and unlike in the 1950s or 60s they get an astronomical financial package on top of it. So it’s not like they gave up those perks in favor of a larger salary and stock options — they get those perks and an insane salary, too.
Actually, I might not know what the hell I’m talking about (it would hardly be the first time). The 90% kicked in over $400,000, which using this calculator, translates to about $3.5 million.
@Tim F.: I was kidding. I doubt they make that much selling T-shirts and begging for NPR, but yeah, Jesse James, and the Teutels (sp?). I would love to see people who make 3.5 million/yr going on TV referring to themselves as “middle class”, and Diane Sawyer nodding sympathetically.
(David Letterman just told me that Dan Quayle’s son is running for Congress in AZ. Hayworth’s seat?)
Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
Yeah. Hi. Welcome to the point. Glad you could make it.
Progressive taxation isn’t based on some hysterical hatred of the rich. Consumer spending makes up two-thirds of the economy. Marginal propensity to consume falls as income increases (a man making $1,000,000 per year does not spend a hundred times more on cars and washing machines and so on as someone making $10,000 per year – they move into investment). Therefore, assuming an identical amount of tax revenue, a more progressive rate of taxation results in more economic growth than a flatter one would (to a certain point, at least).
Would even the staunchest of Teabaggers really go out of their way defending people that’d still be taking home $25 million a year?
At a certain point the discussion of taxes got so stupid that the Republicans started to refer to the “largest tax increase in American history,” and IIRC they were referring to it in terms of _raw dollars_ rather than in terms of _rate_ OR inflation-adjusted dollars. And people kept falling for it, I guess because it just feels true to tax-butthurt Republicans. (OK, I checked: See FactCheck.org.) So I’m sadly sure the same thing would happen again.
That’s still the case for executives at a lot of companies, though, and unlike in the 1950s or 60s they get an astronomical financial package on top of it. So it’s not like they gave up those perks in favor of a larger salary and stock options—they get those perks and an insane salary, too.
This. I had a girlfriend in college in the mid-90s who father was the CEO of a company based in a small town in OH. The firm was Fortune 1000 but not 500. For some reason they had a lot of business in Chicago so we would see him a lot.
He always flew private into Meigs Field and they bought a place here that he would have exclusive access to as long as he was CEO
Yeah, that’s where Oprah lives. And as far as I know none of this (the great expense and convenience of not taking a cab to and from O’Hare) the luxury condo, etc was non-taxable.
Remind the average righttard that Saint Ronnie presided over the two largest tax increases in American history, and you will be called a God-damned liar. However, it happens to be true.
45.
burnspbesq
Arithmetic is inescapable in the long run. You can’t have a buttload of expensive social services, and a big military, and low taxes. You can do that for a while, but eventually the gad-dam commie capital markets will raise your cost of borrowing until you can’t afford to deficit-spend any more.
We need to decide what we want government to provide, and then set taxes at a level that will pay for the government we decide we want and service the existing debt.
This is not complicated, but it seems to be beyond our elected officials, the punditocracy, and everyone else whose livelihood depends on believing in unicorns.
The larger point is true but the details are problematic.
The 1982 increase was the largest post 1940 during peace time (FDR’s 1942 tax increase trumps everything with good cause) and outstripped the Big Dog’s 1993 raise in real dollar and was 150% as large when you talk about as a percentage of the economy. In fairness to Reagan the increase was only after overshooting with his 1981 tax cut bill
You are of course making the wrong assumption that the wealthy create wealth. They may create some, but mainly they’re good at hoarding wealth. Most wealth is created from jobs and most jobs are created by middle class people attempting to become wealthy.
So do you think the 1% of top wage earners who have as much wealth as the bottom 90% are creating 90% of the jobs? No, they just know where the money spigot is and they’re using that spigot to increase their already vast holdings.
48.
Martin
@FormerSwingVoter: Actually, there’s a related but more subtle point. Why do people strive to expand their income? Because their goals exceed their current means. The last 30 years have been an experiment in inventing new goals rather than ratcheting down on the means. Very, very few people actually go Galt – and those that do are usually pretty easily replaced.
49.
Luthe
One day, when I win Powerball and have millions of dollars to spend, I will form a non-profit called the Center for Tax Education. It will run TV ads explaining to the morons masses the relationship between taxes and services. Perhaps there will be workshops in local libraries. Maybe even contributions to those few politicians with the balls to call for tax hikes.
But alas, I have not yet won Powerball, and so this remains but a fond dream.
50.
mclaren
@Joe Buck:
In those days, since the marginal rate was so high, corporate execs had the company pay for everything: they got to live in a company-owned mansion, drive a company car, have the company pay the country club dues, and fly to vacation spots in a corporate jet, and none of this counted as their income…
That’s a lie. And I can prove it.
Corporate jets did not exist in the Eisenhower era. No such thing. The first private Lear jet was assembled in 1963. Private jets did not become commonplace in corporate circles until the late 1970s.
The historical record systematically contradicts Joe Buck’s obviously and foolishly false claims:
In 1950, for instance, General Motors president Charlie Wilson pulled in $586,100 in income, a bit over $5 million in current dollars. Today, someone at that $5 million level will usually clear, after taxes, around $4 million. Wilson cleared the equivalent of only $1.25 million. He paid nearly three-quarters of his income in taxes.
Mid-20th century America, in effect, frowned on excessive incomes at the nation’s economic summit. The result: America’s biggest companies, back then, manufactured cars, not mega millionaires.
Stricter accounting rules during the 1950s and 1960s made it impossible for executives to live in mansions owned by the corporation — that’s a flat-out lie. All the CEOs of the 50s and 60s and mid-70s owned their own homes and paid for them out of their own salaries. If they hadn’t done so, the corporations would have had their balance sheets torn apart by IRS auditors and the corporate accountants and the board of directors would have gone to jail for tax fraud. Only the change in tax laws of the Reagan Degeneration made such atrocities possible.
Joe Buck should buy and read Karl Rove’s forthcoming book to study how he ought to tell his lies. He’s clearly failing badly. Study the facts: the history of U.S. tax laws is online and readily available. During the 1950s the corporate tax skyrocketed, there was an excess profits tax, all the corporate scams and ripoffs Joe Buck claims occurred during the 50s and 60s and 70s were impossible and would have been considered tax fraud.
Joe Buck is just making sh*t up. He’s pulling stuff out of his ass. His claims have no connection with reality.
Here are the real facts:
FACT: From 1932 to 1980, the top marginal tax rate never dropped below 70%, and went as high as 95%. The American economy took off like a rocket.
FACT: After 1980, the top marginal tax rate dropped to 38% and for capital gains has plummeted to only 15%. The American economy has crashed and cratered, with every measure of profitability collapsing compared to the earlier period.
The logical conclusion? Corporate America generated incredible profits precisely because of those high marginal tax rates. And it’s obvious why. High marginal tax rates force CEOs to work like dogs to make enough money to take home and squander. With much lower marginal tax rates, the CEO no longer needs to care whether the company makes money or goes bankrupt because the CEO rakes in so much cash it doesn’t matter.
Here’s another set of facts for you:
FACT: Right now, today, Germany has the most dynamic economic in the world, more solid than China, more productive than America.
FACT: Germany has by far the most empowered labor unions in the world, with the most labor control over coporate management anywhere in the world.
In Germany, line workers elect 50% of the members of every German corporation’s board of directors. Not one member, not two members, half of all board members. If someone suggested that in America, they’d be set on fire and hung from a lamppost by lynch mobs screaming “Socialism!” and “Communism!”
Yet Germany super-empowered labor unions are the most productive in the world.
Once again, the explanation is obvious. When workers sit on the board of directors and decide base pay and working hours and everything else, the workers feel like they’re part of the company and they work their guts out for it. Moreover, the workers are the ones who know how to make things operate smoothly because they’re engaged in reality on the ground, unlike the CEOs in their penthouses, so a board of directors made up of 50% line workers and union members shoots down crazy and counterproductive strategies cooked up by looney CEOs fast.
No surprise.
Eliminate the use of slogans, posters and exhortations for the workforce, demanding zero defects and new levels of productivity without providing methods. Such exhortations only create adversarial relationships.
Eliminate work standards that prescribe numerical quotas for the workforce and numerical goals for people in management…
Remove the barriers that rob hourly workers, and people in management, of their right to pride of workmanship. This implies, abolition of the annual merit rating (appraisal of performance) and of management by objectives. (..)
The worker is not the problem. The problem is at the top! Management! (..) It is not the individual who determines success or failures in the corporation, it is the system as a whole. (..) A system must be managed. It will not manage itself. Left to themselves in the Western world, components become selfish, competitive. We can not afford the destructive effect of competition.”
— W. Edwards Deming, Principles of Total Quality Management (quotes from Wikipedia)
After this brief interruption by observed reality, we now return you to the regularly scheduled fantasy world of kooks like Joe Buck and the other Ayn Rand fringe lunatics who will chant their mindless mantra that high marginal tax rates and stratospheric CEO pay and viciously cannibalistic worker-management antagonism are all fundamental parts of human nature and a necessary and inevitable basic component of capitalist free enterprise, despite the overwhelming mountain of evidence to the contrary.
51.
TenguPhule
Risk.
Ahem, Fuck that shit.
There is more risk being a worker in today’s job environment where employers wield overlord level power and you can literally live or die by your health care benefits then someone with a bunch of money making more money by doing essentially nothing.
52.
TenguPhule
But alas, I have not yet won Powerball, and so this remains but a fond dream.
My dream is a hit reality show called “Snipe Hunt on K Street”
RE: Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
.
Progressive taxation isn’t based on some hysterical hatred of the rich.
Never said it was, though you might think this was the belief based on some of the comments that regularly appear here and in other blogs.
Consumer spending makes up two-thirds of the economy.
And so? This says nothing about the sources of the income. Wages have declined over the past several years and a larger portion of spending has come from credit instead of productivity. This has contributed to the mess we are in.
I absolutely favor progressive taxation. And, by the way, I also favor the estate tax for both economic and social reasons. That said, tax policy is not synonymous with economic policy, and government transfers cannot substitute for real economic production.
Therefore, assuming an identical amount of tax revenue, a more progressive rate of taxation results in more economic growth than a flatter one would (to a certain point, at least).
You cannot assume “an identical amount of revenue.” There is no CBO report or even a claim by the Obama administration that raising the marginal rate will magically produce sufficient revenues to keep the economy going. I haven’t seen any comprehensive study of wages, GDP and the impact of tax rates, either raised or decreased, anywhere.
And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit. And before June 30 rolls around, the prior period revenue projections will be shown to have been polite fictions. Other states are beginning to show the same weaknesses.
Republicans don’t have a clue about the economy and are stuck in libertarian and Randian delusions. But the Democrats need to get rid of some of their pet theories and demonstrate more flexibility and imagination.
Sheesh, what do you folks do fer fun on a Monday night?
55.
kdaug
My experience with the super-wealthy (such as it is – grew up with them) is that roughly 80-90% of the time their money is inherited. And as a general rule, those jackasses tend to be lazy, incompetent fucks.
Not their fault, really. They just never have to work for anything.
And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit.
Tax and fee increases? Please. The increases that were fought for tooth and nail are hardly worth mentioning, and are incredibly regressive. Meanwhile, this morning I visited a family friend in a $6M waterfront home that was probably paying less than $8K per year in property taxes. We have absurdly low property taxes, moderate income taxes and think that auto registration and sales tax can solve everything.
@kdaug: But their income isn’t earned. It’s inherited and so there’s nothing much to tax in the current system. Only a wealth tax would really impact them – which might cause them to be a little less lazy…
60.
TenguPhule
And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit.
That’s because your Wingnut Republican minority can block any actual tax increase that could really help balance the budget. All you get instead is window dressing and Sarah Palin slogans.
So yeah.
61.
Jim in Chicago
@kdaug#52:
In the words of Al Franken: “The problem with the estate tax is that it punishes the most productive members of our society: The children of the extremely wealthy” ;D
62.
Yutsano
@Martin: Well FWIW in WA we do pretty good on mostly property and sales taxes. Of course when the floor fell out of the economy revenue plunged like a stone and the dreaded income tax word actually got mumbled about. That genie got stuffed back in the bottle really quickly though. We also don’t have anywhere near California’s expenses. Something will give there eventually.
Welcome to Tuesday mornings in Nebraska you lightweights.
65.
kdaug
Yeah there is. Tax capital gains at median bracket and enforce an estate tax around 70%.
There’s a certain subtle but detectable sociopathic sense of hubris and entitlement in these people. It needs to be called out and dealt with.
66.
Yutsano
@freelancer (itouch): Hey I went to a cow college man. You’d be amazed what fun you have to make up in a small town in the middle of nowhere. Beer can only get you so far.
You are of course making the wrong assumption that the wealthy create wealth.
I’m not making that assumption at all.
They may create some, but mainly they’re good at hoarding wealth.
I don’t agree here, but it’s not central to my point. But a key point here is that “the wealthy” is not a stagnant group, nor can they continually hoard wealth, especially with a healthy estate tax. And by the way, note that Mexico’s Carlos Slim has displaced everyone, including Buffet and Gates, to become the wealthiest man in the world. Even at this ridiculous level, hoarding only takes you so far.
Most wealth is created from jobs and most jobs are created by middle class people attempting to become wealthy.
This is the point. Jobs are disappearing and wages are declining. How is raising the marginal tax rate alone going to come to the rescue?
So do you think the 1% of top wage earners who have as much wealth as the bottom 90% are creating 90% of the jobs?
Nope.
No, they just know where the money spigot is and they’re using that spigot to increase their already vast holdings.
And, so? Are you suggesting that a country’s wealth is a zero sum game, that there is some total amount of wealth available, and that taxing the 1% will magically shift wealth and jobs to the 90%?
If I type real slow maybe you’ll get the idea. That high marginal rate isn’t so much about getting the Fed money as it is about dissuading those pricks from gouging the last fucking nickle out of the system and leaving some to go down slope? If you don’t get that it is actual economic policy, you’re being deliberately dense or you should be a GOPer.
Are you suggesting that a country’s wealth is a zero sum game, that there is some total amount of wealth available, and that taxing the 1% will magically shift wealth and jobs to the 90%?
No, but it will damn well improve the bottom line of the federal budget, act as a disincentive to make millions by shitting on customers and shareholders, make GOoper donors weep tears of blood and crack that brick ceiling between the have and have nots by making the money MOVE around instead of staying in the same place.
Oh, and by the way, in the meantime we get to go to the moon and beat the Commies.
74.
Martin
And just to put the brakes on the ‘California can’t control their spending’ bullshit, in the most recent data I can find, California ranks 20th in spending per capita. In 2007 (better years, no question, but not horribly good) California spent $8,700 per capita. Washington state: $7,700. Alaska: $15,000. Wyoming: $11,000. New Jersey: $8,700. New York: $10,500. Vermont: $8,500. The lowest state was Tennessee: $5,800. South Carolina: $7,000. National average was $7,500.
Yeah, CA is a bit high, but hardly out of control considering their size. One major problem with California’s spending is that so much of it is tied to ballot initiatives that the legislature has no authority to adjust because they had no hand in actually causing the spending.
RE: And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit.
Tax and fee increases? Please. The increases that were fought for tooth and nail are hardly worth mentioning, and are incredibly regressive.
That’s funny. We were told that these increases would help solve the budget problem. The deficit kept exploding.
I haven’t seen the plan from either a Republican or Democrat that will actually solve the problem. The revenue shortfalls will continue, and the next crisis will soon hit as April tax revenues are seen to be far below projections.
Meanwhile, this morning I visited a family friend in a $6M waterfront home that was probably paying less than $8K per year in property taxes.
And I talked to a family where both the husband and wife are unemployed. They ain’t got no income and can’t pay the property tax that you think is low. If they have to sell their house and cars, which may be likely, they won’t even be able to deduct the loss, but for California purposes, may have to report and pay tax on cancellation of debt income. What rate of income tax do you propose that they should pay on this phantom income?
But their income isn’t earned. It’s inherited and so there’s nothing much to tax in the current system. Only a wealth tax would really impact them – which might cause them to be a little less lazy…
What? How many fiduciary returns have you seen? I mean, with the possible exception of your friend with the $6 million home?
kdaug — Tax capital gains at median bracket…
What does this mean?
and enforce an estate tax around 70%.
At what level of taxable estate?
76.
Mark
@Brachiator
You really have things mixed up.
Property taxes in California are low for anyone whose property is worth substantially more than they paid for it. This includes:
1) Long-time homeowners (of primary homes or income properties)
2) Homeowners in areas where housing prices have not fallen very much
3) Commercial properties (which pay an ever-dwindling share of property taxes)
In other words, the people who can afford and should be paying higher taxes.
And who has high taxes? People who bought homes over the last decade (or two, depending on the area.) With declining property values, Proposition 13 is not in effect for most people in this group, and everyone is at the mercy of the county assessor, who is trying to generate as much revenue as possible.
77.
Karmakin
The entire point is using the tax code as a sledgehammer to break up the current trend of corporations/individuals promoting short-term raze and burn profits over long-term stability.
And I’m willing to entertain any other suggestions on the matter, but it seems to me that the most effective way to do this is to raise capital gains taxes to at LEAST the same level as labor income, and better yet, to punitive levels.
This wouldn’t “kill” investment, but it would redirect it from desired gains from the buying/selling of investments, and towards long-term buy and hold dividends and stable profits.
Again, if there’s a better way to do this, I’m all ears. But I haven’t heard anything convincing as of yet.
Some folks have been saying it for years. I’d defer to folks like Krugman and Robert Reich to figure out what the exact margins and rates should be, but we should have several new margins at the top and much higher taxes on the rich. Hey, even Warren Buffet’s for it…
79.
bago
Technically Hayekian price theory is about the value add of having closer nodes in the economic graph be more determinant when compressing the information of that part of the market into a single floating point number to traverse the graph. While a brilliant insight in the time of information scarcity, there is no need for the compression these days as the lossy compression algorithms of the various node controllers is used to keep information out of the system/economy. Players like Goldman are betting on this when they do various activities to hide the true value of Grecian debt, or when Lehman started playing fast and loose. They will have a more accurate market assessment because they are looking at the pricing vectors before they get compressed into a single price. They are able to capture more market data for their analysis, because they have access to more data.
Honestly, it seems like you could design an excellent self optimizing market if every client of the market could establish their own set of pricing vectors. For example, valuing “Fairtrade” status of the coffee comoddity at 1.3 times the monetary value would be one scalar, while scarcity would be another. In other words, you would price on multiple vectors, and the market could adapt by calculating the marketshare each vector occupied and increase market efficiency.
We have the computers. We have the math. There is no need to compress all market knowledge into a single floating point value. We can do better.
80.
iLarynx
@ Joe Buck
FYI – The Beatles were British. They didn’t pay US income taxes.
My experience with the super-wealthy (such as it is – grew up with them) is that roughly 80-90% of the time their money is inherited. And as a general rule, those jackasses tend to be lazy, incompetent fucks.
I would add that they are inclined to depression, self-loathing, drug abuse, and increasing moral collapse over the generations.
The Moynihan arguments about welfare destroying the morality of the state-supported poor apply to those at the other end of the wealth spectrum, too.
83.
El Cid
Also on the plutocrat front: Simon Johnson says Dem Sen Kaufman is about to call out Goldman Sachs for possible criminal activities in a Senate speech tomorrow.
“[T]his is not about retribution. This is about addressing the continuum of behavior that took place — some of it fraudulent and illegal — and in the process addressing what Wall Street and the legal and regulatory system underlying its behavior have become.”
…
…”When crimes happened in the past (as in the case of Enron, when aided and abetted by, among others, Merrill Lynch, and not prevented by the supposed gatekeepers at Arthur Andersen), there were criminal convictions.”
…
“If we uncover bad behavior that was nonetheless lawful, or that we cannot prove to be unlawful (as may be exemplified by the recent reports of actions by Goldman Sachs with respect to the debt of Greece), then we should review our legal rules in the US and perhaps change them so that certain misleading behavior cannot go unpunished again.”
In addition, the Columbia Journalism Review notices that it was bloggers, and not journalists, who ‘front-paged’ substantial analysis of the recent report on the insiders running Lehman into the ground.
If you’ve wanted to know about the Valukas report and its implications, you’ve been better served by reading Zero Hedge and Naked Capitalism than you have The Wall Street Journal or New York Times. This on the biggest financial news story of the week—and one of the biggest of the year. These papers have hundreds of journalists at their disposal. The blogs have one non-professional writer and a handful of sometime non-pro-journalist contributors.
And, again, just like you’re often better off reading foreign sources directly rather than wait for our lazy billion dollar media corporations to get around to covering whatever bits they want with whatever trendy slant their bosses prefer, the billion dollar media prefer not to mess up our pretty little heads with too strongly emphasizing badthink about Big Finance.
84.
bago
It’s like people stuck in a 2 dimensional relational model, using a two dimensional assosiation paradigm to describe n dimensional relationships. Just drop the grid and normalize the data without the 2d visualization crutch. One way node mappings are data loss engines.
85.
gnomedad
@bago:
That is some fine snark. Al Franken will have to stay on the ball if he wants to remain Congress’s Comic Laureate.
86.
cmorenc
That technical 90% rate was so full of legal loopholes and tax dodges that only suckers payed anything remotely close to that rate. I would actually have little objection to keeping the Bush tax cut rate for the upper-income echelons of taxpayers IF (HUGE AND DOUBTFUL IF) tax breaks were curbed accordingly and they actually wound up paying close to that effective rate on income, instead of a lower actual percentage.
It’s the ACTUAL EFFECTIVE RATE that matters, not the NOMINAL MARGINAL RATE, including the effect of all deductions, exclusions, tax credits etc etc.
Colorado’s so-called Taxpayer Bill of Rights, or TABOR, has contributed to a significant decline in that state’s public services. This decline has serious implications not only for the more than 5 million residents of Colorado, but also for the many millions of residents of other states in which TABOR-like measures are being promoted.
…
Between 1992 and 2001, Colorado declined precipitously from 35th to 49th in the nation in K-12 spending as a percentage of personal income. As of 2006, the state maintained its low ranking among the states at 48th.
…
…Under TABOR, higher education funding per resident student dropped by 31 percent after adjusting for inflation; after TABOR’s suspension, it declined by another 3 percent.
…
…At one point, from April 2001 to October 2002, funding [for public health expenditures] got so low that the state suspended its requirement that school children be fully vaccinated against diphtheria, tetanus, and pertussis (whooping cough) because Colorado, unlike other states, could not afford to buy the vaccine.
There you have it folks, the TABOR path to paradise — at least for those of you pining for the golden days of the 1920s sharecropping South with little public education and rampant hookworm and tetanus.
Ever since Reagan came in, the rich have been playing games to scoop up more of the cash already made. Raiding established companies, stealing pension plans, buying and selling debt instruments, and throwing people out of their jobs while expecting them to consume at the same rate are all ways they did it.
In the meantime, they’ve cut back on future wealth generation like R&D, and monopolized markets to keep smaller, more innovative startups out.
My whole adult lifetime it’s been this way. The problem with American business is American business.
89.
Xenos
@WereBear: This also correlates with the publication of quarterly financial statements. The management of large companies for very short term financial game led to a whole generation of executives who are rewarded for killing off their companies.
90.
mclaren
@Were Bear:
Ever since Reagan came in (..) they’ve cut back on future wealth generation like R&D, and monopolized markets to keep smaller, more innovative startups out.
My whole adult lifetime it’s been this way. The problem with American business is American business.
Exactamundo. Ever since Reagan, America’s economic model has shifted from generating wealth through innovation and capital improvement and increasing the buying power of the middle class that makes up 70% of the U.S. economy, to generating wealth through shedding jobs overseas and creating giant monopolies that destroy markets and lock customers into anti-competitive cartels with artificially high prices.
Look around. In every single area of business, America has become the Nation of Monopolies. Broadband? You have at most 2 choices in most parts of America — the local baby bell monopoly and a cable TV monopoly.
Take a look at book publishing/movies/music — it’s all now controlled by 4 giant vertically integrated media monopolies. These giant anti-competitive cartels not only make the movies, they not only own the blu-ray plants that press the discs, they even own the theaters that show the movies and they own and design and build the only disc player that can play those blu-ray movies. Talk about vertically integrated monopolies–!
From Microsoft’s monopoly on computer operating systems to Dell’s hammerlock on the computer hardware market, to Intel’s ownership of the CPU market, to the giant vertically integrated health care cartels of insurers like Wellpoint and local hospitals that lock in customers to the point where they no longer care if they lose customers when they raise prices, because their customers have no other options…everywhere you look in America, the free market has been abolished.
In the last 30 years America has become the greatest enemy of the free market in world history. America now hates the free market. American business today does everything in its power to stamp out the free market and eliminate capitalist markets. Instead, American corporations today strive to replace free markets with coercive corrupt collusive monopolies, and in almost every area, they’ve succeeded.
Look around. Once upon a time, TVs cost $150. Now your typical giant flatscreen TV costs $1300, and it’s locked into a proprietary digital display system (HDMI) that’s festooned with every kind of anti-copying DRM you can imagine. Once upon a time, Microsoft’s operating systems used to cost $99 and they didn’t require to connect to some server to authenticate the install — and the operating system actually worked. Today, Microsoft’s Vista is a piece of sh*t that doesn’t work right, and it costs $400 and gobbles incredible amounts of RAM and requires a ridiculously fast CPU just to boot up, and on top of that is locked down with massive amounts of DRM and you have to connect to some Microsoft server 10 ways from Sunday to authenticate your install.
Everywhere you look, American business has stopped innovating and started using coercive corrupt monopolies to squeeze more and more cash from the captive customers (victims) they’re bleeding dry.
The single greatest enemy of free markets today is America. The most fanatical Soviet Stalinist communist’s loathing of running dog capitalists in the 1950s pales before the ferocious hatred of American CEOs in 2010 for actual competition and consumer choice and genuine innovations that would be fostered by capitalist free markets.
Would even the staunchest of Teabaggers really go out of their way defending people that’d still be taking home $25 million a year?
They’d be scared to death that one day they would qualify for that rate and their $$$ would go to young bucks buying steaks.
And that’s the confounding variable in all of this; the teabaggers aren’t so much interested in protecting the rich, they’re hell-bent on making sure those people don’t get a break at their expense. It’s been said before, but a teabagger would be perfectly happy living in a cardboard box as long as those people don’t even get the box.
93.
liberal
The Country Ran Fine With A 90% Top Marginal Tax Rate
But it’s meaningless without knowledge of what “taxable income” was.
For example, there was a time in the last century when capital gains were first multiplied by 60% before going into taxable income, IIRC.
94.
liberal
@El Cid:
Currently I live in a suburb of DC, in MD.
For personal reasons, wife is interested in eventually moving to Denver.
But I’m weary of moving to any low-tax state. They tend to be shitholes.
It’s like the arguments about the estate tax. It’s not going to be a meaningful tax until the loopholes are wrung out (especially faux insurance policies as a means of avoiding it).
I’d defer to folks like Krugman and Robert Reich to figure out what the exact margins and rates should be, but we should have several new margins at the top and much higher taxes on the rich.
The most obvious point is that economic rents should be taxed as close to 100% as possible. For example, land value taxes should be crushingly high.
The trickle down theory of conservatives (cut taxes and the rich will rain down prosperity) is just as dumb as the trickle down theory of liberals (tax wealth at huge rates and you will have oodles of money to distribute to the worthy poor and middle class).
Wrong. It depends on how you tax “the rich”.
First, most people who talk about “taxing the rich” are (unfortunately) talking about taxing income of the supposedly wealthy, not wealth. I hate to inform you of this, but income isn’t wealth. The actual rate of effective taxation of wealth falling on the truly rich (meaning, their income taxes divided by their wealth) is extremely small.
Second, most of the wealth of the rich was garnered by collecting economic rents, especially land rent. If you actually knew any economics, you’d know that economic rent can be taxed at extremely high levels, in principle reaching 100%, without any economic distortion whatsoever. In fact, land value taxation has a positive distorting effect, because a lot of urban land is held in very unproductive ways (e.g. surface level parking lots) while waiting for a capital gain and would be forced into more productive use by higher land taxes.
As Adam Smith pointed out, “Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them.”
And John Stuart Mill, “The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?”
About “risk,” surely you’re joking? Tell me about the risk bondholders in financial firms faced in the recent crisis.
California pretty much sealed its long-term economic doom with Prop. 13. You can’t stuff that much money into landowners’ pockets without really damaging your economy.
Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
False. If you tax rent-producing like land at extremely high rates, you keep collecting the tax year after year. (I won’t deny that the transition from a relatively low property tax regime to a higher one would be painful. Do note that there would be many fewer credit bubbles with high land taxes, though.)
Same thing goes for mineral wealth and E-M spectrum, which AFAICT is sold dirt cheap these days.
Yes the “Unlimited Expense Account” was the Holy Grail of the Junior Exec of the 50’s, it was a rare 3 martini lunch that was not expensed at least twice and yes Country Club dues were covered, in large part because business deals were hammered out by hammered guys over martinis at the 19th green, but there was in fact no possibility of expensing a house, nor did company jets even exist in those years.
In the fifties executives worked for the company and not the other way around, it was only in the sixties that we started seeing the deadly fruit as the buzzwords ‘conglomerate’ and ‘multinational’ took root and the idea that you didn’t create wealth by making stuff but instead by running companies. The cult of the manager and latter the even more pernicious cult of the financier were not products of the 90% tax rate.
The 1983 reworking of Social Security, that put the system on a sounder financial footing for a generation, led to increases in the FICA tax rate and the wage base and to the imposition of a separate Medicare tax collected through wage withholding.
Someone please correct me if I’m wrong but didn’t Reagan ultimately shift the tax burden to the middle class by raising the payroll taxes, a regressive tax, while cutting marginal tax rates?
The entire point is using the tax code as a sledgehammer to break up the current trend of corporations/individuals promoting short-term raze and burn profits over long-term stability.
Umm, no. That’s not the point, that’s an example of how the system got so fucked up.
A properly designed tax system raises the revenue necessary to run the government, is easy to administer, and is not used as an instrument of social policy. The use of tax laws to incent or disincent behavior inevitably leads to messes like our current mess. Government should never provide indirect subsidies or penalties through the tax laws. That should be done out in the open, through direct cash grants or penalties, where legislators have to step up to the plate and be accountable for what they are doing.
Any tax system that creates winners and losers is irretrievably fucked up. And that surely describes the current Internal Revenue Code.
Once again, the explanation is obvious. When workers sit on the board of directors and decide base pay and working hours and everything else, the workers feel like they’re part of the company and they work their guts out for it. Moreover, the workers are the ones who know how to make things operate smoothly because they’re engaged in reality on the ground, unlike the CEOs in their penthouses, so a board of directors made up of 50% line workers and union members shoots down crazy and counterproductive strategies cooked up by looney CEOs fast.
Yeah. This worked really well for GM. They were able to flip the company and sell it to the government for 10 cents on the dollar. Go union!
If I type real slow maybe you’ll get the idea. That high marginal rate isn’t so much about getting the Fed money as it is about dissuading those pricks from gouging the last fucking nickle out of the system and leaving some to go down slope? If you don’t get that it is actual economic policy, you’re being deliberately dense or you should be a GOPer.
Type as slow as you like. You’re still wrong. There ain’t no simple causal relation between tax rates, GDP, job growth or wages.
Various posters are tossing around the idea of high marginal tax rates as some kind of disincentive. This is both wrong and stupid.
Mark – You really have things mixed up. Property taxes in California are low for anyone whose property is worth substantially more than they paid for it.
False assumption that just because you think property taxes are low, people magically should be able to afford to pay them. You simply have not been paying attention to the fact that the standard of living in California has declined as jobs have been lost, wages have declined, and food, fuel and sales taxes have increased. I agree with you to some extent with respect to commercial property, but even here if a business closes, there ain’t nobody paying property tax. The city of El Monte, for example, saw its sales and property tax base decline sharply when Longo Toyota, its biggest commercial business, took a hit for obvious reasons.
You also seem to have missed the trend in homeowners successfully getting lower property tax assessments as the bloom has fallen off the home market.
liberal –If you actually knew any economics, you’d know that economic rent can be taxed at extremely high levels, in principle reaching 100%, without any economic distortion whatsoever.
Actual tax policy has never been based on this notion and will not be, not even here in crazy California.
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Mark
Especially when we were fighting for our survival in global conflicts.
Morbo
But if we cut taxes to zero, there will be infinite revenue!
Joe Buck
In those days, since the marginal rate was so high, corporate execs had the company pay for everything: they got to live in a company-owned mansion, drive a company car, have the company pay the country club dues, and fly to vacation spots in a corporate jet, and none of this counted as their income (I think that this is how employer-paid health care got started; first it was for the bosses, then organized labor demanded that the workers get the same deal). There were plenty of loopholes to exploit, like the famous oil depletion allowance, so they all had their own oil wells. The only people actually paying those high rates were those who suddenly found themselves rich without an army of accountants to arrange their taxes for them, like rock stars (the Beatles really did experience “that’s one for you, nineteen for me” one year, though they probably got that fixed after that).
It would probably be better just to have a top rate around 50% and very few loopholes, and make it so even people living off capital gains contributed their share. Some European countries have a wealth tax instead of a capital gains tax, which works somewhat like a property tax.
ominira
@Morbo: Exactly! Just think how much wealth from the rich would trickle down.
Proper Gander
However, one must realize that if there had not been such high taxes on the rich, it would have been that much less likely that Ayn Rand would have written Atlas Shrugged.
Wouldn’t a world without the phrase “going Galt” have been worth it? Sure we probably would be living in a “Man in the High Castle” scenario- East US to the Nazis, West Coast to the Japanese… but ask yourself, how much would a world without the worst novel in human history be worth?
FormerSwingVoter
You liar! Nothing happened between 1780 and 1980! That’s science fact.
rob!
Yeah, but that was under the commie simp Eisenhower. What a RINO!
Mark S.
@Joe Buck:
Those are some good points.
Can someone explain to me why exactly capital gains should be treated differently than other income? “I was thinking of just stuffing all of this money under my mattress, but those capital gains taxes are so low so I might as well invest some of it.”
FormerSwingVoter
@rob!:
Heck, Reagan would be a RINO to these clowns.
DougL (frmrly: Conservatively Liberal)
@Joe Buck:
That was then and this is now. Once good thing that the high rates did was keep executive pay at a reasonable level. As you stated, there were ways around this but I don’t think that would fly with the communication we have today. I would love to see a return to rates of at least 75% at the top. You would see executive compensation drop fast and they would try to revert to the practices of the high-tax past to make up the difference.
Stockholders would be far better informed today than they were back then and you can bet that they would start screaming about it. As they should.
@ominira:
Yeah, golden showers of wealth for the peasants!
AnotherBruce
With 90% top marginal rates in the 50s, I always knew that Eisenhower was a commie symp.
DougL (frmrly: Conservatively Liberal)
@Mark S.: “Can someone explain to me why exactly capital gains should be treated differently than other income? “
Sure. Because poor people don’t get paid with compensation like stock so they don’t deserve the low tax rates.
Dave Paulson
But that’s so unfair to think the folk making millions should pay a higher rate than those of us in the very low 6 figures. Besides, our nation would be devastated without all that trickle-down.
_______________________
Dave Paulson
http://www.thinkersjam.com
I think, therefore I jam
FlipYrWhig
I know I don’t need to remind this crowd, but, FWIW, there were also more brackets.
Brian J
Would most of those here be comfortable with keeping the Bush tax cuts or not rolling them back completely if they were replaced with other types of taxes, like stock transaction taxes or sin taxes? I would be, depending on the details. I can’t imagine why anyone would really object. It’d make things easier at the federal level, but also at the state level, which might prevent such massive cuts.
But in order to broker a compromise like that, we’d have to deal with opponents who were interested in actually giving something up. When more than, what, five Republicans consider voting for tax increases (and even that is pushing it), we could talk. Until then, it’s almost pointless to speculate.
Brick Oven Bill
Tim F.;
Do you think that this government has the capacity to tax the financial industry at 90%?
Or would that rate would just apply to the guy in the garage?
Realistically yours;
-Bill
Brian J
@Joe Buck:
The impression I’ve gotten is that it’s good to lower capital gains taxes or even get rid of them entirely, as long as they don’t lead to deficits. So if we lower or get rid of those taxes, we’d either need to cut spending or replace them with different taxes.
If only we had the sort of political system where we could have an honest discussion of this stuff.
AnotherBruce
Rob, I swear I did not read your comment first, honest, really.
Joe Buck
I’d have no problem with going higher than 50% for the truly astronomical salaries; Japan and Europe don’t pay their CEOs 500x or more of what the median worker makes.
Mark S.
@FlipYrWhig:
Also, that 90% didn’t kick in until you were making a whole shit ton of money, something like $50 million a year in today’s dollars.
Tim F.
@Brick Oven Bill: Interesting question. Get back to me when you find a garage guy making over $3 mil, the top tax bracket under Eisenhower in inflation-adjusted dollars.
Comrade Luke
@Mark S.:
Can’t you just hear everyone screaming bloody murder only getting to keep 10% of their earnings?
You know it would happen.
BR
I wonder how much of the problem is that media talking heads these days make hundreds of thousands or even millions per year, putting them solidly in the top 1% whereas 70 years ago I’m not so sure they were making all that much more than average folks.
(I always think back to Charlie Gibson’s obsession with cutting capital gains taxes during the 2008 debates.)
Brick Oven Bill
Obama (Rahm) named Mark Patterson, Goldman Sachs lobbyist, to be Tim Geithner’s Chief of Staff.
Tim Geithner’s best man at his wedding was his dad.
Nylund
If we said that anyone who made more than $50 million a year had to pay 50% in taxes (no exceptions even if its legally “capital gains”), who would really object?!
Would even the staunchest of Teabaggers really go out of their way defending people that’d still be taking home $25 million a year?
Corner Stone
@FlipYrWhig:
64 plus the play-in?
Corner Stone
@Nylund:
They’d be scared to death that one day they would qualify for that rate and their $$$ would go to young bucks buying steaks.
PeakVT
@Brian J: The problem is that rich people can afford tax accountants and lawyers who can make one type of income look like another. Once different types of income are treated differently, a lot of effort is put into avoidance, which has no benefit for society as a whole.
Tim F.
@Comrade Luke: “Marginal” means that they only pay 90% on what they make over the bracket limit. Everything below that gets taxed at a lower rate. If the top bracket is set at a bajillion dollars, someone making a bajillion dollars and one will pay an extra $0.90 in taxes.
Jim, Foolish Literalist
@Brick Oven Bill: Oh yeah? Well Mark Thiessen’s mother was his prom date.
@Tim F.:
The CarTalk guys?
Brachiator
@ominira:
Trickle down to who? How? Maybe you meant this ironically.
The trickle down theory of conservatives (cut taxes and the rich will rain down prosperity) is just as dumb as the trickle down theory of liberals (tax wealth at huge rates and you will have oodles of money to distribute to the worthy poor and middle class).
Here’s the key issue from the linked story”
Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
Risk.
What about the middle class? If a household taxed at the 15% rate had sold shares of Nike at a gain in 2009, their tax on the gain would be Zero.
Capital gains ain’t just for rich people. But I am amazed at the number of people I talk to who think it fine to blow wads of cash in Vegas or Atlantic City who somehow have become conditioned to believe that they aren’t supposed to buy a stock or a mutual fund.
On the other hand, I know a brother and sister who recently inherited some land and sold it. With the step up in basis and zero capital gains on a portion of the sale, their net gain on the sale was negligible. The LOVE them some capital gains.
Mnemosyne
@Joe Buck:
That’s still the case for executives at a lot of companies, though, and unlike in the 1950s or 60s they get an astronomical financial package on top of it. So it’s not like they gave up those perks in favor of a larger salary and stock options — they get those perks and an insane salary, too.
Mark S.
@Mark S.:
Actually, I might not know what the hell I’m talking about (it would hardly be the first time). The 90% kicked in over $400,000, which using this calculator, translates to about $3.5 million.
Ike was a communist!
Tim F.
@Jim, Foolish Literalist: Yeah. And Jesse James, who is a garage guy like Cesar Milan is a dog walking service.
Brian J
@PeakVT:
True.
Jim, Foolish Literalist
@Tim F.: I was kidding. I doubt they make that much selling T-shirts and begging for NPR, but yeah, Jesse James, and the Teutels (sp?). I would love to see people who make 3.5 million/yr going on TV referring to themselves as “middle class”, and Diane Sawyer nodding sympathetically.
(David Letterman just told me that Dan Quayle’s son is running for Congress in AZ. Hayworth’s seat?)
kdaug
Why do these “low tax” people hate our troops?
We’re in two wars, people!
Comrade Luke
@Tim F.:
I know what it means. I’m saying everyone else doesn’t!
FormerSwingVoter
@Brachiator:
Yeah. Hi. Welcome to the point. Glad you could make it.
Progressive taxation isn’t based on some hysterical hatred of the rich. Consumer spending makes up two-thirds of the economy. Marginal propensity to consume falls as income increases (a man making $1,000,000 per year does not spend a hundred times more on cars and washing machines and so on as someone making $10,000 per year – they move into investment). Therefore, assuming an identical amount of tax revenue, a more progressive rate of taxation results in more economic growth than a flatter one would (to a certain point, at least).
FlipYrWhig
@Nylund:
At a certain point the discussion of taxes got so stupid that the Republicans started to refer to the “largest tax increase in American history,” and IIRC they were referring to it in terms of _raw dollars_ rather than in terms of _rate_ OR inflation-adjusted dollars. And people kept falling for it, I guess because it just feels true to tax-butthurt Republicans. (OK, I checked: See FactCheck.org.) So I’m sadly sure the same thing would happen again.
Ailuridae
@Mnemosyne:
That’s still the case for executives at a lot of companies, though, and unlike in the 1950s or 60s they get an astronomical financial package on top of it. So it’s not like they gave up those perks in favor of a larger salary and stock options—they get those perks and an insane salary, too.
This. I had a girlfriend in college in the mid-90s who father was the CEO of a company based in a small town in OH. The firm was Fortune 1000 but not 500. For some reason they had a lot of business in Chicago so we would see him a lot.
He always flew private into Meigs Field and they bought a place here that he would have exclusive access to as long as he was CEO
http://en.wikipedia.org/wiki/Lake_Point_Tower
Yeah, that’s where Oprah lives. And as far as I know none of this (the great expense and convenience of not taking a cab to and from O’Hare) the luxury condo, etc was non-taxable.
Ailuridae +100000000000 (Codeine)
bago
Scientists are studying Sarah Palin’s travel between Alaska and Florida carefully. They hope to learn more about the flight patterns of that elusive migratory species, the wild Alaskan dingbat.
*snicker*
kdaug
@FlipYrWhig:
America’s Other Deficit: Critical Thinking
burnspbesq
Remind the average righttard that Saint Ronnie presided over the two largest tax increases in American history, and you will be called a God-damned liar. However, it happens to be true.
burnspbesq
Arithmetic is inescapable in the long run. You can’t have a buttload of expensive social services, and a big military, and low taxes. You can do that for a while, but eventually the gad-dam commie capital markets will raise your cost of borrowing until you can’t afford to deficit-spend any more.
We need to decide what we want government to provide, and then set taxes at a level that will pay for the government we decide we want and service the existing debt.
This is not complicated, but it seems to be beyond our elected officials, the punditocracy, and everyone else whose livelihood depends on believing in unicorns.
Ailuridae
@burnspbesq:
The larger point is true but the details are problematic.
The 1982 increase was the largest post 1940 during peace time (FDR’s 1942 tax increase trumps everything with good cause) and outstripped the Big Dog’s 1993 raise in real dollar and was 150% as large when you talk about as a percentage of the economy. In fairness to Reagan the increase was only after overshooting with his 1981 tax cut bill
What other bill are you talking about?
Ailuridae (high as a kite)
AnotherBruce
@Brachiator:
You are of course making the wrong assumption that the wealthy create wealth. They may create some, but mainly they’re good at hoarding wealth. Most wealth is created from jobs and most jobs are created by middle class people attempting to become wealthy.
So do you think the 1% of top wage earners who have as much wealth as the bottom 90% are creating 90% of the jobs? No, they just know where the money spigot is and they’re using that spigot to increase their already vast holdings.
Martin
@FormerSwingVoter: Actually, there’s a related but more subtle point. Why do people strive to expand their income? Because their goals exceed their current means. The last 30 years have been an experiment in inventing new goals rather than ratcheting down on the means. Very, very few people actually go Galt – and those that do are usually pretty easily replaced.
Luthe
One day, when I win Powerball and have millions of dollars to spend, I will form a non-profit called the Center for Tax Education. It will run TV ads explaining to the
moronsmasses the relationship between taxes and services. Perhaps there will be workshops in local libraries. Maybe even contributions to those few politicians with the balls to call for tax hikes.But alas, I have not yet won Powerball, and so this remains but a fond dream.
mclaren
@Joe Buck:
That’s a lie. And I can prove it.
Corporate jets did not exist in the Eisenhower era. No such thing. The first private Lear jet was assembled in 1963. Private jets did not become commonplace in corporate circles until the late 1970s.
The historical record systematically contradicts Joe Buck’s obviously and foolishly false claims:
Source: Alternet article “Does Greed Fuel Stupidity In Corporate America?”
Stricter accounting rules during the 1950s and 1960s made it impossible for executives to live in mansions owned by the corporation — that’s a flat-out lie. All the CEOs of the 50s and 60s and mid-70s owned their own homes and paid for them out of their own salaries. If they hadn’t done so, the corporations would have had their balance sheets torn apart by IRS auditors and the corporate accountants and the board of directors would have gone to jail for tax fraud. Only the change in tax laws of the Reagan Degeneration made such atrocities possible.
Joe Buck should buy and read Karl Rove’s forthcoming book to study how he ought to tell his lies. He’s clearly failing badly. Study the facts: the history of U.S. tax laws is online and readily available. During the 1950s the corporate tax skyrocketed, there was an excess profits tax, all the corporate scams and ripoffs Joe Buck claims occurred during the 50s and 60s and 70s were impossible and would have been considered tax fraud.
Joe Buck is just making sh*t up. He’s pulling stuff out of his ass. His claims have no connection with reality.
Here are the real facts:
FACT: From 1932 to 1980, the top marginal tax rate never dropped below 70%, and went as high as 95%. The American economy took off like a rocket.
FACT: After 1980, the top marginal tax rate dropped to 38% and for capital gains has plummeted to only 15%. The American economy has crashed and cratered, with every measure of profitability collapsing compared to the earlier period.
The logical conclusion? Corporate America generated incredible profits precisely because of those high marginal tax rates. And it’s obvious why. High marginal tax rates force CEOs to work like dogs to make enough money to take home and squander. With much lower marginal tax rates, the CEO no longer needs to care whether the company makes money or goes bankrupt because the CEO rakes in so much cash it doesn’t matter.
Here’s another set of facts for you:
FACT: Right now, today, Germany has the most dynamic economic in the world, more solid than China, more productive than America.
FACT: Germany has by far the most empowered labor unions in the world, with the most labor control over coporate management anywhere in the world.
In Germany, line workers elect 50% of the members of every German corporation’s board of directors. Not one member, not two members, half of all board members. If someone suggested that in America, they’d be set on fire and hung from a lamppost by lynch mobs screaming “Socialism!” and “Communism!”
Yet Germany super-empowered labor unions are the most productive in the world.
Once again, the explanation is obvious. When workers sit on the board of directors and decide base pay and working hours and everything else, the workers feel like they’re part of the company and they work their guts out for it. Moreover, the workers are the ones who know how to make things operate smoothly because they’re engaged in reality on the ground, unlike the CEOs in their penthouses, so a board of directors made up of 50% line workers and union members shoots down crazy and counterproductive strategies cooked up by looney CEOs fast.
No surprise.
Eliminate the use of slogans, posters and exhortations for the workforce, demanding zero defects and new levels of productivity without providing methods. Such exhortations only create adversarial relationships.
Eliminate work standards that prescribe numerical quotas for the workforce and numerical goals for people in management…
Remove the barriers that rob hourly workers, and people in management, of their right to pride of workmanship. This implies, abolition of the annual merit rating (appraisal of performance) and of management by objectives. (..)
The worker is not the problem. The problem is at the top! Management! (..) It is not the individual who determines success or failures in the corporation, it is the system as a whole. (..) A system must be managed. It will not manage itself. Left to themselves in the Western world, components become selfish, competitive. We can not afford the destructive effect of competition.”
— W. Edwards Deming, Principles of Total Quality Management (quotes from Wikipedia)
After this brief interruption by observed reality, we now return you to the regularly scheduled fantasy world of kooks like Joe Buck and the other Ayn Rand fringe lunatics who will chant their mindless mantra that high marginal tax rates and stratospheric CEO pay and viciously cannibalistic worker-management antagonism are all fundamental parts of human nature and a necessary and inevitable basic component of capitalist free enterprise, despite the overwhelming mountain of evidence to the contrary.
TenguPhule
Ahem, Fuck that shit.
There is more risk being a worker in today’s job environment where employers wield overlord level power and you can literally live or die by your health care benefits then someone with a bunch of money making more money by doing essentially nothing.
TenguPhule
My dream is a hit reality show called “Snipe Hunt on K Street”
Brachiator
@FormerSwingVoter:
RE: Unless economic activity expands, taxing the rich will at best get you a one time haul of money.
.
Never said it was, though you might think this was the belief based on some of the comments that regularly appear here and in other blogs.
And so? This says nothing about the sources of the income. Wages have declined over the past several years and a larger portion of spending has come from credit instead of productivity. This has contributed to the mess we are in.
I absolutely favor progressive taxation. And, by the way, I also favor the estate tax for both economic and social reasons. That said, tax policy is not synonymous with economic policy, and government transfers cannot substitute for real economic production.
You cannot assume “an identical amount of revenue.” There is no CBO report or even a claim by the Obama administration that raising the marginal rate will magically produce sufficient revenues to keep the economy going. I haven’t seen any comprehensive study of wages, GDP and the impact of tax rates, either raised or decreased, anywhere.
And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit. And before June 30 rolls around, the prior period revenue projections will be shown to have been polite fictions. Other states are beginning to show the same weaknesses.
Republicans don’t have a clue about the economy and are stuck in libertarian and Randian delusions. But the Democrats need to get rid of some of their pet theories and demonstrate more flexibility and imagination.
freelancer (itouch)
Sheesh, what do you folks do fer fun on a Monday night?
kdaug
My experience with the super-wealthy (such as it is – grew up with them) is that roughly 80-90% of the time their money is inherited. And as a general rule, those jackasses tend to be lazy, incompetent fucks.
Not their fault, really. They just never have to work for anything.
kdaug
@Brachiator:
90%, bitches!
Hell, with that kind of money, we could beat them Soviet Ruskies. We might even be able to send a man TO THE MOON!!
Martin
@Brachiator:
Tax and fee increases? Please. The increases that were fought for tooth and nail are hardly worth mentioning, and are incredibly regressive. Meanwhile, this morning I visited a family friend in a $6M waterfront home that was probably paying less than $8K per year in property taxes. We have absurdly low property taxes, moderate income taxes and think that auto registration and sales tax can solve everything.
Redshift
@burnspbesq: Free ponies for everyone!
Martin
@kdaug: But their income isn’t earned. It’s inherited and so there’s nothing much to tax in the current system. Only a wealth tax would really impact them – which might cause them to be a little less lazy…
TenguPhule
That’s because your Wingnut Republican minority can block any actual tax increase that could really help balance the budget. All you get instead is window dressing and Sarah Palin slogans.
So yeah.
Jim in Chicago
@kdaug#52:
In the words of Al Franken: “The problem with the estate tax is that it punishes the most productive members of our society: The children of the extremely wealthy” ;D
Yutsano
@Martin: Well FWIW in WA we do pretty good on mostly property and sales taxes. Of course when the floor fell out of the economy revenue plunged like a stone and the dreaded income tax word actually got mumbled about. That genie got stuffed back in the bottle really quickly though. We also don’t have anywhere near California’s expenses. Something will give there eventually.
Ash Can
@freelancer (itouch): “what do you folks do fer fun on a Monday night?”
Get shitfaced, pile into the pickup truck, and shoot at road signs and lawn statues.
freelancer (itouch)
@Ash Can:
Welcome to Tuesday mornings in Nebraska you lightweights.
kdaug
Yeah there is. Tax capital gains at median bracket and enforce an estate tax around 70%.
There’s a certain subtle but detectable sociopathic sense of hubris and entitlement in these people. It needs to be called out and dealt with.
Yutsano
@freelancer (itouch): Hey I went to a cow college man. You’d be amazed what fun you have to make up in a small town in the middle of nowhere. Beer can only get you so far.
kdaug
@Jim in Chicago:
Yup.
Brachiator
@AnotherBruce:
I’m not making that assumption at all.
I don’t agree here, but it’s not central to my point. But a key point here is that “the wealthy” is not a stagnant group, nor can they continually hoard wealth, especially with a healthy estate tax. And by the way, note that Mexico’s Carlos Slim has displaced everyone, including Buffet and Gates, to become the wealthiest man in the world. Even at this ridiculous level, hoarding only takes you so far.
This is the point. Jobs are disappearing and wages are declining. How is raising the marginal tax rate alone going to come to the rescue?
Nope.
And, so? Are you suggesting that a country’s wealth is a zero sum game, that there is some total amount of wealth available, and that taxing the 1% will magically shift wealth and jobs to the 90%?
Chuck Butcher
@Brachiator:
If I type real slow maybe you’ll get the idea. That high marginal rate isn’t so much about getting the Fed money as it is about dissuading those pricks from gouging the last fucking nickle out of the system and leaving some to go down slope? If you don’t get that it is actual economic policy, you’re being deliberately dense or you should be a GOPer.
kdaug
@Chuck Butcher:
Ding. The POINT is the disincentive.
TenguPhule
No, but it will damn well improve the bottom line of the federal budget, act as a disincentive to make millions by shitting on customers and shareholders, make GOoper donors weep tears of blood and crack that brick ceiling between the have and have nots by making the money MOVE around instead of staying in the same place.
Ailuridae
@Chuck Butcher:
Charles the Pure.
kdaug
Oh, and by the way, in the meantime we get to go to the moon and beat the Commies.
Martin
And just to put the brakes on the ‘California can’t control their spending’ bullshit, in the most recent data I can find, California ranks 20th in spending per capita. In 2007 (better years, no question, but not horribly good) California spent $8,700 per capita. Washington state: $7,700. Alaska: $15,000. Wyoming: $11,000. New Jersey: $8,700. New York: $10,500. Vermont: $8,500. The lowest state was Tennessee: $5,800. South Carolina: $7,000. National average was $7,500.
Yeah, CA is a bit high, but hardly out of control considering their size. One major problem with California’s spending is that so much of it is tied to ballot initiatives that the legislature has no authority to adjust because they had no hand in actually causing the spending.
Brachiator
@Martin:
RE: And here in California, we have reached the dangerous point where neither spending cuts and tax and fee increases have been able to make a dent in the state budget deficit.
That’s funny. We were told that these increases would help solve the budget problem. The deficit kept exploding.
I haven’t seen the plan from either a Republican or Democrat that will actually solve the problem. The revenue shortfalls will continue, and the next crisis will soon hit as April tax revenues are seen to be far below projections.
And I talked to a family where both the husband and wife are unemployed. They ain’t got no income and can’t pay the property tax that you think is low. If they have to sell their house and cars, which may be likely, they won’t even be able to deduct the loss, but for California purposes, may have to report and pay tax on cancellation of debt income. What rate of income tax do you propose that they should pay on this phantom income?
What? How many fiduciary returns have you seen? I mean, with the possible exception of your friend with the $6 million home?
kdaug — Tax capital gains at median bracket…
What does this mean?
At what level of taxable estate?
Mark
@Brachiator
You really have things mixed up.
Property taxes in California are low for anyone whose property is worth substantially more than they paid for it. This includes:
1) Long-time homeowners (of primary homes or income properties)
2) Homeowners in areas where housing prices have not fallen very much
3) Commercial properties (which pay an ever-dwindling share of property taxes)
In other words, the people who can afford and should be paying higher taxes.
And who has high taxes? People who bought homes over the last decade (or two, depending on the area.) With declining property values, Proposition 13 is not in effect for most people in this group, and everyone is at the mercy of the county assessor, who is trying to generate as much revenue as possible.
Karmakin
The entire point is using the tax code as a sledgehammer to break up the current trend of corporations/individuals promoting short-term raze and burn profits over long-term stability.
And I’m willing to entertain any other suggestions on the matter, but it seems to me that the most effective way to do this is to raise capital gains taxes to at LEAST the same level as labor income, and better yet, to punitive levels.
This wouldn’t “kill” investment, but it would redirect it from desired gains from the buying/selling of investments, and towards long-term buy and hold dividends and stable profits.
Again, if there’s a better way to do this, I’m all ears. But I haven’t heard anything convincing as of yet.
Batocchio
Some folks have been saying it for years. I’d defer to folks like Krugman and Robert Reich to figure out what the exact margins and rates should be, but we should have several new margins at the top and much higher taxes on the rich. Hey, even Warren Buffet’s for it…
bago
Technically Hayekian price theory is about the value add of having closer nodes in the economic graph be more determinant when compressing the information of that part of the market into a single floating point number to traverse the graph. While a brilliant insight in the time of information scarcity, there is no need for the compression these days as the lossy compression algorithms of the various node controllers is used to keep information out of the system/economy. Players like Goldman are betting on this when they do various activities to hide the true value of Grecian debt, or when Lehman started playing fast and loose. They will have a more accurate market assessment because they are looking at the pricing vectors before they get compressed into a single price. They are able to capture more market data for their analysis, because they have access to more data.
Honestly, it seems like you could design an excellent self optimizing market if every client of the market could establish their own set of pricing vectors. For example, valuing “Fairtrade” status of the coffee comoddity at 1.3 times the monetary value would be one scalar, while scarcity would be another. In other words, you would price on multiple vectors, and the market could adapt by calculating the marketshare each vector occupied and increase market efficiency.
We have the computers. We have the math. There is no need to compress all market knowledge into a single floating point value. We can do better.
iLarynx
@ Joe Buck
FYI – The Beatles were British. They didn’t pay US income taxes.
http://en.wikipedia.org/wiki/Taxman
asiangrrlMN
God. No open thread? Sorry, but my brain asploded. I would like some kittehs or food pr0n plz. kthxbai.
Xenos
@kdaug:
I would add that they are inclined to depression, self-loathing, drug abuse, and increasing moral collapse over the generations.
The Moynihan arguments about welfare destroying the morality of the state-supported poor apply to those at the other end of the wealth spectrum, too.
El Cid
Also on the plutocrat front: Simon Johnson says Dem Sen Kaufman is about to call out Goldman Sachs for possible criminal activities in a Senate speech tomorrow.
In addition, the Columbia Journalism Review notices that it was bloggers, and not journalists, who ‘front-paged’ substantial analysis of the recent report on the insiders running Lehman into the ground.
And, again, just like you’re often better off reading foreign sources directly rather than wait for our lazy billion dollar media corporations to get around to covering whatever bits they want with whatever trendy slant their bosses prefer, the billion dollar media prefer not to mess up our pretty little heads with too strongly emphasizing badthink about Big Finance.
bago
It’s like people stuck in a 2 dimensional relational model, using a two dimensional assosiation paradigm to describe n dimensional relationships. Just drop the grid and normalize the data without the 2d visualization crutch. One way node mappings are data loss engines.
gnomedad
@bago:
That is some fine snark. Al Franken will have to stay on the ball if he wants to remain Congress’s Comic Laureate.
cmorenc
That technical 90% rate was so full of legal loopholes and tax dodges that only suckers payed anything remotely close to that rate. I would actually have little objection to keeping the Bush tax cut rate for the upper-income echelons of taxpayers IF (HUGE AND DOUBTFUL IF) tax breaks were curbed accordingly and they actually wound up paying close to that effective rate on income, instead of a lower actual percentage.
It’s the ACTUAL EFFECTIVE RATE that matters, not the NOMINAL MARGINAL RATE, including the effect of all deductions, exclusions, tax credits etc etc.
El Cid
Meanwhile, conservative anti-tax philosophies continue to yield positive results for our citizens, particularly the children:
There you have it folks, the TABOR path to paradise — at least for those of you pining for the golden days of the 1920s sharecropping South with little public education and rampant hookworm and tetanus.
WereBear
What we have here is a failure to create wealth.
Ever since Reagan came in, the rich have been playing games to scoop up more of the cash already made. Raiding established companies, stealing pension plans, buying and selling debt instruments, and throwing people out of their jobs while expecting them to consume at the same rate are all ways they did it.
In the meantime, they’ve cut back on future wealth generation like R&D, and monopolized markets to keep smaller, more innovative startups out.
My whole adult lifetime it’s been this way. The problem with American business is American business.
Xenos
@WereBear: This also correlates with the publication of quarterly financial statements. The management of large companies for very short term financial game led to a whole generation of executives who are rewarded for killing off their companies.
mclaren
@Were Bear:
Exactamundo. Ever since Reagan, America’s economic model has shifted from generating wealth through innovation and capital improvement and increasing the buying power of the middle class that makes up 70% of the U.S. economy, to generating wealth through shedding jobs overseas and creating giant monopolies that destroy markets and lock customers into anti-competitive cartels with artificially high prices.
Look around. In every single area of business, America has become the Nation of Monopolies. Broadband? You have at most 2 choices in most parts of America — the local baby bell monopoly and a cable TV monopoly.
Take a look at book publishing/movies/music — it’s all now controlled by 4 giant vertically integrated media monopolies. These giant anti-competitive cartels not only make the movies, they not only own the blu-ray plants that press the discs, they even own the theaters that show the movies and they own and design and build the only disc player that can play those blu-ray movies. Talk about vertically integrated monopolies–!
From Microsoft’s monopoly on computer operating systems to Dell’s hammerlock on the computer hardware market, to Intel’s ownership of the CPU market, to the giant vertically integrated health care cartels of insurers like Wellpoint and local hospitals that lock in customers to the point where they no longer care if they lose customers when they raise prices, because their customers have no other options…everywhere you look in America, the free market has been abolished.
In the last 30 years America has become the greatest enemy of the free market in world history. America now hates the free market. American business today does everything in its power to stamp out the free market and eliminate capitalist markets. Instead, American corporations today strive to replace free markets with coercive corrupt collusive monopolies, and in almost every area, they’ve succeeded.
Look around. Once upon a time, TVs cost $150. Now your typical giant flatscreen TV costs $1300, and it’s locked into a proprietary digital display system (HDMI) that’s festooned with every kind of anti-copying DRM you can imagine. Once upon a time, Microsoft’s operating systems used to cost $99 and they didn’t require to connect to some server to authenticate the install — and the operating system actually worked. Today, Microsoft’s Vista is a piece of sh*t that doesn’t work right, and it costs $400 and gobbles incredible amounts of RAM and requires a ridiculously fast CPU just to boot up, and on top of that is locked down with massive amounts of DRM and you have to connect to some Microsoft server 10 ways from Sunday to authenticate your install.
Everywhere you look, American business has stopped innovating and started using coercive corrupt monopolies to squeeze more and more cash from the captive customers (victims) they’re bleeding dry.
The single greatest enemy of free markets today is America. The most fanatical Soviet Stalinist communist’s loathing of running dog capitalists in the 1950s pales before the ferocious hatred of American CEOs in 2010 for actual competition and consumer choice and genuine innovations that would be fostered by capitalist free markets.
WereBear
@mclaren: Yes, it’s exactly what you do when you have your head up your rectum and don’t know what you are doing.
Or basically, the Conservative Model of Business: we will make you pay more for less!
No wonder they carry on about free markets; they fear them.
Grumpy Code Monkey
@Corner Stone:
And that’s the confounding variable in all of this; the teabaggers aren’t so much interested in protecting the rich, they’re hell-bent on making sure those people don’t get a break at their expense. It’s been said before, but a teabagger would be perfectly happy living in a cardboard box as long as those people don’t even get the box.
liberal
But it’s meaningless without knowledge of what “taxable income” was.
For example, there was a time in the last century when capital gains were first multiplied by 60% before going into taxable income, IIRC.
liberal
@El Cid:
Currently I live in a suburb of DC, in MD.
For personal reasons, wife is interested in eventually moving to Denver.
But I’m weary of moving to any low-tax state. They tend to be shitholes.
liberal
@cmorenc:
Exactly.
It’s like the arguments about the estate tax. It’s not going to be a meaningful tax until the loopholes are wrung out (especially faux insurance policies as a means of avoiding it).
liberal
@Batocchio:
The most obvious point is that economic rents should be taxed as close to 100% as possible. For example, land value taxes should be crushingly high.
liberal
@Brachiator:
Wrong. It depends on how you tax “the rich”.
First, most people who talk about “taxing the rich” are (unfortunately) talking about taxing income of the supposedly wealthy, not wealth. I hate to inform you of this, but income isn’t wealth. The actual rate of effective taxation of wealth falling on the truly rich (meaning, their income taxes divided by their wealth) is extremely small.
Second, most of the wealth of the rich was garnered by collecting economic rents, especially land rent. If you actually knew any economics, you’d know that economic rent can be taxed at extremely high levels, in principle reaching 100%, without any economic distortion whatsoever. In fact, land value taxation has a positive distorting effect, because a lot of urban land is held in very unproductive ways (e.g. surface level parking lots) while waiting for a capital gain and would be forced into more productive use by higher land taxes.
As Adam Smith pointed out, “Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them.”
And John Stuart Mill, “The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?”
About “risk,” surely you’re joking? Tell me about the risk bondholders in financial firms faced in the recent crisis.
liberal
@Martin:
California pretty much sealed its long-term economic doom with Prop. 13. You can’t stuff that much money into landowners’ pockets without really damaging your economy.
liberal
@Brachiator:
False. If you tax rent-producing like land at extremely high rates, you keep collecting the tax year after year. (I won’t deny that the transition from a relatively low property tax regime to a higher one would be painful. Do note that there would be many fewer credit bubbles with high land taxes, though.)
Same thing goes for mineral wealth and E-M spectrum, which AFAICT is sold dirt cheap these days.
Bruce Webb
@Joe Buck: Ah Joe you’re full of it.
Yes the “Unlimited Expense Account” was the Holy Grail of the Junior Exec of the 50’s, it was a rare 3 martini lunch that was not expensed at least twice and yes Country Club dues were covered, in large part because business deals were hammered out by hammered guys over martinis at the 19th green, but there was in fact no possibility of expensing a house, nor did company jets even exist in those years.
In the fifties executives worked for the company and not the other way around, it was only in the sixties that we started seeing the deadly fruit as the buzzwords ‘conglomerate’ and ‘multinational’ took root and the idea that you didn’t create wealth by making stuff but instead by running companies. The cult of the manager and latter the even more pernicious cult of the financier were not products of the 90% tax rate.
burnspbesq
@Ailuridae:
The 1983 reworking of Social Security, that put the system on a sounder financial footing for a generation, led to increases in the FICA tax rate and the wage base and to the imposition of a separate Medicare tax collected through wage withholding.
burnspbesq
@mclaren:
REMINDER: Correlation is not causation.
Nice little screed you’ve got there, though.
batgirl
re: Reagan
Someone please correct me if I’m wrong but didn’t Reagan ultimately shift the tax burden to the middle class by raising the payroll taxes, a regressive tax, while cutting marginal tax rates?
burnspbesq
@Karmakin:
Umm, no. That’s not the point, that’s an example of how the system got so fucked up.
A properly designed tax system raises the revenue necessary to run the government, is easy to administer, and is not used as an instrument of social policy. The use of tax laws to incent or disincent behavior inevitably leads to messes like our current mess. Government should never provide indirect subsidies or penalties through the tax laws. That should be done out in the open, through direct cash grants or penalties, where legislators have to step up to the plate and be accountable for what they are doing.
Any tax system that creates winners and losers is irretrievably fucked up. And that surely describes the current Internal Revenue Code.
Flugelhorn
@mclaren:
Yeah. This worked really well for GM. They were able to flip the company and sell it to the government for 10 cents on the dollar. Go union!
Brachiator
@Chuck Butcher:
Type as slow as you like. You’re still wrong. There ain’t no simple causal relation between tax rates, GDP, job growth or wages.
Various posters are tossing around the idea of high marginal tax rates as some kind of disincentive. This is both wrong and stupid.
Mark – You really have things mixed up. Property taxes in California are low for anyone whose property is worth substantially more than they paid for it.
False assumption that just because you think property taxes are low, people magically should be able to afford to pay them. You simply have not been paying attention to the fact that the standard of living in California has declined as jobs have been lost, wages have declined, and food, fuel and sales taxes have increased. I agree with you to some extent with respect to commercial property, but even here if a business closes, there ain’t nobody paying property tax. The city of El Monte, for example, saw its sales and property tax base decline sharply when Longo Toyota, its biggest commercial business, took a hit for obvious reasons.
You also seem to have missed the trend in homeowners successfully getting lower property tax assessments as the bloom has fallen off the home market.
liberal –If you actually knew any economics, you’d know that economic rent can be taxed at extremely high levels, in principle reaching 100%, without any economic distortion whatsoever.
Actual tax policy has never been based on this notion and will not be, not even here in crazy California.