I’m beginning to suspect that Matt O’Brien isn’t omniscient.
The Ezra Kleinless wonkblog remains excellent. In particular Matt O’Brien is about as young, smart, witty, and hard working as Klein. However, I think he may not have read everything.
He notes that the allegedly reformicon tax plan includes the Bush tax cuts for the rich on steroids. Then he reviews recent, but only recent, history writing
“Apparently raising the top marginal tax rate to 39.6 percent is the first step on the road to serfdom. (I’m pretty sure that’s in the Communist Manifesto).”
Why yes it is (pretty much).
Point 2 of the 10 point plan in the Communist Manifesto
“2. A heavy progressive or graduated income tax. “
Now 39.5% would seem absurdly light to Dwight (Eisenhower) but it would have sounded extremely heavy in 1848*. Note that Marx and Engels added “or graduated” in case their readers needed further explanation of the strange concept of a “progressive income tax.” At the time, a flat income tax would have been less regressive than the existing systems based mainly on excise taxes.
* typo corrected thanks to Lyle in comments.
I assume you meant 1848, as rates went up to a nominal 91% in 1948.
a progressive income tax was already done by the “bourgeois” well before the Communist Manifesto from time to time. Matter of fact, most of the 10 points outside a couple(like abolishing government backed private property) were invented by the “liberals”. Marx and Engels studied Christian groups to try and get a feel for ‘communism’. Weitling, Cabot and Owen were the original communists and I think Weitling debated Engels(ended badly for him) was a devout Christian. Most right-hegelians will never admit this. They live in a fantasy world based on plutocracy and its international dictatorship. That is why “right-hegelian” militia groups will never make it. Most of their garb comes from dialectical sources rather than tribal ones.
Here is a link to the Federal Income Tax rates from 1913:
I did this table a few years ago to illustrate the problem with the number brackets. But it also gives the top tax brackets. As you can see the top tax bracket was above 62% from 1932 to 1982 and above 90% from 1944 to 1964:
I did this table a few years ago to illustrate the problem with the number brackets. But it also gives the top tax brackets:
Year__Tax Rate for $4000___Tax Rate for $25,000_____Highest tax rate____For Income over___Number of Brackets
Note : The rates stayed the same between the years shown.
“I did this table a few years ago to …”
“I did the table below a few years ago to ..”
It still says 1948 on the top page.
I seem to remember that in the first Bush administration the top income tax rate rose to 39% at something like $150,000 (figures may be way off) and then dropped off (!) again at something like $300,000.
Showing the top marginal rates or the rates in general helps some understand historically, but it does not contest effectively the rights argument that high rates are not fair. I believe this is because people have a very simple sense of fairness. One cookie for you, one cookie for me. Thus, people think of fairness in a linier fashion.
This simplicity is fine for cookies until one starts to realize that one of the people getting a cookie owns the cookie factory and a few of the others are simply working for that owner.
An economy distributes income on a curve not a straight line and this is the understanding that has been fought back and buried over the time since Reagan. The argument has been intentionally based on the childish concept of fairness we are all taught and teach our children.
Thus what is required, and what the adults understood in 1933 going forward is the concept of curves. A tax code must produce a counter curve to the one the economy produces in just the correct measure to assure the reduction of life’s risks at the level of the most common life experience while minimally effecting the economies ability to produce income. We had that. We know the ranges as to shares of income and effective rates that best do this.
The concept of a curve needs to be put back into our discussions regarding the economy and thus taxes. This is what I published here March 2012: http://angrybearblog.strategydemo.com/2012/03/defining-rich-vi-1936-tax-tables.html
It shows the curve. It shows that there was reasoning to our tax tables in the past as oppose to today’s concept of simply picking a number that some poll thinks they can sell and still get elected based on some really, really childish concepts of fairness and thus growth by the economics profession.
I think you are right but maybe a bit hard to understand.
One thing about “top rate” is that it obscures this is a top MARGINAL rate and those high earners are NOT paying 90% or whatever on all of their income, but maybe only on that over ten million dollars… or something.
I, even I, at one time, maybe a short time ago, had trouble with a “90%” tax rate, but having seen what the economy is doing (CEO’s making 30 million dollars a year. Hell, even college coaches making 3 million, makes me less sympathetic to their plight. And if the marginal rate is so high that Ronald Reagan decides it’s not worth his effort to make another movie this year, I say “yea!”
Readers should be warned that that last sentence was meant to provoke thought, not the opposite.
On the other hand, “liberals” who say “regressive tax, regressive tax, awk, awk” as though they had identified the secret evil heart of Social Security are, in fact, morons. As are those who say “tax the rich” as a solution for everything… just like those who say “lower taxes” as a solution for everything.
Yeah, we could use some actual thinking about tax rates, but don’t hold your breath.
Becker, you are correct that people today gasp at the thought of anyone paying high tax rates. One (partial) work-around was sought by Bill Clinton: no business deduction for compensation above $1 million to an individual. Congress agreed but insisted on a gigantic loophole. It should be closed, tight.
Bill Clinton, not long ago,said that he never should have caved-in on the loophole. Of course, closing the loophole would bring out the “double taxation” crowd in force, but they’re wrong (and their arguments for low tax rates on dividends also should be rejected).
Regardless of the rate, normalised tax collection as a percentage of GDP has stayed relatively constant at around a 17.5% (give or take). Wouldn’t that support those that claim that reducing taxes pay for themselves through higher economic activity, less avoidance, etc., and conversely that increasing taxes only increases avoidance while reducing economic activity,etc?
Dan Becker and PJR huh ???!!????
I’m sure some people today gasp at the thought of anyone paying higher taxes, but a solid majority of US adults are quite enthusiastic about higher taxes on people with high incomes.
It simply isn’t true that increased tax progressivity is perceived by most Americans to be unfair. A solid majority of Americans have said that high income people pay less than their fair share of taxes in poll after poll after poll done by Gallup since 1992. If you want to understand what people think is and isn’t fair, you should ask a representative sample of people. Fortunately pollsters have done this. There can be no doubt about what a solid majority of Americans think .
“As I read off some different groups, please tell me if you think they are paying their fair share in federal taxes, paying too much, or paying too little. How about [see below]?”
Fair share Too much Too little Unsure
% % % %
4/3-6/14 24 13 61 2
4/4-7/13 26 11 61 2
4/9-12/12 25 10 62 3
4/7-11/11 25 13 59 2
4/8-11/10 26 15 55 4
4/6-9/09 23 13 60 3
4/6-9/08 24 9 63 4
4/2-5/07 21 9 66 4
4/10-13/06 21 8 67 4
4/4-7/05 22 7 68 3
4/5-8/04 24 9 63 4
4/03 24 10 63 3
4/99 19 10 66 5
4/96 19 9 68 4
4/94 20 10 68 2
3/93 16 5 77 2
3/92 16 4 77 3
search for “fair share” . You will have to click next a few times to get past the latest poll which only asked about corporations.
Notice the dramatic total non shift when taxes increased on super high incomes post fiscal cliff and when the ACA surtax began to be collected.
Also when specific tax increases are discussed, tax increases on high incomes have majority support. This is true of the obamacare tax increase on high incomes and raising the FICA ceiling and, basically, all tax increases on high incomes which have been enacted or proposed.
If you are aware of some data which contradicts my claims, I’d be interested in seeing it. What evidence can you site to support your contrary claims.
bit of a glaring error here. of course people think the OTHER guy’s taxes are not too high. what counts is what they think about THEIR taxes.
I personally think everyone’s taxes are too low. The “rich” could pay more taxes (last i read the “effective” tax on the rich was about 17%) until “the deficit” is no longer an issue.
the poor could certainly pay a FICA 2% higher than present… in the first place it’s not really a tax, but a savings and insurance payment which they get back with interest when they need it most.
and the dear middle could and should pay another 2 or 3% just in solidarity and to avoid the suspicion (by me) that they really don’t give a damn about the country, the poor, or anything but getting the most they can without paying for it.
Becker, most survey questions that ask whether the wealthy are paying enough in taxes, and people generally say no and the wealthy should pay more in taxes. They are being asked about effective rates, not marginal rates. And they generally believe that the wealthy unfairly reduce their taxes to less than what they should be paying.
I’ve found one poll that gets a little closer to a question about the top marginal rate here: http://thehill.com/images/stories/news/2012/02_february/crosstabs_20120223_thehill.pdf It asked what the top rate should be for people earning over $250,000. Most people said it should be 25 percent or less. Only 2 percent cited a figure greater than 40 percent.
It’s anecdotal, but ask your non-expert friends what top marginal rate should apply to people earning a million or more. I’ve found that they’ll go no higher than 50 percent and dismiss anything above that as unfairly “confiscatory.”
With such limited evidence, I conclude that–for economic reasons–we should push the limit of what people will find not unreasonable (probably 50 percent, which was Reagan’s top rate 1982-1986) AND make this money non-deductible for businesses as Clinton proposed.
what Becker said:
“A tax code must produce a counter curve to the one the economy produces in just the correct measure to assure the reduction of life’s risks at the level of the most common life experience while minimally effecting the economies ability to produce income. We had that. We know the ranges as to shares of income and effective rates that best do this.
there was reasoning to our tax tables in the past as oppose to today’s concept of simply picking a number that some poll thinks they can sell and still get elected based on some really, really childish concepts of fairness and thus growth by the economics profession.”
what i said was “good luck getting anyone to understand that.
what you seem to be saying is “go with the polls.” which still leaves the problem “why would the rich who control the government pay higher taxes just because the polls think they should?”
i think, quite naively, that you could get many (enough) of “the rich” to pay a little higher tax if you appealed to their patriotism and showed some solidarity by raising your own middle class tax, and convincing “the poor” that raising their payroll tax… i.e. paying for their own retirement/insurance… is a very good idea for them.
Even if that’s a hard sell, it’s something i would rather say in public than, “lets tax the rich more because the polls say we should.”
Coberly, I agree it might be a hard sell to convince the Koch brothers that it’s their patriotic duty to pay taxes. But worth a try, publicly. Meanwhile, since many if not most wealthy people will oppose tax hikes on themselves, it seems wise not to dismiss their ability to enlist public opinion on their side.
I didn’t “exactly” just pick a number out of the air based on limited opinion polling. Here at AB and elsewhere, I’ve encountered research and analysis indicating that a marginal income tax rate approaching 70 percent on the highest incomes may be best for economic growth, more equitable growth, and tax revenues to pay for what we want. As Becker said, we once had that. But I also detect that people today agree with tax opponents that such high tax rates were and are “unfair” even though they want wealthy people and companies to pay more than they currently pay. The Clinton proposal–to deny a business deduction for compensation over a million–suggests one way forward. As he once said, it’s arithmetic. The high paychecks would be taxed as profits (at a “fair” rate) and then as individual income (at a “fair” rate). Using today’s tax rates, the combined tax would be a little over 60 percent; if we added a tax bracket on at the top at 50 percent–the highest rate originally sought by Reagan–the combined tax rate on that money would be a little over 67 percent.
marginal rate of 70% on what income?
i am prepared to believe that 70% would lead to more growth. i am not prepared to believe that “growth” is the purpose of life.
I have no doubt “the rich” will oppose any tax increase. But I’d still rather try to sell it to them and the public as a patriotic (and ultimately beneficial to them) act than to tell them and the public that it’s “only fair” that the rich pay for everything we want.
as far as Clinton “only arithmetic,” this was the guy who said raising the retirement age was the “obvious solution” to the SS “crisis.”
There is no SS crisis, and raising the retirement age would be less obvious to old people with bad knees and bad jobs and maybe less life expectancy that “average’ than it was to Bill and Newt who liked their jobs and people on their knees.
i don’t dismiss public opinion on their side. but i think i have a better product and can better affect public opinion with a “what’s best” for the country and for you personally campaign than a “soak the rich” campaign. I think even “the rich” could understand the reason to fight the criminal rich than they would understand a simple minded (obvious?) make the rich pay rhetoric, which as far as I know only sppeals to those who are still fighting the Revolutioin of 1848.
The poll you linked shows the duplicity I was talking about and talked about in my posts back in 2012 and earlier.
Sure, people think the top pays too little. Interesting the questions above that show a change of view after around 2001 from a good majority thinking they paid too much to a more equal split of saying they pay about right. Asked if what they were paying “this year” was fair we see the same shift in the split
2009 we see a 61/35% split of fair/not fair this year to 2014 54/41% split. Your tax too high was 66/31% 2001 shifting to 52/42% 2014.
This gets to my point. I did not say people would not accept higher rates. I said they don’t get what a progressive income tax schedule really is. Just talking about the top rates will not help counter the need for a progressive tax schedule.
I’m old enough to remember that the argument of the tax code being too complicated was code for to many brackets. Well we’re at 3 now. 2 for income 1 for cap gains and the polls response are reflecting this simple fairness concept.
On the back side of all this, when the Bush cut were put in and I looked at the NYT chart that broke out what they really meant, I laughed at the fact that those at $500K/year were going to pay a higher % than those at $1.5 million (I believe that was the number). I laughed because I was rather certain most of those at $500k did not know they were just screwed by the party they voted for. I’m confident from those I know in $500K income ranges that they still don’t get progressivity regarding a tax code.
I stand by my posting of 2012. People don’t get we need a curve.
polls show how effective the propaganda has been. you use a poll to shape your message. you do not use it to shape policy.
people, in general, do not understand anything with numbers in it.
they can’t even understand they could “fix” Social Security for an extra eighty cents per week. even if they believe you (me) their next thought is “how can i avoid that extra eighty cents…. by putting the cost onto someone else.”
and if you told them it was really a dollar a week, they would gasp in horror: “That’s 25% More! We’re all going to Die!”
please note, they can do the arithmetic (some of them) but they can’t understand the numbers.
or to put it another way:
if they were “making” a hundred k and paying a 20% tax, they would bitterly resent the lost 20k.
but if they were making 80k and paying no tax, they would think they were doing just fine.
unless of course they knew someone who was making 200k.