Friday, July 17, 2009

Equality Of Taxation

Matt Yglesias has a good point based on this:

When considering the alleged plight of the very rich groaning under the socialist yoke of Charlie Rangel’s tax proposals, it’s worth keeping in mind that the super-rich’s share of the overall income pie is been skyrocketing:


The reasons behind this trend are complicated. But one natural response to it would be to raise taxes on the very rich and use the tax revenue to finance public services. Under that scenario, everyone winds up better off than they were 25 years ago. Absent stepped-up taxation on the rich, changes in the structure of pre-tax income in the United States ensure that many—if not most—Americans see little actual gain from economic growth.

If you notice there, the wealthiest 10% of Americans account for roughly 50% of the country's entire income, and the wealthiest 1% account for just shy of 25% by themselves.

The point Yggy is trying to make here is that we kind of have to tax the wealthy. It's the only place we can really put new taxes, because that's really the only place where we've seen actual economic growth over the last ten years or so. That's just good fiscal policy, frankly. "A rising tide lifts all boats" but if you can't afford a boat in the first place, you just drown when the tide comes in. Yggy concludes:

This is worth noting because outside the health care context, many morally admirable policies such as liberal immigration laws and openness to trade have the impact of both boosting overall economic growth and also exacerbating domestic income inequality. They’re also very good for poor people in the third world who want to have jobs in which they do stuff in exchange for money. Responding to growing inequality with ramped-up taxation and ramped-up social services makes these kind of policies more sustainable and serves the general interests of mankind.
Also, let's face it, it's not like we can really tax the middle class too much more to begin with. Most of us are strapped. If you're going to have that kind of income inequality, then you're going to have to change your tax revenue picture too.

It's also very telling to see just how much Bush's tax cuts and the wars in Iraq and Afganistan contributed to the financial disaster we have today.


Shakes The Clown said...

People do move in and out of those brackets. If you bought a 50,000 house in 1970 and sold it for 450,000 in 2006 you would be in the top 1% of our income distribution, but only for a year.

People tend to forget that these things are fluid and changing. The top 1% 20 years ago or 10 years ago are not the same people as the top 1% today.

You also need to understand the distinction between income and wealth. John Kerry's wife was won of the weathiest women in the world but she didn't have a lot of income. The income she had was largely tax exempt bonds and stuff. I think she paid are 12% when she made her filings public. The wealthy find ways to avoid taxes. The most productive people on the other hand like doctors and engineers can't hide income like Ms. Kerry can hide her wealth.

We are going to sock it to the most productive people, and it will give them a negative incentive to be productive. I can't imagine that will end well.

And can you show me a chart if you take away all the dirt poor immigrants that come to this country? I would imagine the numbers wouldn't look so bad in the last couple of decades.

StarStorm said...

You know what I notice, as well, although I admit that it's fairly simplistic of me. But then, I'm not an economist.

The last time that little black line peaked like that? Right before the Great Depression. Hell, the peak just before preceded a recession...

So yeah, if anything, that's really fucking telling.

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