Taxes and Inequality
Kevin Drum observes that our tax code isn’t very progressive with rich people paying basically the same rates as the middle class and the very rich actually paying less than some other income groups:
Kevin’s post also linked to this page which offers this useful addendum to some of what I’ve posted recently about income shares in the United States:
The fact that the top 0.1 percent control 8 percent of national income is hugely relevant to thinking about how to understanding living standards in the United States. We have a similar per capita income to Finland, but our top 0.1 percent is way better off than Finland’s, whereas Finland’s child poverty rate is immensely lower than our own. Various countries come out as slightly poorer on average, even though the average resident of those countries actually has a higher income than the average American.
Don’t worry, though, Robert Samuelson assures us that poor people in the United States all have super-powered lobbyists working for them.
36 Responses to “Taxes and Inequality”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
December 16th, 2008 at 4:36 pm
We’re spreading the wealth around!
from the middle class to the rich . . .
December 16th, 2008 at 4:50 pm
Various countries come out as slightly poorer on average, even though the average resident of those countries actually has a higher income than the average American.
What does this gibberish mean?
December 16th, 2008 at 4:59 pm
Our idea of fairness keeps changing. When the economy is terrible fairness rules, and the economy improves. Eventually, however, we develope compassion fatigue as we did under Carter, and our idea of fairness becomes more conservative until the economy crashes and we begin again.
December 16th, 2008 at 5:03 pm
The fact that the top 0.1 percent control 8 percent of national income is hugely relevant to thinking about how to understanding living standards in the United States.
Actually it looks like it’s 9 percent, but who’s counting. Mind you, these bar graphs show data from before the Bush administration. I’d love to see what they look like now.
December 16th, 2008 at 5:20 pm
Those are some pretty dated numbers. 2001 was the height of the tech boom, and I suspect a lot of that top .1% was due to the stock price bubble that burst shortly thereafter.
December 16th, 2008 at 5:22 pm
Gordon, it means that Matt struggles with different measures of central tendency. The mean income of Americans is higher than those in other countries, while the median income of Americans is lower than that of those in other countries. The mean is heavily skewed by our super wealthy/high income outliers.
December 16th, 2008 at 5:28 pm
Shorter G.Gekko:
Could someone fill me in on middle school math, please.
December 16th, 2008 at 6:00 pm
The percentage of my income paid in income and self-employment tax is well above what that graph says. I’m in a middle income bracket. I don’t know whether the whole graph is inaccurate, whether it’s inaccurate for my bracket, or whether I’m just paying that much more because I’m self-employed.
December 16th, 2008 at 6:01 pm
Let’s say we taxed the top .1 percent at 100%. We would tax Bill Gates, Warren Buffett, Larry Ellison, and the Walton family at 100%. Of course, their taxable incomes are probably a tiny fraction of their nominal wealth, which consists of stocks that yield very little in dividends. The feds could sell the shares and put the cash into “investments” like high speed trains to Detroit, which would mean less money for software or reinsurance or superstores. Or the wealth could be distributed to the poor, to do as they like. But if the poor wanted higher wages, they would be well advised to reinvest it — the status quo, in other words. The only difference would be the name on the check.
December 16th, 2008 at 6:08 pm
The only difference would be the name on the check.
The only difference would be the difference between one name and millions of names. So yeah, the only difference would be the difference.
December 16th, 2008 at 6:14 pm
So what are the poor going to do with the money that the rick weren’t planning to do? If the poor don’t reinvest it, then we’re all poorer. More sushi and fewer robots. I don’t see how that makes the poor better off in the long run.
December 16th, 2008 at 6:22 pm
This argument goes nowhere because it will be pointed out that while the tax rate is close the amount of taxes paid by the wealthy is a large percentage of the total. So that is unfair and we must cut taxes on the wealthy, as we have done for 30 years.
There was a causal relationship between the lowering of top tax rates, especially the capital gains rate including the former and now eliminated short term capital gains rate which was higher than the long term rate. As ‘capital’ income was tax favored over work the inevitable followed. Everyone turned to ‘investment’ to get income. What followed were the serial bubbles, which have now collapsed. While the game was on however assets inflated and the rich got richer from what they called investment but was actually speculation.
And as the rich got richer and richer they felt smarter and smarter. Seeing themselves as more than ever the heroes of free markets and the foundation of the sytstem. It was a virtuous circle and a beautiful thing. Always urging lower tax rates for themselves.
Well that game is over now As of 2004 the top decile had 43% or all income but more importantly 80% of all assets. Well those assets have now been cut in half. The distribuiton might be close to the same but half of all the ‘wealth’ built up by the inflation of them is now gone. The tops income will be halved also as their outsized income was dependent upon the inflation of assets.
Capital should not be tax favored over work. This has to be the mantra of all progressives. Huge portions of the capital holding class were not heroes but rather pigs, criminals, geeks, grifters and treacherous back stabbers.
December 16th, 2008 at 6:34 pm
Rachel,
Being self employed I assume you are paying twice as much for Social Securty and Medicare as others.
December 16th, 2008 at 6:57 pm
Re: 2001 was the height of the tech boom
???
2001 was the year of the tech bust. (Early) 2000 was the height of the tech boom, with stocks trending downward by autumn of that year.
December 16th, 2008 at 7:15 pm
Shorter G.Gekko:
Could someone fill me in on middle school math, please.
No I get middle school math (what’s middle school?). My problem is with the facts:
Of course if Matt wants to compare America to some tax havens then that’s fine with me.
December 16th, 2008 at 9:44 pm
What’re the percentages when you add in sales and real estate taxes? Even worse, I bet.
December 17th, 2008 at 7:04 am
It is more regressive as shown since it shows payroll taxes at about 8%.
It is a simple fact that payroll taxes are about 14%. The fiction that the “employer’s half” of that tax is somehow different or should not count is just that — fiction.
It is a fiction that exists, so far as I can tell, mostly to make our tax system look less regressive than it really is and to make our tax burden (especially on the working poor and midle class) look like it is less than it really is….
December 17th, 2008 at 2:22 pm
That first charts lists the top 400 taxpayers, not the top 400 incomes. Those are probably very different lists.
December 17th, 2008 at 4:04 pm
A lot of reason for the lack of progressivity is the payroll tax, and if you don’t like it, take it up with FDR. The actual income tax is quite progressive, the bottom 40% on average pay nothing (in fact have a negative income tax due to various credits) while the top 20% pay 85% of the income tax
http://www.cbo.gov/ftpdocs/88xx/doc8885/12-11-HistoricalTaxRates.pdf
December 17th, 2008 at 10:14 pm
Re: of progressivity is the payroll tax, and if you don’t like it, take it up with FDR. The actual income tax is quite progressive, the bottom 40% on average pay nothing
This is not true. You only get away with paying nothing if you have lots of exemptions. If you’re single (or married but no kids) and you rent– oh well, you’re paying major taxes.
February 27th, 2009 at 11:10 am
“The distribuiton might be close to the same but half of all the ‘wealth’ built up by the inflation of them is now gone.”
Schade. And no time left for the “wealth” to trickle down to the rest of us.
March 22nd, 2009 at 5:56 am
tramadol
If you have to do it, you might as well do it right
March 22nd, 2009 at 10:20 am
buy viagra online
Excellent site. It was pleasant to me.
April 2nd, 2009 at 5:00 am
I want to say – thank you for this!
buy cheap viagra
April 3rd, 2009 at 4:01 am
Excellent site. It was pleasant to me.
cheap brand pfizer viagra