CBPP on the Surtax
Like me, the Center on Budget and Policy Priorities hadn’t really been looking toward a surtax on high-income Americans as the way to finance health care expansion. But that’s what the House of Representatives legislation would do, and CPBB deems it “a reasonable approach”. For one thing, this is a measure that would leave the vast majority of Americans completely unscathed. The richest 1.2 percent of the population would be the ones bearing the burden. That’s something opponents are going to try to obscure, but it’s the reality.
The other point is the one I was making here, the richest Americans have managed to acquire a much larger share of overall income than they used to have. Under the circumstances, ratcheting-up their taxes is a way of ensuring that the GDP growth of the past 25 years redounds to the benefit of everyone. And in particular redounds the benefit of people who could really use some help:
All things considered, I think there’s a reasonably compelling logic behind the idea that it makes more sense to finance health reform through health-related tax measures like curbing the exclusion or taxes on alcohol and other public health hazards. But taxing the incomes of high earners is a reasonable alternative.
52 Responses to “CBPP on the Surtax”
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July 17th, 2009 at 4:46 pm
When I see these charts, I always wonder: how much of the growth in the top 20% is accounted for by the growth in the top 1%, and how much represents growth among the next 19%?
July 17th, 2009 at 5:03 pm
That makes 0.7% in yearly real growth for the middle quintile from 1979 to 2006.
And 0.4% for the lower quintile.
And 5% for the top1%.
Fuck Reagan.
July 17th, 2009 at 5:16 pm
As usual, I find Matt’s casual embrace of more regressive tax measures pretty annoying. And I would turn his point around: if this tax can get through because it is being treated as health-related, then great!
July 17th, 2009 at 5:18 pm
By the way, that said, I think capping the exclusion is indeed a good idea. I just think it will be easier down the road.
July 17th, 2009 at 5:34 pm
Slightly off topic, but the chart Matt posted (yesterday I believe) showing the effective tax rate among income groups was very telling. The group with the highest effective tax rate is the most productive, by which I mean those who derive most of their income from compensation. Since I am in that group that is taxed at the highest effective tax rate, I am rather sensitive about the topic. But worse, as a matter of policy, is the group with the highestmarginal rate of federal taxes, including both income and payroll (social security) taxes. That is, someone whose compensation is at $100,000 pays a marginal rate of almost 50%. With all the sympathy these days about raising the marginal rate for the wealthiest Americans to 39%, how about some love for the poor guy making $100,000 who pays a 50% marginal rate.
July 17th, 2009 at 5:40 pm
With all the sympathy these days about raising the marginal rate for the wealthiest Americans to 39%, how about some love for the poor guy making $100,000 who pays a 50% marginal rate.
I get your point–but my sympathies more lead to me wanting to remove the cap on payroll taxes first, before giving these people a tax break.
July 17th, 2009 at 6:00 pm
Ah, so BigY has nominated himself to be the income police. Tsk. Just a small reminder, the more progressive the tax system, the fewer people you rely on for revenue. And as is the case here, the people in question are the most mobile, and inventive. Be careful what you wish for.
July 17th, 2009 at 6:04 pm
And as is the case here, the people in question are the most mobile, and inventive.
Bernie Madoff ain’t too mobile these days, poots.
And it’s not as if it applies to you, since you’re neither rich nor smart.
July 17th, 2009 at 6:08 pm
There’s a better case for sin taxes than for cutting that 256% down to size? Please.
July 17th, 2009 at 6:08 pm
So, Social Security is to become welfare, and you’re looking to impose a top rate of around 60% for a guy in California. Nice. I think the correct term for you people is income nazis.
Keep up the good work.
July 17th, 2009 at 6:08 pm
“The group with the highest effective tax rate is the most productive.”
“how about some love for the poor guy making $100,000 who pays a 50% marginal rate.”
You would be embarrassed by this if either of you were capable of stepping outside your piggy banks for one second. Compare your porcine bitching to the billions of people who live (or die) on less than one dollar a day. Consider the millions upon millions in this country PRODUCING vastly more actual goods that actually get CONSUMED by people than you, laboring now under the delusion that their sweat will reward themselves and their children with stability and a better life. When it most clearly will not.
Bitching about having to “scrape by” on $50,000 a damn year… only in America.
July 17th, 2009 at 6:11 pm
Oooh, Shooter’s gonna go Galt!
July 17th, 2009 at 6:13 pm
shooter242 yet again brings his brilliant light for to shine down upon us.
Nice Godwin maneuver there, shooter.
Wait – in what possible way is Social Security not a system of welfare? Or do you mean “welfare” in quotes, which is when unmarried black women fill crack houses to capacity with aborted babies and “rims” in order to collect checks?
In other words, are you trying to be repugnant, or stupid?
July 17th, 2009 at 6:14 pm
I suppose on the theory that misery loves company you’d support removing the cap on payroll taxes (FICA)?
July 17th, 2009 at 6:37 pm
If we are going to bring in the billions of people that survive (or starve) on less than a dollar a day, how do liberals plan to pay for their health care when the move to the United States? You do in fact want to help the poor, right? Or is it just the poor that can reelect you into office year after year, once they become dependent on the welfare state, that truly matter?
Interesting how this chart excludes the last 2 years… Trough to peak statistical artifacts never had it better.
July 17th, 2009 at 6:42 pm
I find Matt’s casual embrace of more regressive tax measures pretty annoying
I’ve also noticed and been irritated by his circumspection, his grudging accreditation of highly progressive measures, like taxing robber barons. The “much larger” share of income at which the top 1% have now arrived is, to be precise, 20%: http://img.skitch.com/20080815-jm841sjrf1m4chk64xw5f11t6.jpg. Matt well knows this, and I can’t understand his inclination to shield such people from tax rates which, even with the surtax, are as low by historical standards as their share of income is high.
July 17th, 2009 at 6:44 pm
Sycophant, do you REALLY think that the last two years would make a damn bit of difference to those charts? HONESTLY?
July 17th, 2009 at 6:47 pm
If such people continued to earn a dollar a day after moving to the United States, this would be a serious question.
You want to know who’s REALLY mobile and inventive? Try someone who earns a dollar a day and then moves to the United States. That right there is one mobile, inventive mofo – not some fatass derivatives broker and Goldman.
July 17th, 2009 at 6:52 pm
Sycophant, you’re eliding two totally separate issues – starvation and immigration – and then imposing your trollish view of “liberals” (whatever that’s supposed to mean). Your response has nothing to do with my argument at all, and your “reasoning” begged the question you were posing.
Empirically the United States grows and manufactures more than enough food to feed the entire world, several times over. And our economy and innovation are still unrivalled. I propose we replace the money we give corporations (to feed us pills, and shoot brown people) with money to feed the poor in our own nation, force them to go to school or job training, and keep them healthy. Given that it really doesn’t cost much (compared to our military budget) to do all of those things at once, we would still have plenty left over to maintain a sensible defense of our (and other nations) and feed plenty of starving people overseas.
July 17th, 2009 at 6:54 pm
I meant “conflate,” not “elide.” Mea culpa.
July 17th, 2009 at 7:03 pm
Unless I messed up the math, creating new tax brackets of 40% at $1 million, 45% at $5 million, and 50% at $10 million would raise something like $62 billion a year. Okay, that’s not counting increased efforts at evading income taxes but still, not bad and it would affect something like 0.3% of the population. Plus it’s got that “above an obviously big number” thing going for it.
July 17th, 2009 at 7:12 pm
You do in fact want to help the poor, right? Or is it just the poor that can reelect you into office year after year, once they become dependent on the welfare state, that truly matter?
Yes, the laws of human behavior always reduce to the basest motives, the most squalid self-interest. Thanks for the reminder, man. I sometimes forget.
July 17th, 2009 at 7:16 pm
joe: “Try someone who earns a dollar a day and then moves to the United States. That right there is one mobile, inventive mofo – not some fatass derivatives broker and Goldman.”
Seriously! (Have any of you angry weirdos even heard of microlending?) I don’t understand why people keep non sequituring about immigration – especially when it seems to me to cut the other way in every economic/xenophobic argument for which they invoke it. Illegal immigrants in particular are able to survive here for so long (despite earning so little money from their toil) precisely BECAUSE they’re so mobile and inventive!
I’m not saying we should replace all the CEOs of financial corporations with the guys hanging out in front of my local Home Depot. (Although that would be AWESOME.)
But why should it be that the “most brilliant and innovative” among us are loathe to share their money or teach the rest of us? If they are truly more brilliant and more innovative, we “lesser mortals” surely would never be able to catch up or do the same thing more cheaply. Is it perhaps that the 256% crowd build their desks so much higher (and more mahogany-rich!) than ours to maintain the ILLUSION of their own supremacy? (I may consider Bill Gates as a noteworthy exception to this generalization.)
Put another way, why is it that for decades the corporate world’s definition of “innovation” has been finding cleverer ways to screw workers, and artfully conceal bleeding fiscal wounds to shareholders? If 256-percenters are the “best and brightest,” why has theirs become the MOST defensive and retrenched approach to the business of business?
My point is this: the richest of the rich do what comes naturally to them. But their insulation is a “systemic risk” to America, where no one is supposed to be in a cut above or beside the law. And, at very least, the people who spend their time making things worse for everyone else (so they can remain floating on top) shouldn’t be in bed with those ostensibly charged with making things better.
July 17th, 2009 at 7:24 pm
If such people continued to earn a dollar a day after moving to the United States, this would be a serious question.
My guess (an current immigration statistics back this up) is they would be adopted to the welfare rolls seconds after hitting the shores and given health care better than 95% of the people on earth. How would the Social Democratic state pay for this if they truly wanted to help the poor of the world by granting them citizenship?
Empirically the United States grows and manufactures more than enough food to feed the entire world, several times over. And our economy and innovation are still unrivalled.
Any guesses as to why the least socialized industrial nation on earth just happens to be the richest?
force them to go to school or job training
Just like forcing those Negroes to pick cotton.
I think this quote applies rather aptly:
July 17th, 2009 at 7:28 pm
Sycophant, do you REALLY think that the last two years would make a damn bit of difference to those charts? HONESTLY?
As California has learned with it hyper-progressive tax codes, the income of the top 1% is several orders of magnitude more volatile than the lower quintiles.
July 17th, 2009 at 7:30 pm
*blinks*
What country are we talking about, exactly?
July 17th, 2009 at 7:38 pm
Fencedude: My guess is Glennbeckistan – though I certainly couldn’t point to it on a map.
July 17th, 2009 at 7:41 pm
The top 5% in California pay an effective rate of around 4%. It’s a flat tax of 9.3% after about 45k. That aint “hyper-progressive.”
And property taxes are low here, so overall taxation puts in the top 1/3 of states.
July 17th, 2009 at 7:50 pm
The CBO projects a $1.7 trillion deficit this year. The total of ALL personal income tax collected in 2006 came to $1.06 trillion. (~$1.2T, 2008) Did those two numbers register?
Yes, ALL the income taxes from everybody in the nation, young and old, rich and poor, won’t even cover the DEFICIT.
This is what another poster meant when he said there aren’t enough rich people to tax, to get where Obama wants to go. For those who are mainly interested in damaging rich people, it won’t matter. But, for the smarter crowd, the point will pop out that creating disincentives for risk and investment isn’t helping pay the bills much, while convincing people to hunker down for the next tax increase. Are you sure that’s a good idea?
Keep up the good work.
July 17th, 2009 at 7:55 pm
So…its better to do nothing?
July 17th, 2009 at 8:09 pm
Here you are, Shooter.
http://krugman.blogs.nytimes.com/2009/07/15/deficits-saved-the-world/
July 17th, 2009 at 8:11 pm
IIRC, the charts that David Kay Johnston uses has real median income pretty much stagnant from 1977 or so.
July 17th, 2009 at 8:22 pm
What country are we talking about, exactly?
The United States? You can’t be truly this dense. If we allowed open immigration and passed some of the programs liberals are trying to it would be a disaster.
July 17th, 2009 at 8:24 pm
And who do you see here advocating completely open immigration?
July 17th, 2009 at 8:25 pm
Here you are, Shooter.
http://krugman.blogs.nytimes.com/2009/07/15/deficits-saved-the-world/
Do you even understand what you are posting?
The government can’t just “pick up the slack.” They must tax or dilute wealth to spend money. Krugman is one of the least qualified people to ever win a Nobel and liberls are going to milk his idiocy for a generation.
July 17th, 2009 at 8:33 pm
(Waits for a NotAsStupidAsSycophant to appear)
July 17th, 2009 at 8:51 pm
So…its better to do nothing?.
No. Even better. Cut taxes, and start a couple of unnecessary wars. There is nothing that “freedom” and low taxes for the rich cannot cure.
July 17th, 2009 at 8:57 pm
I’ve identified the problem.
July 17th, 2009 at 9:25 pm
Raylward, it’s true that folks in the low six figure range do wind up with a disproportionate tax burden, since the tax rates grow a lot more slowly after that point. But I’m a bit confused by the 50% marginal rate figure. I assume that includes state tax?
I don’t know where you live, but let’s say california, which I believe has the highest income tax. The top federal rate on 100k would be 28%. The top state would be 9.3. Add in FICA, at 6.2, and I get a top marginal rate of 43.5%. (And that of course, would only apply to about 18k of income). Do sales taxes make the difference? Am I forgetting one?
Seth, by my figuring that would work out to taking home about 65k – substantially more than 50k – and paying about 35% of all income on taxes (plus sales tax). And that’s assuming all of the 100k is taxable income, which is unlikely.
July 17th, 2009 at 11:05 pm
And who do you see here advocating completely open immigration?
I see liberals making outlandish claims about equity and people dying in the streets, but willing to do nothing about people who are actually dying in the streets around the world. Allowing those who are truly suffering to make institutional changes such as moving to the United States would drastically improve their lives and no detriment or cost to our own.
July 17th, 2009 at 11:43 pm
you’re looking to impose a top rate of around 60% for a guy in California.
Is a top marginal rate of 60% for income taxes at all levels supposed to scare me? We had top marginal rates, federal only, way higher than that for many prosperous years post-WWII, and probably even more such years if you included all levels of taxation.
July 18th, 2009 at 3:26 am
Does he have reverse tax shelters?
His marginal Federal tax rate is 28%. If he lives in California, he pays 9.55% state. He pays 7.65% FICA.
Even filling out 1040EZ and keeping his money in a shoebox he isn’t paying 50%. If he decides to put some of that money in tax deductible investments, he pays even less.
We’re also talking about only $6800 of marginal income right now. Anything more than that gets taxed at a lower rate, as FICA drops to medicare only.
July 18th, 2009 at 3:31 am
Tax nazis? Like Carter, Ford, Nixon, Johnson and Kennedy? They presided over 70% margional rates for federal taxes alone. I hate to think what Eisenhauer is. He presided over 90% rates.
July 18th, 2009 at 8:41 am
We also were the only intact national economy, and had proportionately fewer casualties than the rest of the world. Do you think that might have had something to do with said prosperity?
As for taxation, how about all those deductions we used to have, that are now gone or means tested away? They didn’t have the AMT either. But hey, this is one reason I voted for Obama, it was time to put the wonderfulness of higher taxes myth to bed, and only horrific experience is going to counter that idea. I’d say we are nicely on the way there.
July 18th, 2009 at 9:09 am
Instead of talking about “soaking the rich,” the important point to make about funding health care out of the windfall profits of the wealthy is that such a measure also helps to de-financialize our economy. The reason the top 1% have seen their incomes explode in the last 30 years is that the nature of our economy has changed from one where returns on investment were tied to boring things like factories and bright ideas by guys like Bill Gates. Instead, we now have an economy built largely on speculative mania and fancy instruments that make money from money by seeing how far each dollar can go via reckless over-leaveraging. Taking some of that money away from our Masters of the Universe and putting it to more productive use helping to keep Americans healthier will also help to make our economy healthier by taking away cash that the rich are just going to speculate away. It’s just human nature. The hedge funds were unregulated because they were only open to the rich who could afford to lose a million or two on machines that made gold from salt water. Now we have a hedge-fund economy in which the rich just have too much money at their disposal to spend wisely, so they tend to gamble it away. We need to make banking “boring” again as Krugman said by re-connecting Wall Street to Main Street.
July 18th, 2009 at 9:20 am
The subtext here of course, is that you are smarter than they are and should be given their money to do with as you please. But that also admits that you aren’t smart enough to get their amounts of money on your own, so you need government to abscond with it at gunpoint, on your behalf.
Tsk.
July 18th, 2009 at 9:46 am
Shooter242
But’s it’s not their money. It’s borrowed money. And the only reason they have it is that the government stepped aside and through a lack of regulation or restrictions on leveraging allowed them to essentially create new money, which they then used as debt-instruments to cannabalize the real economy for whatever profits they could find. Somehow I’m thinking they’re not as smart as you think they are.
July 18th, 2009 at 10:30 am
[...] And here’s really the crux of the matter. The millionaires represent 0.27% of households in this country. They’re households that have done precipitously well over the past ten years while wages for everyone else have flat-lined. If you look back over the past 27 years, the numbers are even more staggering. (Chart posted by Matthew Yglesias). [...]
July 18th, 2009 at 12:53 pm
Ted, I can see you’re not a business type, so I’ll ease up a bit. Reality is that EVERY enterprise of size uses borrowed money. That’s why the credit crunch is still a big deal. Nothing new happens without borrowed money, all the way from the local deli getting a new slicer to Uncle Sugar tapping China.
Making new money is an integral part of banking. The real problem we had was no transparency, nobody knew who had what, or how much. There is plenty of blame to go around, and one can denounce Wall St. all day long, but lumping in the rest of American top earners for punishment is misguided.
The point remains that they have earned their money, and here you are wanting it for yourself. Worse, you’re prepared to empower government to take that money by force if need be. In my book that makes you as bad, if not worse, than the people you decry.
July 19th, 2009 at 10:48 am
Plus: those greedy fucks have been looting the public treasury for decades now. This surtax is just a drop in the bucket of what they owe everyone. Hell yeah have a surtax on the richest 1.2%. We need MORE surtaxes like that to recover what they stole.
July 19th, 2009 at 10:51 am
And a hearty “Fuck You!” to Shooter the pompous moron.
July 19th, 2009 at 1:33 pm
Wow, that is immensely dishonest. This year’s deficit incudes the TARP and the stimulus bill – both one-time expenses – but shooter is pretending that this year’s deficit is a reasonable baseline against which to judge the significance of future tax increases.