Obama Administration: Buffett Rule About Fairness, Not Budget
The Obama administration admits its push for the "Buffett Rule" is not about dealing with our budget woes.
The Obama administration admits its push for the “Buffett Rule” is about “fairness” rather than dealing with our budget woes.
Politico (“Buffett rule not solution to debt, W.H. says“):
The Obama administration is emphasizing “fairness” over deficit reduction in its renewed pitch for the “Buffett rule” ahead of next week’s scheduled Senate vote.
Introducing a minimum 30 percent income tax on millionaires “was never our plan to bring the deficit down and get the debt under control,” Jason Furman, the principal deputy director of the White House National Economic Council, told reporters on a conference call Monday afternoon. “This is not the president’s entire tax plan. We’re not trying to say this solves all our economic problems, all our budget problems.”
Making the argument for the rule based on billionaire investor Warren Buffett’s argument that it’s wrong for him to pay a lower tax rate than his secretary, President Barack Obama said in the State of the Union address in January that paying the “fair share of taxes” was necessary for a “sense of shared responsibility. That’s how we’ll reduce our deficit.”
[…]
Republicans have dismissed the proposal as a crass campaign stunt, because it won’t raise much revenue to pay down government debt after three straight years of deficits exceeding $1 trillion.
Sen. Orrin Hatch (R-Utah) slammed the bill late last month, after the congressional Joint Committee on Taxation estimated the rule would generate $46.7 billion in revenues over the next decade. ”It was designed for no other reason than politics — there is no economic rationale for it,” Hatch said in a statement. “I hope the president will stop the class warfare and start leading by putting out real proposals to bring down our debt.”
While $46.7 billion is real money, an additional $4.67 billion a year in revenues won’t cover the Pentagon’s toilet paper expenditures.* So, yes, this is about political symbolism moreso than fiscal responsibility.
As to the symbolism, it strikes me as pretty silly. I actually agree with the president and Warren Buffett that Warren Buffett (and Mitt Romney!) are taxed too little. But that’s a function of stupid rules in our tax code–granted, rules for which people like Buffett and Romney lobbied–not an overall policy.
A post-hoc rule that says that, if your gross revenue exceeds a given threshold, you owe the federal treasury 30 percent of your gross revenue strikes me as unfair. While our tax code is far too complex and contains far too many loopholes, many of which are a direct result of rent seeking, it seems reasonable that everyone should be treated equally under the code. So, if a person making $30,000 a year is eligible to deduct mortgage interest on his primary residence, the cost of college tuition for his kids, and so forth, so should a person making $300,000 a year or even $300,000,000 a year.
The reason that Buffett and Romney pay such a small percentage of their income in taxes is because we’ve chosen to tax capital gains differently and, more perniciously, allow those in the finance sector to treat their investment of other people’s money as if they were risking their own money. It would be much more honest–if perhaps not as good a campaign stunt–to propose changing those rules and then debate that over the next several months.
UPDATE: Josh Barro decries “The Arbitrariness of the Buffett Rule.” The upshot is that it doesn’t even achieve what it sets out to do: ensuring that people who earn a ton of money pay 30 percent of their wages into the Federal Treasury.
Imagine that you’re a rich person who owns a bunch of income producing real estate. Your income from this real estate is several million dollars a year. Maybe you own the properties directly, or maybe you hold shares in a Real Estate Investment Trust. Either way, your real estate holdings are taxed on a pass-through basis: no income tax is paid at the property level, and you pay personal income tax at ordinary income rates. Since you make so much money, you’re paying tax on that income at the top rate of 35 percent. The Buffett Rule doesn’t affect you.
Now imagine that you own a successful medium-sized business, with several million dollars a year in net income. Because you own this business by yourself (or with just a handful of partners) you have organized it as an S-corporation, which is a pass-through entity. The business pays no corporate income tax, and you pay personal income tax on your share of the profits at ordinary income rates. Again, you’re taxed at 35 percent, and the Buffett Rule doesn’t affect you.
Or imagine that you own a really large business, but you’ve found a way to organize it as an S-corp. Maybe you’re Sam Zell, in an alternate universe where the Tribune Company acquisition wasn’t a disaster. You also pay tax at 35 percent and have no Buffett Rule concerns.
But now imagine that you own a large chunk of a C-corporation. Your profits are taxed twice, but at lower rates. Over the last ten years, federal corporate income tax collections have amounted to 21.8 percent of corporate profits, as measured by the Bureau of Economic Analysis. Then, when you realize those profits (either as dividends or as a capital gain on sale) you will have to pay a further 15 percent in tax. These combine for an effective tax rate of 33.5 percent, very close to the above situations, and your slight federal tax advantage is likely offset by a disadvantage at the state level.
But unlike your rich friends above, the Buffett Rule would turn your world upside down. Raising your personal income tax rate on dividend and capital gain income to 30 percent increases your effective tax rate to 45.3 percent. The Buffett Rule isn’t just a big tax increase on the rich, it’s a big distortion against corporate equities and in favor of other kinds of capital that rich people might own.
Again, the problem is that our tax code is ridiculously complicated. Some of the complication is part of rational public policy choices; most of it is a combination of rent seeking and policies that made sense in a different era but are now just loopholes to be exploited.
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*A bit of hyperbolic humor there but it’s probably not that far from the truth. The only Pentagon line item under $4.67 billion is Family Housing, which is $3.1 billion a year, down 20 percent from the previous year. We spend nearly $2 billion a year de-commissioning old chemical munitions.
This is the least surprising news since Ricky Martin came out of the closet. OF COURSE the so-called “Buffett rule” (which I have no doubt Buffett himself would find a way to avoid) is about “fairness” rather than actually generating any appreciable revenue.
There is certainly plenty of discussion that needs to happen about the levels of taxation on capital gains and dividends, and you’re right that it won’t happen because it’s not “as good a campaign stunt.”
The more cynical among us might even think this proposed “rule” is meant to distract from real discussion, with the actual objective being to maintain the status quo while merely appearing to address the problem.
You know…
…is a lot different than saying it’s not about the budget. Obviously it raises revenue…so it’s about the budget by definition. Was it ever intended as a pancea? Maybe in your mind.
Romney makes in 3 days what I make in a year. The idea that he pays the same tax rate as me is ridiculous. And the Romney/Ryan economic plan would cut his taxes even more.
I’d love to see a wholesale change to the tax code. But in the current political atmosphere where Republicans do not support Republican ideas? Never going to happen. Most likely the Buffet Rule won’t either.
And if history is any guide…should President Romney have the Senate and the House…it’s deficit explosions like Nagasaki and Hiroshima combined.
I call bullshit.
The Obama administration “emphasizes” fairness, and James creates the false dichotomy. He makes it “rather than” dealing with budget woes.
Do conservatives get “math” removed when they sign up?
Is there actually a way that higher taxes on the rich can NOT reduce the deficit? Math tells me no.
(Really, in a broader sense the argument “x cannot cure the deficit by itself, and so x should be off the table” is the central conservative pathology.)
Perhaps my memory is shot, but didn’t Obama in his SOTU address specifically state that the so-called “Buffett Rule” or millionaire’s tax was his ace in the hole for tackling the deficit?
In any event, “fairness” as the lynchpin for national tax policy is a recipe for a flaming train wreck of a toxic disaster, for reasons that are beyond obvious.
Were I made emperor with plenary powers over tax policy I’d repeal the 16th Amendment, scrap the income tax entirely, and then substitute in its place a national sales tax which would exempt such items as basic foodstuffs, water, milk, medicine, baby formula, etc. Taxing discretionary consumption makes sense. To tax savings, investments, R&D and capital, however, is sheer folly.
Since the total abrogation of the federal income tax is a pipe dream, however, and won’t ever happen even in a parallel universe, I would settle for a comprehensive tax reform bill very similar if not close to identical to the one proposed a few months ago by Jon Huntsman. Flatten and reduce the marginal tax rates for individuals. Eliminate deductions and other loopholes. Simplify. A broader base of federal revenue with lower marginal rates. The only area in which I disagree strongly with Huntsman’s plan is that it would retain three layers of so-called “graduated” rates. I’ve never agreed with that concept. One flat rate for all except the truly indigent is a better program.
@Hey Norm: @john personna: Oh, c’mon. I’m not criticizing the administration for proposing a reform in the tax code that doesn’t solve all of our problems; I’m criticizing them for spending a ridiculous amount of time on a publicity stunt that amounts to a rounding error. This is entirely about symbolism, with the minuscule substance a happy byproduct.
Actually, it’s a bit of a sick joke when you think how many banner cuts the GOP promote that cost less that that. We still gotta kill NPR right? Job training? High speed rail?
@James Joyner:
No, James. You are making an oblique attack on progressive taxation, whether you are conscious of that or not.
Your subtext is that progressivity is not an aid to a balanced budget.
I guess it depends on whether you want to equalize marginal tax rates or extract the greatest amount of revenue on a continuing basis. The problem is that you can’t do both.
Any number of studies have found that the tax on capital gains that maximizes continuing revenue is actually quite low. Here’s one of the recent studies which finds that a rate below 10% actually increases revenues.
As long as capital gains are taxed at a lower rate than earned income the very rich will pay a significantly smaller proportion of their total income in taxes than those who depend primarily on earned income. One of the advantages that the very rich have is the ability to manage their incomes to minimize their tax burden. You pays your money and you takes your choice.
If you decide that greater equality is more important than revenue, you're presented with two alternatives. Either you can trim your spending commensurate with the lower revenue or you can borrow (or just spend into existence) the difference between what tax revenues and expenditures. Those choices have consequences, too.
Reducing spending requires tough political choices and, well, spending less on stuff you probably actually want to spend on. Borrowing more (or spending into existence) runs the risk of increasing inflation or a loss of faith in the currency.
@Tsar Nicholas:
On the other hand, conservatives still start from the other end. It’s still “name a tax rate you like,” and then pretend it works.
That 9-9-9 coincided with Cain leading in the polls is no coincidence.
@john personna:
Britain’s recent experience with raising its top rate to 50% and seeing a net decrease in revenue might indicate your math didn’t take every possible scenario into account. There are plenty of ways higher taxes on the rich won’t reduce the deficit.
@john personna:
You need to distinguish between “higher taxes” and “higher marginal rates”. By definition higher taxes will result in greater revenues. It’s tautological. But how to realize higher taxes? In the particular case of capital gains, as noted above, the rate at which revenue is maximized is actually quite low.
@Dave Schuler:
I’m confident that The Seattle Freedom Trust did a little data-mining there, Dave.
All those play the game that a behavioral change can be extracted from a chaotic system. We live through multi-decadal bull and bear markets. We take our profits both when we can, and when we must.
It’s kind of imbecilic to think that people banking the secular bull market 1980-2000 set the pattern for people experiencing a lost decade. And yet, politico-economists will claim they do.
@john personna:
Those are line items in a budget, not fundamental questions of taking money from citizens.
There are ways of introducing progressivity into taxation that I support. I support, for example, a high standard deduction, which essentially takes the poor off the roles. I’m not even adamantly against graduated brackets. I’m reflexively against backdoor methods, though, like the Alternative Minimum Tax or what I perceive the Buffett Rule to be (I don’t think we’ve yet seen an actual implementation plan) which penalize people if following the rules doesn’t yield the desired revenues.
@john personna:
Please note that you’ve just dismissed the study rather than refuting it.
@Dave Schuler:
As I say, I think your study is political. I would counter with:
That Wishful Thinking About Tax Rates by Christina Romer.
Of course, maybe you can find another impartial “freedom trust” …
BTW, I think that if we were starting from scratch we probably wouldn’t tax income at all but might want a progressive tax on consumption.
Yep JJ symbolism has no place in politics. Tie a tax fairness issue to the Daddy Warbucks of America and it has no symbolic power whatever. It might strike you as pretty silly but it strikes me as pretty clever. If you want a target to which the word silly could be applied you might want to look at Romney/Ryan’s plan to create only two tax bands (10% and 25%) and recover the lost $5 trillion of revenue by closing loopholes NONE of which they are willing to name.
@James Joyner:
My point is that you threw $4.67 billion in the street, while many of the right’s hot button issues cost much less.
So, you want to shift to “taking”?
Serious?
@john personna:
Dr. Romer is writing about income taxes generally. My point is specific to the tax on capital gains. In other words, your rejoinder is a non sequitur.
@Dave Schuler:
We are all used to the consumption dodge. It’s beautiful because few understand what it really means … something like 20% tax on everything, including food and rent.
@Dave Schuler:
I think we probably wouldn’t.
I’m criticizing them for spending a ridiculous amount of time on a publicity stunt that amounts to a rounding error.
$4.7 billion per year is only a rounding error if you are looking at the Pentagon budget. Such a sum constitutes more than the entire Small Business Administration budget. It’s more than half the budget of the Army Corps of Engineers or EPA. It’s more than double the budget for disaster spending and it’s about 2/3 of the Head Start budget.
In short, a lot could be paid for with that money. It’s not a rounding error.
@john personna: Taxing and spending start from different thresholds.
For spending, since it relies on taking from the taxpayers, every nickel ought be justified. So, if it’s silly to spend taxpayer money on a program, the fact that cutting the program only nets, say, $1 million a year–a rounding error–is beside the point.
For taxation, you’re taking away people’s money using the coercive power of government. So, there has to be a pretty substantial advance in the common weal to justify it.
@Dave Schuler:
My central complaint is against capital gains data mining, the transitory 1-time yield after a secular bull market, and the extreme unlikelihood that a low capital gains tax would create permanent government income in all economies.
No one has data set which can prove that low capital gains tax will maximize yield, as you claim, going forward. Period.
@Dave Schuler:
The Searle Freedom Trust wouldn’t by any tiny chance have an agenda would they? I’m standing by for your next link to a study by Heritage or AEI…..LOL
@James Joyner:
I think you have to be a conservative, and a budget buster (but I repeat myself), to believe that spending and tax are not two sides of the same coin. For a balanced budget both have to be set together. The cannot diverge.
What you’ve really done in that 11:49 comment is illustrate the conservative error, the one I call a pathology above.
You just said spending is a political question and taxation is a moral question. That is a recipe for doom.
Those are line items in a budget, not fundamental questions of taking money from citizens.
Really, James? Really?
Perceptions count. If one intends to tax the poor more, or cut their benefits, which the math demands, a perception of fairness is the spoon-full of sugar Mary Poppins referred to.
Speaking of perceptions, I believe there is one about high tax rates for the wealthy as well. Going back to the days when it was set at 90%, the idea wasn’t that there would be many people actually paying it, and indeed there were very few. The idea was that business owners would be strongly encouraged to hire and expand their businesses with excess profits, or give it to their employees, rather than take it home. I personally suspect this had a lot to do with the returning vets from WW2. Jobs had to be found for them. They simply had to be.
@James Joyner:
For an allegedly sophisticated guy JJ you do say some naive things at times. You originally supported the invasion of Iraq on which so far we’ve blown a little north of a trillion dollars and there will be more legacy costs for another 40 years. Did this advance the common wheal?
@Brummagem Joe: I’m not going to turn this thread into a discussion of a war that’s been over for quite some time. Suffice it to say that national security policy is often based on worst case scenarios involving very high risk. It’s just a very different kettle of fish.
There’s some degree of irony in Obama arguing in favor of the “Buffett Rule” by arguing against a “rigged” tax code when, in reality, what the rule does is even further rig the tax code and make it far more complicated than it needs to be. The Buffett Rule is, in effect, just another Alternative Minimum Tax grafted on to the Internal Revenue Code. If the President were truly in favor of ending a rigged tax code then he’d be proposing real comprehensive tax reform instead of something that won’t pass Congress and which is clearly little more than an election year gimmick
“Fairness” is a rather subjective concept, so trying to enbody it in law seems a recipe for arbitray justice. And in this case, it seems more like just spackling over the actual problems.
There’s a lot of people who think the tax code is not doing what it’s supposed to be doing, but it’s easier to propose quick fix gimmicks like the buffet rule rather than begin a serious discussion of what fundamental changes need to be made.
he’d be proposing real comprehensive tax reform instead of something that won’t pass Congress
But you repeat yourself.
@john personna:
You obviously are not a significant player in the capital markets. May I remind you of Bill Clinton’s reduction in the cap gains rate and it’s effect.
So if you are going to hammer away at symbolism in politics…where is the story about the Romney/Ryan budget that does not even pretend to be real? It claims $14M in unspecified loophole closures and discretionary spending at 3% of GDP. They told the CBO…”trust us”. If ever there was a symbolic budget…that’s it. At least the Buffet Rule actually raises revenue…as advertised. The Romney/Ryan plan…purported to balance the budget…actually explodes the debt…in typical Republican fashion.
Many itemized deductions are already effectively phased out for six-figure incomes by the AMT, Buffet Rule or not. The tax code is too complicated and income too unevenly distributed to treat everyone “equally” anyway. Millionaires don’t need a deduction for mortgage interest or college education to be incented into either of those activities, so there is not really a policy reason to give them those kinds of deductions. For that matter, one might fairly ask whether the mortgage interest deduction still makes sense in its present form — why award bigger tax breaks to people who buy more house than they can afford and then run debts on their house for decades, compared to someone who takes a modest loan and pays off their house in 10 years? If that’s how they want to live their life fun, but do we need to subsidize that sort of behavior that helped get us into this great recession in the first place?
The continuing problem in this debate is that it distracts from the fact that the middle class needs to pay more in taxes too, unless voters want to support spending cuts, which when push comes to shove they seem not to want to do.
But it is hard to fault Obama for playing politics in an election year when confronted with the never-ending assault of the Fox News brand of Republican political spin.
@James Joyner:
The point wasn’t the war it’s the fact govts often make dumb decisions about what to do with those tax dollars they’ve coerced from us and it’s this fact that makes this statement of yours naive viz
@Drew:
Ooops….our major player in the capital markets is back.
@Doug Mataconis:
What comprehensive tax reform bill that Obama sends to congress is ever going to pass? Yep it’s an election year symbol/gimmick but a potent one particularly when the president’s opponent has an income of $22 million and is paying less than 14% of it in tax. Obviously it’s the power of the symbol that has JJ exercised….well that’s politics for you Doug…shocking isn’t it…..Republicans would never sink so low as to use symbols would they? Honestly there are few funnier spectacles than intelligent men trying to rationalise away the obvious.
I’m not a major player in the Capital Markets…like Drew is (swoon)…but Bruce Bartlett has a piece on tax reform worth reading.
http://economix.blogs.nytimes.com/2012/04/10/how-to-really-simplify-the-tax-code/
Not saying I agree…but I respect Bartlett.
@Brummagem Joe:
Am I surprised that the President is a political hack? Not really.
But he’s a hypocrite for talking about “rigged” tax codes when he convened a commission on the deficit that proposed major comprehensive tax reform in a report that he has never uttered a single word about.
@john personna:
Simplistically, “Math” tells me that taxing 100% of income will maximize revenues and thereby maximize deficit reduction. Reality, however, does not conform to simplistic tax rate equations.
@Doug Mataconis:
Am I surprised you’re suffering from ODS Doug? Not really. If we’re going start criticising presidents for resorting to some ju jitsu in presidential years then by this criteria every president in history is a political hack.
I’ll try once more to explain “capital gains data mining.”
We live on many timescales. We may check back on twitter after a minute or two. We might execute a stock sale and check back for completion later in the day. We might buy investments for our retirements. There is a big leap in time scale between the former and the latter.
Humans have a hard time thinking about decades because such problems are both rare (and if you subscribe to evolution, outside our evolutionary experience).
Capital gains, real long-term capital gains, operates at those long time scales. It is shaped by many, many, causes beyond our control. The foremost is whether we were fortunate enough to be born and reach middle age as a secular bull market in stocks, or something like home prices, takes hold. That, more than anything, will shape our behavior and our outcomes.
Think about it, people like my dad invested in the 70’s and 80’s not because capital gains taxes were low, but because a bull market was forming. People in his cohort had collected a lot of gains by the 2000s. And yes, GWB could stimulate a sell-off by lowering capital gains tax.
Think about what’s happened since then, and the claim that lowering capital gains will again stimulate revenues. From what profit? From what gain? From the lost decade?
Serious?
@Andy:
Don’t be an idiot.
BTW, let’s also remember that the Buffet Rule isn’t about capital gains. It’s about income, esp. carried interest.
C’mon…you must be dizzy from spinning that hard.
Kent Conrad (D-N.D.) said on Fox News Sunday that he urged President Obama not to publicly support it out of fear that it would produce reflexive Republican opposition. Conrad was spot-on…and everyone at the time knew it. The Grand Bargain…on which Boehner could not deliver his caucus…was pretty much along the same lines.
Shorter Doug…”I just hate Obama”.
Pathetic…
@john personna:
Obviously if your investments are tanking you won’t be selling and you won’t be paying tax on your non-existent capital gain, therefore no revenue.
However, if your investments are doing well enough, you’ll have some unrealized capital gain and a decision to make: do I sell now and take the gain, or do I hold off?
Of course, the capital gains tax rate is only one factor in that decision. My opinion, as a fairly small-potatoes investor, is that the rate itself is far less important to the hold/sell decision than any anticipated CHANGE in the rate.
If the rate is 15% and will be for the foreseeable future, it’s probably not much of a factor (except as far as it might fit into the overall tax picture). I’ll hold or sell based on whether I want some money to spend. If the rate is going to drop to 10% next year, I will hold. If it’s going up to 20%, I’m selling now (or on 31 December).
Perhaps wealthier investors look at it differently, and in their overall tax picture the capital gains tax rate may be a more significant factor, but I tend to think if it’s steady and considered “baked in” then it won’t be a huge influence on federal revenue either way.
@Doug Mataconis: “But he’s a hypocrite for talking about “rigged” tax codes when he convened a commission on the deficit that proposed major comprehensive tax reform in a report that he has never uttered a single word about. ”
Oh, for Pete’s sake, Doug. You’re a smart man. You know better than this. The Simpson Bowles commission NEVER issued any recommendations, because they were unable to reach even the partial concensus that was required. A couple of the commissioners then put out some suggestions of their own. But it wasn’t the commision report.
@Dave Schuler: Piketty and Saez @
http://www.nber.org/papers/w17616
don’t share your faith in supply side economics.
@Andy: Even Greg Mankiw doesn’t think we’re anywhere near the Laffer point. The Bush tax cuts on capital gains helped well off people (and paid for several Stan family European vacations) but were a disaster for the economy and an even greater disaster from a moral point of view.
@Mikey:
I won’t describe my situation too closely, but I paid little tax this year. Some of my income is from tax free vehicles. Some is in tax sheltered accounts. And some will be capital gains, someday. I have no need to sell and book that income now. I have liquid accounts for current spending.
To want to take advantage of “low” tax rates we need to spend beyond our current cash position.
If a truly rich guy wants a yacht or another house or a big birthday party, he pretty much has to raise that much cash, regardless of tax rate. He may play coy, and pretend he won’t sell or invest … but ask him if he invested before the Bush era. He pretends he would not, but his personal history probably tells a different tale.
@john personna:
That’s pretty much how I’ve come to see it as well.
As it stands I do have some investments I’m holding and will hold until I decide I want/need to liquidate them, but the current level of capital gains tax has nothing to do with the decision. Would I like to be able to sell and keep all the gain? Of course I would. But the fact I will get taxed at 15% on them won’t factor into when I sell.
@wr:
Doug is a smart guy but he’s suffering from a severe irony deficiency and you can’t get pills for it at the pharmacy. While describing the president as a hack he constantly applies double standards which is one of the distinguishing features of hackery. Alas JJ is also guilty of the same behavior on this particular issue. No one is disputing it’s a bit of political theater in an election year, and rather a clever one given his opponent; all presidents do it; by comparison with the recklessness and grotesque fantasies coming out of the GOP in congress it’s pretty small potatoes; no need to get all self righteous about it.
I was listening to the radio and they reminded me that this is about a 30% tax rate.
The Buffet Rule is about 30%.
Geez, think about all those above who went off on 100% or similar. Or even went to “takings” for a 30% tax rate.
Truly conservatism is about how taxes feel and not about paying the bills. And, when 30% tax feels like the jackboot of an oppressive government on your neck … then probably any tax rate at all feels the same. Woe be the Republic.
It can be argued that because of the drastic difference in marginal rates at the top for income vs. the capital gains tax at 15%, the incentive is for the wealthy to obviously convert income into capital gains.
Hence, the wrenching debacle we just went through in the whole sub prime mortgage crises as clever financial wizards used all manner of investment legerdemain to set up holding companies and asset backed securities et al. to manipulate and evade taxes on income.
This was done sans regulation by the government and the results were disastrous.
Look you right wing bi()*^*%, its pretty simple (as I am a lot older than anyone here I would imagine), we did it one way from 1920 – 1932, a disaster. It was called a great depression for a reason.
Then, we were literally saved by the New Deal and the mass of regulations and labor friendly legislation designed to even the playing field. Result, middle class income doubles from 48 – 1973.
Reagan comes in, the rich triumph, the middle class is on life support, and I have to read the absolute garbage that spouts from obviously intelligent gentleman who believe in the myth of less regulation and more tax cuts to the wealthy. Its like a German wanting Hitler back in power.
The baby boomers are the most over-educated, self indulgent, pampered, selfish generation ever.
And the dumbest. The first generation to ruin it for the next. I guess some of you nitwits will only be happy if we are all making bricks from mud and straw for Pharaoh, since obviuolsy to some, the top 400 earners should have ALL the money.
JJ and DC, I trust you studied history since I imagine they just don’t hand out ph.ds, but christ how do the lot of you on the right bury your heads in the sands in light of the EPIC failure of the last 30 years of “Reaganism” to lift any boats but the yachts of the obscenely rich?
@the Q: FYI, in 1980 the median weekly compensation for all full-time workers throughout the entire economy (hourly and salary) was the sum of $262/week. In 2011 that figure was $756/week. The CPI-U during that time frame has risen at a lesser rate. In 1980 there were just over 99 million civilians gainfully employed in this country. In 2011 that figure was just under 140 million. The respective employment population ratios are within one single percentage point: 59.2 vs. 58.4.
Those figures don’t quite jibe with what appears to be your primary thesis, do they?
Also, a separate but related topic, it’s pretty tough to blame “Reaganism” for the periods between 1987-1994 (Democrats controlled the entire Congress), 1993-1995 (Democrats controlled the entire federal government), 2007-2009 (Democrats controlled the entire Congress) and 2009-2011 (Democrats controlled the entire federal government).
That rant needs a major rewrite.
What did you do there, report the wages without inflation adjustment, and then just mention inflation as a factor?
Here is a link to an article, with reference to the underlying census data. It shows:
Again, how on earth did you get from $262 to $756?
I suppose it was a lie, hiding the inflation component, and you did not give us a link to hide your lie.
Actually, quite a few tax economists would like to see a system which is “disinterested” in the method by which we get taxes. Which would mean taxing capital gains at the same rates as ordinary income.
I’ve always felt the “double-taxation” argument to be a crock. If companies happen to be tax entities on their own (which they are), then taxing them when they make money is no more unusual that taxing a wholesaler as well as the final seller-to-consumer. If getting taxed at the corporation level really frosts your shorts, then go use an S-corp or an LLC. You’ll lose the possibility of smoothing out the income stream over time and it will be treated as ordinary income, but hey, that’s your decision.
Taxation is the price we pay for living in a civilized society. Too bad so many Republicans can’t think of anything else but to continually complain about this responsibility. Please demonstrate to me that a stable first-class economy exists in the world that manages to support itself on the tax levels you feel appropriate. And don’t use a country like Saudi Arabia–the only reason it has the economy it does is because it’s selling off its oil, which is not replaceable.
@john personna:
Well, those of us on the more conservative side often feel that liberalism is about how taxes sock it to the rich and not about paying the bills. So we’re even, I suppose. 😉
I wouldn’t say that, for myself anyway. I certainly understand it’s not possible to support the government we have without some level of taxation, and I’m not at all opposed to a progressive income tax (the U. S. has one of the most progressive in the world, by the way). But a discussion of tax rates separate from a discussion of what “the bills” are going to be is not very productive, I think.
I also believe there’s a certain level of shifting of the tax burden toward the top that we can’t exceed without triggering some behaviors that will result in diminishing returns. Ask the Brits what happened when they jacked their top marginal rate up to 50% a couple years ago.
@john personna: Read my comment again. Then read your comment again. I’m talking about median weekly income. You’re talking about median annual income. I’m talking about the period since 1980 (in response to that disjointed and fatuous “Reaganism” rant). You’re talking about the period since 1973. Apple. Orange. In any event the conclusions are the same: Over the past 30 years (and 40 years) there have been small but measurable inflation-adjusted gains in incomes for all American workers. Not exactly the Grapes of Wrath scenario to which reference was made in that earlier rant by that other commenter.
@Tsar Nicholas II:
Are you kidding?
Do you seriously think that median weekly income can more than double while annual income stays the same?
No, you are using data that is not inflation adjusted. You could have provided a link to disprove that.
BTW I must laugh out loud at “apples, oranges.”
I talk about the huge span from 1973 to 2010, you talk about a shorter span within it.
No, you can’t double wages in the shorter span and have flat wages in the longer one.
@Mikey:
Yeah, well wake me when 40% top-marginal tax is on the radar.
We are at the end of history as far as taxes are concerned.
(I actually was a conservative who hated taxes, of course top marginal was at 70% when I felt that way. I’m not “stuck” now with the same feeling, 35% top marginal, and trillions in debt.)
@john personna: Just to make things 111% crystal clear: I’m referencing wage & hour data from the Labor Dept.’s BLS. You’re referencing Census data. The former uses current dollars, not chained dollars. The latter uses chained dollars, not current dollars. For the median weekly income data, as opposed to the Census data, you have to use the nominal dollars and then factor in inflation. Again, however, the ultimate conclusion is the same: Inflation-adjusted incomes for all American workers have increased over the past three and four decades. They haven’t declined. They haven’t plummeted. It’s not exactly the Grapes of Wrath II.
@Tsar Nicholas II:
Bullshit and no links.
Though this is acknowledgement that you are claiming inflation as growth in wages.
@john personna: Um, no, you’re 180 degrees off. Read my original comment again. I referenced median weekly income data that uses current and not chained dollars. Then in the very next sentence I pointed out that inflation (CPI-U) has risen at a lesser rate over the same time frame. Ergo income growth has exceeded the rate of inflation. That’s the whole point. Incomes have grown at a faster rate than inflation. Since 1973. Since 1980. Not too much faster, mind you. Certainly not as much as everyone would like. But, still, there’s been an inflation-adjusted gain in incomes. Not exactly a Grapes of Wrath II scenario. You can look up these items yourself. The BLS keeps databases that go back several decades. BLS.gov. Check the historical database for wages. It’s all in there. They also have an inflation (CPI) calculator.
@Tsar Nicholas II:
That’s just impossible, and that’s probably why you are not providing links.
I have given links, and I can give more on wages not moving, for instance this.
US Personal Income Over time – by Race & Sex
In 1970 the overall wage, in 2004 dollars, was $28,100.
In 2000 the overall wage, in 2004 dollars, was $31,089
That’s edged up, but nothing like your $262 to $756 claim.
It is still bullshit, without a link to back it up.
BTW, that overall wage was back down in 2004 to $30,513
@john personna: John, what part of chained vs. current dollars do you not understand? The BLS database for wages doesn’t report itself in chained dollars, like the items to which you’re citing. With BLS wage data you have to take their reported (current – nominal) dollar figures and then you have to factor in inflation.
Look, just to placate you, and since I have some time to kill, those weekly median income figures (using chained dollars) would be as follows: $715 in 1980 vs. $756 in 2011. Again, a small but measurable inflation-adjusted gain in incomes. Which jibes with every other data point. Which jibes with the figures to which you yourself cite. There’s been a small but measurable inflation-adjusted gain in incomes over the past four decades and over the past three decades. No matter how you slice it that’s the conclusion. Not exactly a Grapes of Wrath II scenario.
P.S. — I can’t link to the individual databases on the BLS Website. When I used to blog I tried that dozens of times. For some reason it doesn’t work. I might be computer illiterate. I don’t know what the problem is. You can find these items yourself. BLS.gov. Check the historical databases for the wage figures. It’s user friendly.
@Tsar Nicholas II:
If you would have said ” $715 in 1980 vs. $756 in 2011″ in the beginning, you would not have had a problem with me.
You did not:
Basically it’s taken all these posts to actually nail down that it was not 262 versus 756 in any meaningful sense.
@john personna: Well, in the very next sentence I referenced the inflation rate growing at a lesser clip, so I presumed it was understood that I was using current (nominal) dollars. Also, look at it this way: Had I converted those figures to chained dollars from the get-go then you and I this morning would not have had the pleasure of each other’s company. 😉
What a lovely way to try to cover for your dishonesty…dishonesty that proves the Q was correct in much of what he wrote…
Back to the core topic, Jared Bernstein reports:
Can we get another “takings” for that? Paying more than 15-18 would be “taking,” and “class warfare” no doubt.
@john personna: But *why* did they pay such low rates? Were they “millionaires” because of a one-time windfall that is exempt from taxation? Because of carried interest? Capital gains?
I’m all for making rules that make sense and eliminating existing ones that don’t. I’ve yet to see an argument in favor of the carried interest rule that makes any sense, so am inclined to think we should eliminate it absent new evidence.
I do, however, reflexively reject backdoor taxes like the AMT or one that says “Millionaire? Screw you, give us more.”
Tsar Nicholas,
So when you said “The CPI-U during that time frame has risen at a lesser rate”, what you really meant was that including inflation means that the weekly earnings rose over that 30+ year period by 6% in real dollars (or less than 2/10% per year), instead of 189%, as in the nominal dollars you posted. And you were writing this in opposition to The Q claiming that middle class wages had stagnated over that period.
@James Joyner:
First, we should not that these are “millionaires” in the modern sense of earning that much in a calendar year, and not having that much worth.
After that I have questions of my own. Firstly, what kind of windfall is there that is not taxed? Did I miss out?
Next, you ask about capital gains and carried interest, but they are actually, at, not below 15%, right?
The figure quoted was for people paying less than that rate.
@john personna: I’m not sure how the scoring is being done. If it’s done on gross income rather than taxable income, for example, it would be easy to conjure examples: inheritance, sale of home, one-time gifts, etc.
Additionally, I’m not sure how, say, the Instagram sale is handled. Are the sellers taxed if they earned $250,000,000 this year? Or is that amortized in some fashion? If the former, it would strike me as unjust even though I’m dubious that they actually created that much value in such a short period.
@john personna: I’m no longer a “tax-hating conservative” either, and certainly marginal rates today are historically low.
But many liberals I know, both “in real life” and on the internet, advocate for very high taxes on the wealthy with a justification of “because f**k you, rich boy.” (Present company excepted, which is one reason I like coming here.)
Tsar, take your head out of uh-hem,…. income for the middle class doubled from 1948 to 1973, that much is agreed upon by both left and right economists. At the current rate of increase, it will take centuries for those incomes to double again.
It used to be if someone said 2+2=4 and someone else says 2+2=5, there would be a way to decide which is right.
Unless, of course, one is arguing with flatulent wingnuts.
Look baby boomer Reagan spawn, i understand your allegiance since you grew up with that as your universe.
When I grew up, we used to joke that 3 things were a given: FDR would always be president, Joe Louis always the heavyweight champ and the Yankees would always win the pennant.
The idea of Republicans in power was about as far fetched to my generation as you wingnuts thinking that Obama was born in Hawaii.
From 1932 to 1992 the house was 56 out of 60 years run by dems. The senate was controlled by dems for all but 12 years. Ike never really challenged the New Deal, so until Nixon, Repubs wondered the wilderness.
And for damn good reasons. They almost wiped out the middle class, offered zero solutions to national calamity, were moronically wedded to the “less regulation, worship the rich” policies that were exceedingly unpopular with the vast majority of Americans of my time.
After WW2 and the shared sacrifice of all of us, the idea of excluding blacks and women and kids under 21 from voting were resoundingly rejected.
High marginal rates, strict enforcement of anti trust laws and union membership did not destroy capitalism..in fact the growth rates under those policies were higher than under supply side policies.
These are all facts, but to those who think U.S. history started with Jimmy Carter who destroyed America, only for reagan to save it, I understand your appalling ignorance since you weren’t around to experience the socialist, fuck the rich America of the 30s, 40s, 50s, and 60s.
So, to your cohort, getting rich by any means, unfettering the uber wealthy from any social contract, self-aggrandizing at the expense of your fellow citizens is de rigueur.
Which is ok, if you assh#%# weren’t such supremely close-minded in your defense of the indefensible.
Tsar, strains mightily to try and imply that the middle class under supply side dominated policies of the last 30 years, thrived as much as they did under a completely different set of economic poliices from 1948- 1980.
And you make yourself to be a pompous ass as others here destroyed your bullshit stats.
In short, we’ve tried in the 80s the supply side bs, then again in the 2000s and we are about to shoot ourselves again if Mitt is elected or the Ryan budget is taken seriously.
And when the inevitable happens, it will be the mindless wingnuts who will blame the deficits and economic abyss on Obama no doubt, in order to spare their mind of conflicting facts.
Tsar, take your head out of uh-hem,…. income for the middle class doubled from 1948 to 1973, that much is agreed upon by both left and right economists. At the current rate of increase, it will take centuries for those incomes to double again.
It used to be if someone said 2+2=4 and someone else says 2+2=5, there would be a way to decide which is right.
Unless, of course, one is arguing with flatulent wingnuts.
Look baby boomer Reagan spawn, i understand your allegiance since you grew up with that as your universe.
When I grew up, we used to joke that 3 things were a given: FDR would always be president, Joe Louis always the heavyweight champ and the Yankees would always win the pennant.
The idea of Republicans in power was about as far fetched to my generation as you wingnuts thinking that Obama was born in Hawaii.
From 1932 to 1992 the house was 56 out of 60 years run by dems. The senate was controlled by dems for all but 12 years. Ike never really challenged the New Deal, so until Nixon, Repubs wondered the wilderness.
And for damn good reasons. They almost wiped out the middle class, offered zero solutions to national calamity, were moronically wedded to the “less regulation, worship the rich” policies that were exceedingly unpopular with the vast majority of Americans of my time.
After WW2 and the shared sacrifice of all of us, the idea of excluding blacks and women and kids under 21 from voting were resoundingly rejected.
High marginal rates, strict enforcement of anti trust laws and union membership did not destroy capitalism..in fact the growth rates under those policies were higher than under supply side policies.
These are all facts, but to those who think U.S. history started with Jimmy Carter who destroyed America, only for reagan to save it, I understand your appalling ignorance since you weren’t around to experience the socialist, screw the rich America of the 30s, 40s, 50s, and 60s.
So, to your cohort, getting rich by any means, unfettering the uber wealthy from any social contract, self-aggrandizing at the expense of your fellow citizens is de rigueur.
Which is ok, if you assh#%# weren’t such supremely close-minded in your defense of the indefensible.
Tsar, strains mightily to try and imply that the middle class under supply side dominated policies of the last 30 years, thrived as much as they did under a completely different set of economic policies from 1948- 1980.
And you make yourself to be a pompous ass as others here destroyed your bullshit stats.
In short, we’ve tried in the 80s the supply side bs, then again in the 2000s and we are about to shoot ourselves again if Mitt is elected or the Ryan budget is taken seriously.
And when the inevitable happens, it will be the mindless wingnuts who will blame the deficits and economic abyss on Obama no doubt, in order to spare their mind of conflicting facts.
@James Joyner, @Mikey:
Forgive me for seeing you both barking at “f**k you, rich boy” (and posing hypotheticals to excuse 15-18% tax) while the deficit remains north of a trillion per year. I mean, seriously?
(do you see yourselves as budget realists as you do that?)
As regards earnings for US workers, here is a disappointing fact:
The US Has the Highest Share of Employees in Low Wage Work (among developed nations)
In the words of the film … “America, f**k yeah!”
One certainly has to wonder…even Ryan’s plan seems to be made up of fantasy…
Surely no one is surprised in the least by this statistic…
@john personna: I don’t recall posing any hypotheticals to excuse anything. My hypotheticals were generally along the lines of trying to illustrate the impact any given rate of capital gains tax would have on a wealthy person’s behavior (with my eventual conclusion being “not much”). I had thought, actually, that you and I were in general agreement.
There are many discussions to have about the causes and solutions to trillion-dollar deficits. My point, and perhaps James’, is that those discussions are as ill-served by people whose primary interest is “f**k you, rich boy” as they are by people whose primary interest is “no tax hikes EVER.”
@john personna: @Mikey: See my post from three years ago, “Class Warfare: Framing the Debate.”
@Moosebreath:
You mean the counsellor spent much of April 11 telling porkies again on the assumption he’s the only only one who knows the difference between nominal and constant dollars….LOL.
@Mikey:
I was splitting “f**k the right” and “hypotheticals” between you and James. You did one, he did the other.
You guys did this (and James links to “Class Warfare: Framing the Debate” as we discuss 15-18% real taxes, and a 30% proposed tax.
J.F.C.
Let’s all just pay 15-18%!
Surely the budget will just balance itself.
Put another way, with focus: it matters where we stand.
If we were at 70% top marginal rate right now, and the left had momentum in commentary with true “f**k the rich,” and capital gains were actually treated as regular income, you might have a point.
But you don’t.
You are stuck, or frankly stupid. You are making arguments as if we are at 70, or 90% marginal, when someone is only proposing a 30% back-up plan, because we are functionally at 15-18%.
WTF
@john personna: Is it really entirely irrelevant if half the country seems far less concerned about what tax and spending policies will best serve the nation than they are about shafting “the rich?” I’ve heard liberals flat out demand a return to the 90% tax bracket for “the 1%” and display no concern whatsoever for any negative economic consequences that might ensue. How is that at all a healthy contribution to the national debate?
It’s fundamentally no different in principle from the other half who seem to think de-funding NPR and Planned Parenthood will balance the budget while we eliminate the capital gains tax and absolutely refuse to raise taxes on anyone at any time ever no matter what America’s fiscal status may be.
I mean, seriously, for what was basically just a throw-away line on my part (recall the winking smiley?) you seem to have inferred a lot more than I meant. For goodness’ sake, it’s not like I’m ignorant of the fact marginal rates are at historic lows.
@Mikey:
Shirley, you can understand my frustration.
We have a record high deficit.
We have record low tax rates.
We have continued “patter” on class warfare. Yes, some of that might be in “good humor,” but jeez Louise, look where we stand.
@john personna: It is a big distraction, isn’t it? I mean, look at how our discussion went, and I pretty much AGREED with you from the get-go.
@Mikey:
I guess I mistook you and James for a common front then, sorry.
And in the bigger picture, no I don’t think it is a distraction. The right really is manning the barricades, because any more than 15-18% effective tax rate for the rich is (insert inflammatory language).
@john personna: I’m not sure even James is pushing to keep rates that low. I think we all agree that the “class warfare” rhetoric interferes with reasonable discussion, both from the right (“never raise taxes on the rich EVER”) and the left (“raise taxes on the rich to the stratosphere regardless of the consequences”).
My personal view, even as a person who sits a bit to the right, is that the GOP’s general refusal to consider even the small tax hikes we’re discussing is the more obstructive of the two.
@john personna: Yes, @Mikey is right. In this post and the “Class Warfare” post I linked, I specifically state that my sense is that we should do away with the carried interest rule, ensure that the differential treatment of earned income and capital gains is based on risk rather than rent-seeking, and that a return to Clinton-era top marginal rates is not “socialism.” Indeed, my sense is that letting the “Bush Tax Cuts” expire across-the-board makes sense given that it’s a pretty small tax “hike” that would net rather massive additional revenues to the Treasury.
James, why are bright folks like you and Doug becoming such a small voice in the Republican Party?