One meme that’s been going around is the notion that we can’t tax the rich because they’re the job creators. First, this doesn’t seem to comport with recent history. Taxes on the wealthy are a historical lows and job creation is anemic at best. And, the idea is pernicious. It has a “be happy with your scraps, you ungrateful peasant.”
Also, for those so inclined, Jesus.
It’s really just trickle down economics with a fresh coat of paint slapped over it.
It’s easier for a camel to pass through the eye of a needle than for a job-creator to enter the Kingdom of Heaven!
Blessed are the cheesemakers?
Let’s be honest about it: you can’t tax the rich because they just pass the cost to the lowest consumer on the food chain. You can’t tax Exxon, because that tax is applied directly to the price of the end product, and is thus a tax on the poor. Ditto Apple. You can’t tax Wal*Mart or GE for all the same reasons. All of the money these companies have to pay taxes come from end consumers like you and me, NOT from some great big nebulous mystery organization in the sky. In the end, ALL taxes are paid by us, the common citizen. So this whole debate about who deserves to pay what is just a giant pile of steaming BS. All of this distributed taxation is just a way to whitewash the fact that WE pay all of this money to the government…every single one of us. You are paying Wal*Mart’s taxes for them every time you buy a pack of toilet paper, a block of cheese, or a flat screen Visio TV. Their corporate taxes are built right into the prices of the goods they sell to us. This becomes even more convoluted when you consider that many people are there spending money given to them by the government for one reason or another. This national taxation debate literally cannot proceed any further until people pull their collective head out of the collective ass and see that there is absolutely no way to increase the size and scope of government without the low guys on the totem pole paying for it. Sorry, but that’s just the way it is.
And I thought economics dictated that people always force the prices of products down by competition – but then the corporations have found ways to make sure that doesn’t happen, right? That is, if there are any retailers left after Walmart forces them all to close….
You know, just for shits and giggles, lets try increasing taxes on these entities and see if the results corroborate the hypothesis. Might be that competitive forces and other types of friction prevent the shit from flowing downhill quite as fast as we suppose.
Andrew, you have a fatal flaw in your logic, in that you assume that all price increases would be equal across all income levels. That isn’t true. Take gasoline, for example. There are more wealthy people driving Escalades than poor people. They would be hit harder. Or take macaroni and cheese – that would disproportionately impact poor people.
Or the other scenario is that company A, B, and C all make 30% Net Income (after tax) in a competitive environment. Taxes go up 5%, reducing their NI to 28.5%. While they all could raise prices to get the 1.5% NI back, one may decide that they can live with 28.5% in order to steal market share. The other two eventually match and 28.5% is the new normal. Current thoughts on oligopoly would support this.
In addition, many of the tax proposals have nothing to do with prices. Raising the capital gains tax wouldn’t impact prices at all. I buy a stock at 10, sell at 20. I have no ability to change the price of anything. In addition, given that other sources of income are taxed at higher marginal rates, it is doubtful that I would stop investing with a moderate increase.
At this point, you can do what you will with your head and its current position.
You know what? I’m calling my own personal fatwah: No more discussion of this topic until Buffet makes his tax return available.
The more I research the subject, the more full of shit I think Buffet is. I do not believe that he only pays 17%. If he does, he has a much better accountant than even other billionaires. Even according to the IRS, none of the top income earners paid so little in taxes as a % of their income.
At the very least, Buffet is mixing up absolute taxes paid with marginal tax rates.
I think the proper description of people like you, Doug, is ungrateful. By any measure, “the rich” pay far more as a % of their income than you do (do you pay 17% of your income in federal taxes?)
Obama talks about “shared sacrifice”, then asks more of the people who already pay all of the taxes.
There are a lot of other people who need to get out of the cart and help push it, and they ain’t millionaires. Far from it. When the average household from the bottom quintille doesn’t have ONE income earner in it, that’s where we need to look for people to work more.
One more thing. What other explanations for poor job and income growth can there be? How does raising taxes influence them?
I think the real story is:
–rising incomes in developing countries, even in Africa.
–a dramatic slowdown in the earnings gains of all but the very-highly-educated in the U.S. People with MBAs and PhDs, especially medical degrees.
–polarization of incomes occurring in other OECD countries, not just the U.S.
–manufacturing output rising in the U.S. while manufacturing employment is flat
–anecdotal evidence of the pattern of creative destruction: Borders bookstores closing while sales of books on e-readers soar; video streaming displacing physical movie rentals; etc.
I can agree that raising taxes might not create jobs and that the poor job creation might not be caused by the current (historically) low taxes on the wealthy. However, the available evidence suggests either that there is not a strong correlation between tax rates on upper incomes and job creation or that lower taxes on upper incomes leads to poor job creation. It does not suggest that low taxes on upper incomes increases job creation.
There are not “historically low” taxes on the wealthy. Fallacy number 1. By any measure, the wealthy pay far more of the tax burden now than they did in the times of much higher marginal tax rates.
Like Buffet, you are mixing up actual taxes paid and marginal tax rates.
Remember, when FDR raised that top rate to 91% (or whatever the actual number was), he did it to stick it to one man: John D. Rockefeller. And there is no evidence that he ever actually paid that rate, there were sufficient loopholes then (as now) to bring down rates.
So what are these high marginal tax rates really about? Making liberals like you feel better?
Of course they pay more of the tax burden now; they have more of the stuff. That’s what happens when wealth gets concentrated. If you have 80% of the wealth, it makes sense that you’d pay 95% of the taxes. Those first few dollars are more important than the millionth dollar or whatever because you have to use the first dollars to put food on the table and keep a roof over your head.
What I want to know is what portion of that wealth the very wealthy (say, those worth $5 million+ – but especially those worth $100 million+) are paying in taxes now compared to what they’ve paid historically.
See, you’re making another mistake. People pay taxes on their income and realized returns, not on their wealth.
But even so, if we’re talking about income (wages and realized gains), the rich pay more today than they did in, say, 1980.
Now, you are right about one thing: the wealthy today are wealthier than they were in 1980, which explains why they pay so much in taxes. But isn’t that exactly what Reagan was trying to do with supply side economics?
Perhaps the fallacy was the “trickle down”, but the fact is that it isn’t very clear why trickle down hasn’t worked. I think it has more to do with the facts I listed above (growing middle class in every single developing nation, more competition for jobs globally, and increasing returns to the most educated but very little for anyone else). The rich derive their income from the capital gains of multinationals who increasingly get their income overseas. Or they are the most highly educated professionals who have very little global competition for their skills (a doctor in Bangledesh doesn’t really compete with one at Rush Medical Center in Chicago, even if he is more highly skilled).
I probably didn’t explain that well. This: http://blogs.wsj.com/wealth/2011/09/26/why-the-rich-pay-40-of-taxes/
does a little better job, and has the pertinent statistics. I do think that it is interesting that the rising share of income for the rich is a global phenomenon seen in even much more socialist countries.
The facts are not as Doug makes them out to be. The rich pay more in taxes now than they have in even the recent past.
http://www.ncpa.org/pdfs/ba606.pdf
The meme is, of course, incomplete. The larger point is that one should not terrify the rich into sitting on their hands. One can do it by discouragingly high tax rates but that’s not the only method of doing so. President Obama has established a number of poor policies. Pour encourager les autres, he’s decapitated the gulf state oil business sector and their support firms. If your catering firm is down 30% because of the Obama’s illegal permitting regime, you’re not going to do much hiring. Ditto for the rest of the extraction business that depends on timely and regular federal permits.
If you’re in the electricity production business, you’re battening down the hatches, just trying to keep the grid from collapsing as the administration shoots down gigawatts of baseload power with new regulations designed to destroy the ability of large numbers of plants to stay open. Now who is going to be daft enough to do a major expansion in the face of that? There are no, zero, nada forms of power that do not have at least one subset of the environmental movement. Yes, there are environmentalists that protest both wind and solar. The Obama administration is not clear which environmentalists have their hands on the energy policy tiller at any particular moment. Nothing is safe in terms of creating energy jobs.
I could go on and on but it gets boring and depressing to go through it all. If you’re not a highly connected Obama contributor, you’re vulnerable to having your business driven into the ground by administration policy. People sit on the sidelines when that happens.
Add tax increases to that depressing situation and things just get worse but low taxes by themselves aren’t going to fix the regulatory disaster that’s going on.
C’mon, Buzzcut. Please don’t be criticizing anybody by dragging out a link to an organization whose Chairman is a du Pont.The NCPA isn’t a “authoritative” organization unless one’s middle name is “conservative”. If I must, I too can drag out some opaque “think tank” whose conclusions differ significantly from your example.
All of this is “opinion”. Yours, mine, and most significantly, theirs. They are just better funded and better degreed than we are. Still doesn’t necessarily make them correct.
I’ll jump on the bandwagon blaming Obama to some extent for businesses slowing down, but it isn’t because of any one policy. It is because of uncertainty.
If businesses and the holy job creators knew for certain that capital gains taxes are going to be set at 30%, they will be required to pay healthcare for all employees at X rate, and the tax loopholes that some large corporations have are going to be eliminated, they would moan about it, but at the same time they would adapt and continue to make money. I’ve said it before, any business can hire an unlimited number of people that make more money for the business than they take home. The tax rate really doesn’t matter too much in most cases.
However, they don’t know. There is too much uncertainty. When you have no idea what is going to happen, you don’t expand your business, you don’t hire more people, you don’t take risks. You stay with what you have, because that is what your competitors are doing as well. Once there is less uncertainty, you take risks because you know your competition is likely to do the same. At that point, the risk of inaction is worse.
So, it really doesn’t matter if Obama passes the worst-case socialist scenario that Republicans fear. What matters is that we find out what it is and learn to adapt to it.
varangianguard, do you dispute any of the data in that link? Got any graphs to back up your assertions?
The idea that taxes got more progressive under Bush fits my feeling from the time. Those child tax credits from ’01 were HUGE. I went from paying federal taxes to getting a refund for everything I paid. And I didn’t have an insubstantial income, it was comfortable for the Chicago ‘burbs. If I wasn’t paying income taxes, very few people were, and the burden had shifted up.
Over the years, I’ve come to make a lot more money, and I now do pay federal taxes, but an almost inconsequential amount. Having 4 kids, a big mortgage, and Lake County property taxes (1.5% of assessed value, vs. the 1% that y’all enjoy) will do that for you. But I know from acquaintances who make a little more than I do that those things get phased out at about $150k of income. Thus, marginal tax rates are actually higher than those published.
It seems I’ll have to work on it, Buzzcut. Frankly, I’m not sure that anything in that article “means” anything besides being just an agglomeration of government statistics written up to purport an agenda. I’ll get back on this. Oh, and the graphs are one of the “problems” here. I can certainly make up graphs using context-less statistics, if that’s really all you require? Just checking.
And, this “fits (your) feeling“? Not very rigorous or scientific, I’m thinking. lol
And, this “fits (your) feeling“? Not very rigorous or scientific, I’m thinking. lol
That’s exactly what it is. You know, you do your taxes, you see that you’re getting back everything you put in, but you certainly don’t know the larger context of what is happening. It’s just intuition and logic, until somebody goes through and actually crunches the numbers for the country as a whole.
Well, here it is. It took so long to answer because I found it difficult to wrap my head around what Mr. Stroup was trying to do. I know exactly what he wanted to prove, but I’m just not sure he didn’t just “massage” his way there. Since I will not be able to see his total analysis, I’ll go ahead and address my concerns about his paper.
First, I find fault with Mr. Stroup’s conclusion that the tax codes have been getting more progressive since 1986. Superficially, that statement seems valid enough to anybody, but he concentrates completely upon the “top 1%” in his analysis which leads one to wonder exactly what the next 9% (and the next 10% after that) might be galloping away with. In effect, he may simply be using sleight of hand to make his point.
Second, Mr. Stroup keeps his discussion based upon percentages, rather than upon raw numbers. This is disengenuous, in my opinion. Percentages aren’t “number crunching” facts. They can be, and are in this milieu, misleading. Yes, woe upon the “rich” who have to pay such a higher percentage than other taxpayers, but let’s talk about real numbers here. These people are still walking away with obscene amounts of cash, after taxes. Oh, the pain.
Third, let’s talk graphics. Figure I sucks. What does the y-axis represent, exactly? Placing the data points from the research wouldn’t have cluttered it up too much. And what about Areas B and C? Is this what Mr. Stroup is referencing on page 2 when he’s writing about ratios? If yes, then say so. Clarity is lacking in Figure I, and it was the more important graph.
Finally, why does his data in Figure I only represent 2004? He starts out talking about change over time (from 1986 to 2004), but then drops the ball and only selects a single year to bolster his thesis. Is that because it’s representative of the whole time period? Is it because that single year reflects his conclusions while the others don’t? We can’t tell. He didn’t say. I wouldn’t mind this if he would have mentioned why he did it that way. Makes me leery of his entire thesis.
I suppose my criticisms won’t change your mind, but I am concerned that people blithely use this kind of “analysis” to back up their own point of view. Sorry, but I consider this too sloppy to take too seriously.