Laffer Curve at Work
Guess what? George W. Bush didn’t cut taxes for the rich. He raised them. He also made the system more “progressive.”
- People making $200,000 or more are paying 72% more in taxes than they did before their tax rates were lowered.
- Their share of taxes has climbed from 42% to 52%.
- These results hold, even a year into the recession and after the stock market slide.
See the full article on taxes and the rich here.
Denominator?
Steve
Interesting, but misleading. In 2002, the top 1% of income earners accounts for 16% of the US’s total personal income. A decade later, that top 1% were earning almost 24% of the total income. That’s at the same time median real family incomes have been flat to down.
When tax rates on capital fall, investors are more willing to move capital out of less-productive activities knowing capital gains taxes won’t erode the value as much. The move (i.e. sale of one asset to invest in another) triggers a taxable gain or loss. As investors moved from one asset to another, they paid higher taxes. The new investments were presumably more productive resulting in higher income which also results in more taxes.
This is something I witnessed firsthand in my father growing up. He would hold on to under-performing land or stock to avoid paying the high taxes in the 1970s. Hindsight is 20/20, but had he disposed of certain assets and taken the hit (i.e. paid the taxes) he probably would have been better off. But he didn’t know that back when his marginal rate was high (but allowable deductions generous).
This is consitent with the pattern for every major reduction in tax rates for the rich. Total tax payments rise, the sytem becomes more progressive and critics complain that somehow it’s unfair.
artk, government doesn’t control people’s incomes. It does control their tax rates. Reported income for the rich always chnages when you change their rates. The reason? Wealthy people have enormous discretion over how and when then recieve their income.
But you should already know this. Didn’t you say you were a stock market trader?
Steve–what denominator would you like for taxes paid by those with $200,000 or more in adjusted gross income? It isn’t a ratio, after all.
When people talk percentages, they should give all of the numbers. Historically, GDP and income increase. One would expect that over a period of years, people will pay more in taxes than they did in the past. Just saying you now pay more is not very meaningful. I just happen to have the Tax Policy Foundation site open looking at other stuff. It only goes through 2007, but if we look at the top 0.1%, we see that their average income rose from $476,000 to $1,049,000 in 2007. The math is pretty easy to do from there.
Steve
If tax rates are a percentage of incomes of course taxes go up as incomes go up. Census reports that the real income (in 2008 dollars) required to be in the top fifth of the income distribution was $107,091 in 1967. It was $180,000 in 2008, having peaked at $185,824 in 2006.
The upper limit of the lowest quintile went up, too. It was $16,090 in 1967 and $20,712 in 2008. This does notinclude the enormous growth in in-kind government subsidies which are not counted as income. Growing economies are good for everyone.
The Tax Foundation release on the tax returns of the top 0.1% also noted that “high-income people have incomes and tax liabilities that fluctuate wildly with the economy. The sharp rise in federal government tax revenue from 2003 to 2007 is likely to be followed by a substantial dip in 2008, 2009 and perhaps 2010 as the economy struggles through the worst recession since the early 1980s”
It doesn’t sound like the Tax Foundation expects these people to be paying more in the (near) future than they paid in the past.
Linda, you’ve misread the chart. 180,000 is the lower limit for the top 5%, not the top quintile. The bottom quintile is up 22% since 1967, the 4th quintile is up 34%, the top quintile is up 50% and the top 5% is up 68%. You can talk about “in-kind” for the poorest to make is look like they are somehow cashing in, but that doesn’t apply to the top 40 percent, the rich are getting richer.
artk–you’re right, I did make a mistake and post the lower limit of the top 5% rather than the lower limit for the top 20%. Thank you.
In-kind aid for the poorest means that their consumption income increases considerably beyond what is shown by money income. They are therefore considerably “richer” than straight income data would suggest. Personally, I hope that the the rich and the poor continue to get richer. In a market economy people not getting subsidies only get richer if they are producing things that others want to pay for. It isn’t a zero sum game, and their higher incomes do not hurt those who have less.
Linda, despite your wishful thinking, the numbers speak for themselves. Sure, it’s not a zero sum game, but the fact is that the higher your income, the more you benefit from any economic expansions. It’s not like when the economy expands 10%, every one’s income goes up 10%, if you’re in that bottom 20% your income goes up much less than 10%, if you’re in the top 5%, your income goes much more than 10%. The increases of the top income earners come out of the pockets of the poor.
I’m not talking my book; I know how much I benefit from this system. Both I and people I work with every day have more disposable income than we know what to do with. There’s just something wrong with a system that allows me on a regular basis to spend more on diner than half the country makes in a month, when that half’s barriers to health care access results in measurably lower life spans than upper income groups.
And, no it’s not my responsibility to give it away, it’s a shared obligation of the entire society and everyone has to pitch in. Somehow we’ve allowed a doctrine of mammon and selfishness to replace community.
and no it is neither an “obligation” a “responsibility” or a “duty” born out to or by society. Community takes a back seat to the individual and always will. Somehow we’ve allowed a doctrine of self-sacrifice and service for the greater good to take over. I ain’t your keeper.
Well, jack, I’ll tell you. Even the dawn of our species, when we were hunter gatherers, we recognized our shared obligations. It’s interesting that as society and technology has increased our interdependence some people deny a million years of human development.
artk–if you have more disposable income than you know what to do with, then I suggest a large donation to the National Center for Policy Analysis for the support of this blog.
I second Linda’s idea. And here is why: If NCPA’s policy proposals were adopted, poor people would have more income, better job opportunities and greater access to health care.
The problem with artk’s view of the world is that he seems to think that socialism and the welfare state are good for poor people. If we settled any political debate in the twentieth century, it should have been that one. It is universally true, all over the world, that the poor do better, the freer the economy.