History US tax rate history - A return to the glory days

[SixNein]

While I disagree with the premise that the wars in the Middle East are just about oil (the 6 supermajors, only half are American companies, are <6% of the worlds oil), I'll argue on your premise anyhow. I think everyone should taxed proportionately to their income - based on a percentage based tax (as opposed to a 'flat tax' like every person owes $5000/yr regardless of income - remember, % based is already a step progressive and contributing according to wealth). Why does it need to be skewed more than that? How can you justify a wealthy individual potentially contributing tens of thousands times more than a middle-american? A 'big exec' earns 10mill/year. A 'middle family' earns 150k/yr. For simplicity sake, these are the rates: <250k - 30%, >250k - 70% (similar to proposed rates a few years ago when collectivists took congress). The middle family will owe about 45k. The big executive will owe 7million dollars. That ratio is 7,000:45. 155x different for only ~60x the difference in income. Under that tax system, the 'big exec' is paying 2.5x more per dollar earned than the lower family. That is called success discrimination. Oh, and that's before state taxes - if this executive lived in California - he'd have less than 1million dollars in take home income. 1/10th of what he made. You may be jealous and mock 'boo hoo', but he took risks, got a little lucky, and was able to be successful with his life. Why does the government need to take that away?

Also, by your justification, someone obtaining direct government assistance (welfare, medicaid) should be required to pay more tax as well. Lastly, these major companys, when reporting profits, do generally pay tax on the company's income. So wouldn't extreme taxes on the heads of these companys represent a multiple taxation - if one is to assume your reasoning?

Again, using your 'protecting oil' premise, if taxes increased to that point - it's likely these executives wouldn't have assets to worry about internationally any more. The remaining 6% of the world's private oil industry would just be ceeded back to the Middle East. We would still need oil, but have no one to contribute. If you're really interested in obtaining tax money - look at the profitable corporations which paid no taxes this year, like GE. Basically they took enviro-collectivist special interest 'tax benefits' and ran with them to make several billion dollars in profit and owe $0.00. Now, I do also agree that the oil/ethanol subsidies are also out of hand (I can't find a source, but remember hearing that big three each paid about 15% in tax, down from a nominal rate of ~22% for the industry because of subsidies) - they should be fully taxed as we don't need to be subsidizing any of this.

And again, you're the one making the argument that the wealthy are 'worth more' to the government. So, if that's the case - then why shouldn't they have a larger say? If the wealthy are taxed proportionately higher, then shouldn't they have a proportionately higher say in the givernment as well? See the figures above - maybe the oil executive should have 155 votes for the middle family's 1 vote?

(I don't think that someone should have more votes intrinsically based on wealth, but just extending the premise to illustrate my point using your analogy)

The top is making what? Nearly half the income in America. So I don't think it would be too crazy to suggest that the top is making about half of the government's spending. And the top also gets quite a lot of legislation favors too... I don't think i would feel sorry for the top if it saw tax increases of 20%. (But I'm only suggesting the end to the bush tax cuts).

 

[SixNein]

No. The recession can explain why revenues are low, but it cannot explain why expenditures are high. Expenditures are high because Congress voted to increase them. Some of that increase, the "stimulus" was in response to the recession, to be sure, but stimulus was a choice. Perhaps a good choice, but a choice nevertheless.

Also, a budget that is balanced in boom times but not in bad is not, in my mind, "balanced".

In my opinion, government should save money in good times and spend in bad times.

Well the government has spent a great deal of money over the last decade on two wars, gigantic tax cuts, a new entitlement program, and stimulus packages. And with the recession, the government has a huge budget shortfall from the lack of revenues. There is no question that there is a spending problem. I do think part of that is being driven by legislation not just the spending programs themselves. There are several areas in government that are in dire need of reform that help drive up the cost for those spending programs. Patent reform is one example.

I don't see the financial logic of starting two wars, creating a entitlement program, and offering huge tax cuts at the same time. Taxes should have went up not down, or these programs should not have happened.

 

[ParticleGrl]

No. The recession can explain why revenues are low, but it cannot explain why expenditures are high.

Of course it can- more unemployed people means more unemployment money spent. More part time workers who can't find full-time work means more food stamps. More people enroll in medicaid.

In a recession, the social safety net kicks in and does what its supposed to do which means expenditures go up. At the same time, revenue goes down.

 

[Vanadium 50]

The top is making what? Nearly half the income in America. So I don't think it would be too crazy to suggest that the top is making about half of the government's spending.

From a past thread:

As of 2007, 1% of the population held over 36% of the wealth in this country. When they pay 36% of the taxes, I'll stop advocating for higher taxes on the wealthy.

Time to stop.

According to the IRS (http://www.irs.gov/pub/irs-soi/07in05tr.xls) in 2007, the top 1% paid over 40% of the income taxes. (40.42%)

 

[Vanadium 50]

The top is making what? Nearly half the income in America.

If you define "top" as the fraction making 50% of the income, that's roughly the top 10%, who makes 48.05% of the income. (2007 numbers) They pay 71.22% of the income taxes. The threshold for being in the Top 10% is $54,519 a year.

If you raise the tax on these people by 20%, that would raise $130B. The deficit is $1.6T - i.e. it solves 8% of the problem.

If you raise the tax enough to balance the budget, you need to increase it by 230%. What are now 25, 28, 31 and 35% brackets become 83%, 92%, 102% and 116%.

 

[OmCheeto]

From a past thread:

Time to stop.

According to the IRS (http://www.irs.gov/pub/irs-soi/07in05tr.xls) in 2007, the top 1% paid over 40% of the income taxes. (40.42%)

Just did an analysis of that spreadsheet.

Amazing that 1.4 million tax filers make enough to cover that much of the federal budget.

What I want to know now, is why the top 1% are not complaining that the top 0.1% are paying less taxes then they are, and have been since 2004?

ps. I now know why 50% of American's don't pay taxes.

 

[mheslep]

...
Well the government has spent a great deal of money over the last decade on two wars, ...

Eight years of Iraq/Afghan war spending amounts to about three months of current 2011 total spending, or about nine months of the 2011 deficit.

 

[Ivan Seeking]

In my opinion, government should save money in good times and spend in bad times.

Well the government has spent a great deal of money over the last decade on two wars, gigantic tax cuts, a new entitlement program, and stimulus packages. And with the recession, the government has a huge budget shortfall from the lack of revenues. There is no question that there is a spending problem. I do think part of that is being driven by legislation not just the spending programs themselves. There are several areas in government that are in dire need of reform that help drive up the cost for those spending programs. Patent reform is one example.

I don't see the financial logic of starting two wars, creating a entitlement program, and offering huge tax cuts at the same time. Taxes should have went up not down, or these programs should not have happened.

Well the government has spent a great deal of money over the last decade on two wars, ...

Eight years of Iraq/Afghan war spending amounts to about three months of current 2011 total spending, or about nine months of the 2011 deficit.

What is your point: A trillion here and a trillion there don't matter?

It mattered to Republicans when Obama took out far less for Americans.

 

[mheslep]

Tax the red line...

[PLAIN]http://www.cbpp.org/images/cms//6-25-10inc-f1.jpg[/QUOTE]The red line does not necessarily represent people over time BTW, but a statistical construction. People can (http://en.wikipedia.org/wiki/Sam_Walton" ) start out on the blue line and over 25 years move to the red line.

 

[russ_watters]

[To Ivan] It matters more now for obvious reasons: Obama is spending faster, at a time we can less afford it. I seem to remember you complaining a lot about the debt under Bush. Does it not bother you anymore?

 

[russ_watters]

On the topic of the central government, yes, taxes on the top %1 percent must increase. The bush tax [cuts] must go.

Just for clarity, do you mean ALL the Bush tax cuts?

 

[Vanadium 50]

What I want to know now, is why the top 1% are not complaining that the top 0.1% are paying less taxes then they are, and have been since 2004?

You would have to ask them. But a couple of possibilities present themselves.

(1) They may not subscribe to the political philosophy that the responsibility for paying for government services falls predominantly on those richer than themselves. Or even if they do, they feel that applying that argument will backfire because it will then be used on them.

(2) It is a fact that the higher your income, the more volatile it is. We think of the "top 0.1%" as if they are a static group, but in fact people move in and out of it. Many of those people are likely in the 1% cohort when they are not in the 0.1% cohort.

(3) The 0.1% group gets more of its income from capital gains than the 1% group, so it increase the share paid by that group would most likely involve an increase in the capital gains tax, and thus hurt the 1% as well. Cutting off one's nose to spite one's face, as it were.

 

[Al68]

They have not only have control but absolute control. If they want to dump chemicals into the ground, they are free to do so. If they want to dam up the water, by all means if it flows on their land. The government does not regulate these things under the libertarian philosophy.

I think you have a misunderstanding of power. Power is kind of like energy. It can't be created or destroyed. We give the power to the government that it uses for authority. If you take away the government, the power still exists in our hands, and a great deal of that power will go to the wealthy. Monopolies can still exists because the same money and relationships that influence government can be used to influence owners of private property.

I won't address each point individually here, but that is all simply false. All of your points have been addressed by me and others in https://www.physicsforums.com/showthread.php?t=443042&highlight=libertarianism".

You don't believe there is a direct link between wealth and freedom in a libertarian society?

No, not if the word "freedom" is used to mean liberty instead of an alternate definition.

Wealth not government would protect freedom in a libertarian society.

Nonsense. You seem to have libertarianism confused with anarchy.

Fine, we'll end the conversation about libertarianism. But I do suggest you do some searchings like "Criticism of libertarianism" and read some arguments against the view.

I have read extensively on the subject, and have discussed it in these forums, which is why I linked another thread on it. There are actually legitimate arguments against libertarianism, but your arguments are based on gross misconceptions and misrepresentations of libertarianism.

 

[mege]

What is your point: A trillion here and a trillion there don't matter?

It mattered to Republicans when Obama took out far less for Americans.

Actually, the modern conservative pundits (Hannity, Beck) made their shows basically critisizing President Bush's overspending and the media bias that was occurring more loudly than ever. That seems to get forgotten now a days when they critique President Obama for the same thing...

 

[OmCheeto]

You would have to ask them. But a couple of possibilities present themselves.

(1) They may not subscribe to the political philosophy that the responsibility for paying for government services falls predominantly on those richer than themselves. Or even if they do, they feel that applying that argument will backfire because it will then be used on them.

(2) It is a fact that the higher your income, the more volatile it is. We think of the "top 0.1%" as if they are a static group, but in fact people move in and out of it. Many of those people are likely in the 1% cohort when they are not in the 0.1% cohort.

(3) The 0.1% group gets more of its income from capital gains than the 1% group, so it increase the share paid by that group would most likely involve an increase in the capital gains tax, and thus hurt the 1% as well. Cutting off one's nose to spite one's face, as it were.

Sorry to make you go to all that trouble. It's kind of easy to interpolate from the drop in income for the 1% graph that they also derive much of their income from investments.

I was just hoping people would look at the graph on the right and see that the rich and uber rich tax rates have been falling, while everyone else's was going up.

I did a few more hours of analysis this morning and came up with the following conclusion: The Reagan and Bush tax cuts ****** us all.

We would be at a zero deficit right now if we'd maintained the following tax rates over the last 20 years:

50% on the top 1% (currently $1,423,580 agi average)
40% on the top 1-5% (currently $227,950 agi average)
30% on the top 5-10% (currently $132,316 agi average)
20% on the top 10-25% (currently $85,891 agi average)
15% on the top 25-50% (currently $47,490 agi average)

I would include a separate tax bracket for the top 0.1%, to relieve the pain on the other 99.9%, but the data only goes back a few years.

And I would include the bottom 50% in the equation, but the fact that the 400 richest people in America are worth as much as the 150,000,000 poorest people, kind of speaks for itself. http://www.alternet.org/economy/145705/the_richest_1%25_have_captured_america%27s_wealth_--_what%27s_it_going_to_take_to_get_it_back"

You can only get so many roommates into a 1 bedroom apartment before anarchy ensues.

But then again. **** 'em... Slackers!

Tax the poor!

 

[Vanadium 50]

Increasing the taxes as you describe would require increasing the capital gains tax. Message 310 explains the difficulties with that.

 

[OmCheeto]

Increasing the taxes as you describe would require increasing the capital gains tax. Message 310 explains the difficulties with that.

I remember message 310. It struck me as either poor math, or hyperbole.

In 2009, the IRS collected $60B in capital gains tax. Assuming that it increases proportionally to rate (something any economist and even the budget forecasters at OMB will dispute - this is a strict upper limit), the IRS will collect at most an extra $64B for it. However, 6% of the market's wealth, or about $2.4T, would be wiped out in order to do this. To put this in perspective, this is 30 Hurricane Katrinas.

$64 billion in taxes would eliminate $2.4 trillion in wealth?

So when the capital gains tax went from 30% in 1996 to 15% in 2004, was $2.4 trillion in wealth created?(corrected for inflation of course)

Hmmm... Let's do some fun math!

doubling cgt reduces wealth by $2.4t's
halving cgt increases wealth by $2.4t's
quartering cgt increases wealth by $4.8t's
eighth: $9.6t's
16th: $19.2t's

There you go.

Cut capital gains taxes to ~1% and we've created enough wealth to pay off the national debt. With $5 trillion left over for tomorrows ball game and a double order of hot dogs.

Yippie!

 

[Al68]

doubling cgt reduces wealth by $2.4t's
halving cgt increases wealth by $2.4t's
quartering cgt increases wealth by $4.8t's
eighth: $9.6t's
16th: $19.2t's

There you go

Now that's some faulty math. Using the first line an an assumption, and assuming a linear relationship, it should be:

doubling cgt reduces wealth by $2.4t's
halving cgt increases wealth by $1.2t's
quartering cgt increases wealth by $1.8t's
eighth: $2.1t's
16th: $2.25t's
0% cgt: increases wealth by $2.4t's, the same amount as would be reduced by doubling it.

Of course that doesn't prove the initial assumption is correct, or that the relationship is linear. But it does show, at a minimum, that such an assumption is far more reasonable than you tried to make it out to be.

And it's proof positive that Obama Kool-Aid is killing your math skills, dude. I'd be careful with that stuff if I were you.

 

[Vanadium 50]

I remember message 310. It struck me as either poor math, or hyperbole.

Have you ever taken a course in Economics? The Law of One Price is very, very basic component of it./

So when the capital gains tax went from 30% in 1996 to 15% in 2004, was $2.4 trillion in wealth created?(corrected for inflation of course)

Today, the market has a valuation of $40T, and the S&P 500 is at 1339.67.

On January 2, 1996, the S&P 500 was at 620.73, so the market had a valuation of $26.3T in 2011 dollars.

On December 31, 2004 the S&P 500 was at 1213.55, so the market had a valuation of $41T in 2011 dollars.

 

[WhoWee]

Have you ever taken a course in Economics? The Law of One Price is very, very basic component of it./

http://books.google.com/books?id=2s...ge&q=law of one price and derivatives&f=false

 

[Vanadium 50]

That page isn't being served. What is the point you are making?

 

[WhoWee]

That page isn't being served. What is the point you are making?

If possible - be aware of any derivatives when applying the Law of One Price to a portfolio.

 

[Vanadium 50]

I agree that any simple analysis can be made more complicated. Heck, we have people right now on PF trying to analyze gears with GR. But are you arguing that increased taxes on capital gains do not make stock shares less valuable?

 

[OmCheeto]

Have you ever taken a course in Economics? The Law of One Price is very, very basic component of it./

Yes, but that was 30 years ago, and there is no mention of it in my textbook. Perhaps it is an old concept with a new name. I also couldn't find it in my encyclopædia, which was published in 1990. But I read up on it, and yes, it is an incredibly simple concept.

Today, the market has a valuation of $40T, and the S&P 500 is at 1339.67.

On January 2, 1996, the S&P 500 was at 620.73, so the market had a valuation of $26.3T in 2011 dollars.

On December 31, 2004 the S&P 500 was at 1213.55, so the market had a valuation of $41T in 2011 dollars.

Ok, I actually did the math. I see now where you got the $2.4T.

I find the logic a bit flawed though. It seems to assume that everyone that owns stocks is the original company owner.

I don't know the ratio of "original company owner" to "investor" capital in the market place, but investors only pay tax on the gains. Since the market moves up at about 3% a year, with $40T as a benchmark, that gives us a 1 year profit of $1.2T. A 15% tax on that is $180 billion, 3 times higher than the amounts actually collected, but far less than the $2.4T.

That page isn't being served. What is the point you are making?

It links to: Mathematical Models of Financial Derivatives By http://www.math.ust.hk/~maykwok/"
Professor & Program Director of MSc in Mathematics (Financial Mathematics and Statistics)
Department of Mathematics
Hong Kong University of Science and Technology

Hardly page 2 of Econ 101. More like Econ 601.

 

[turbo]

We can parse some of the ideological semantics to arrive at some kind of agreement (I hope). The GOP says that we have to cut spending, but all tax increases are off the table. This kind of speech is disingenuous, because the Bush tax cuts were "spending" in the real sense that revenues were reduced. Tax cuts for the poor and the middle-class are stimulative, because such people tend to spend all or most of their income. Tax cuts for millionaires and billionaires are not stimulative in this respect. Similarly, rescinding tax breaks and subsidies for agri-giants and energy companies is not a "tax increase" but a fair shake for US consumers who already have to pay more and more for energy and food, and whose taxes go to pay for these corporate give-aways.

Subsidies are spending. Tax breaks to businesses and the wealthiest 1-2% of individuals are spending. If the GOP actually wants to cut spending, they have some pretty fat targets at hand. Tax breaks to average individuals and small businesses are spending, too, but they are stimulative, and might help us climb out of this recession.

The last 5-6 years of my work career, I was comfortably in the top 2% of earners, and I never begrudged a penny of my taxes. The "no new taxes" crowd in DC have a lot of support from the Taxed Enough Already wing. I wonder how many of those pensioners who are bused in for rallies have actually pulled down $250K/year and would be affected by repealing the Bush cuts for the top 2%. Not too many, I'd bet.

 

[WhoWee]

I agree that any simple analysis can be made more complicated. Heck, we have people right now on PF trying to analyze gears with GR. But are you arguing that increased taxes on capital gains do not make stock shares less valuable?

No - raising capital gains might cause a sell-off and further chase investors off-shore. Worse yet - IMO - the GM deal has eroded investor confidence in the debt markets.

 

[Vanadium 50]

Might? They surely will. As soon as the post-tax yields fall below the risk-free interest rate, the rational investor will sell.

As for bonds, the GM bailout has told the world "corporate bonds are for chumps". It used to be a bond meant you got paid back first. In the post-GM world, the government's buddies get paid back first. I don't give a hoot if those buddies are fat cats or union workers, because the salient point is that whoever it is, it isn't me.

 

[Al68]

This kind of speech is disingenuous, because the Bush tax cuts were "spending" in the real sense that revenues were reduced.

That is not what "spending" means in any non-fraudulent sense. http://dictionary.reference.com/browse/spending" means to "to pay out, disburse, or expend", not "reduce revenues".

There is no legitimate reason to use the word "spending" instead of "reduce revenues" to refer to reducing revenues, unless the intent is to mislead people about what is being referred to. It's fraudspeak, simply put.

 

[turbo]

That is not what "spending" means in any non-fraudulent sense. http://dictionary.reference.com/browse/spending" means to "to pay out, disburse, or expend", not "reduce revenues".

There is no legitimate reason to use the word "spending" instead of "reduce revenues" to refer to reducing revenues, unless the intent is to mislead people about what is being referred to. It's fraudspeak, simply put.

When money is shifted from one sector of the economy to another, it is spending in a very real sense, and my characterization of that is not "fraud". The government has agreed to increase deficits and borrowing in order to enrich some at the expense of others. If this is not spending, I don't know what is.

IMO, it's high time that the GOP took a step back and re-thought some of the off-budget spending (two wars) and reckless deficit-spending that "W" engaged in (his generous tax-cuts, for instance) to further enrich the rich and roll all of that back, incrementally but relentlessly, before slashing the safety nets that our poor and elderly rely on for their health-care and financial "security". If you think that retirees living on SS are financially secure, then you probably have never tried living on ~$1200/month when the prices of gasoline, heating oil, and food are soaring. No COLA for over 3 years, now? I don't know how the cost of living is calculated in Foggy Bottom, but real people pay more and more for food and energy than ever, and SS only goes so far.

 

[Al68]

When money is shifted from one sector of the economy to another, it is spending in a very real sense, and my characterization of that is not "fraud". The government has agreed to increase deficits and borrowing in order to enrich some at the expense of others. If this is not spending, I don't know what is.

IMO, it's high time that the GOP took a step back and re-thought some of the off-budget spending (two wars) and reckless deficit-spending that "W" engaged in (his generous tax-cuts, for instance) to further enrich the rich and roll all of that back, incrementally but relentlessly, before slashing the safety nets that our poor and elderly rely on for their health-care and financial "security". If you think that retirees living on SS are financially secure, then you probably have never tried living on ~$1200/month when the prices of gasoline, heating oil, and food are soaring. No COLA for over 3 years, now? I don't know how the cost of living is calculated in Foggy Bottom, but real people pay more and more for food and energy than ever, and SS only goes so far.

All of that is simply false, in any literal sense. That's what "fraudspeak" means. There is no non-fraudulent reason to word things the way you just did, even if we accept that non-literal speech can be non-fraudulent.