Liberal Tax Myths

[njtt]

I am not sure what the “myth” here is supposed to be, but I am pretty sure that it is a myth that liberals think that high tax rates on the wealthy are a good thing, or any sort of end in themselves. At best they are a useful and sensible policy option in some circumstances, a minor evil that it is best (in some circumstances) to suffer in the service of some greater good. A means, not an end.

Liberals don’t love taxes, they just love some of the social goods that taxes enable (which are not limited to what can be bought by government spending, by the way) more than they hate taxes.

[WillFarnaby]

@brickbacon

Wouldn’t you need to look at total tax revenue as opposed to income tax revenue to make that sort of statement?

That’s true but among liberals it seems pretty standard to simply cite the higher marginal rates as prima facie evidence that the rich used to pay a much higher share.

@Damuri_Ajashi

That hardly seems progressive.

What?

And corporate tax revenues as well. Corporate tax revenues basically fell off the chart.

I was under the impression that even liberals recognized the silliness of corporate taxes nowadays.

[rogerbox]

@WillFarnaby

I was under the impression that even liberals recognized the silliness of corporate taxes nowadays.

Yeah, because it’s not like corporations make use of the commons that must be paid for by somebody, or anything.

[2sense]

@WillFarnaby

I was under the impression that even liberals recognized the silliness of corporate taxes nowadays.

I think many of us would agree with you that the current paradigm of high rates that are basically paid only by those corporations without the political clout to wring loopholes out of Washington is not the way to go. But that’s not to say that corporate taxes overall are a bad idea.

[brickbacon]

@WillFarnaby

That’s true but among liberals it seems pretty standard to simply cite the higher marginal rates as prima facie evidence that the rich used to pay a much higher share.

It’s typically stated as prima facie evidence that the rich used to pay a much higher share of their income in income taxes. Which is true, but overstated. Either way, that is not what your claimed addressed. You said:

@WillFarnaby

So basically, the liberal argument that, in the past, we relied more heavily on the rich for our tax revenue falls flat in my opinion.

I don’t know if that’s true, even leaving aside the subjectivity of the claim. Either way, your stats don’t even begin to address that, so your conclusion is very premature.

[Damuri_Ajashi]

@WillFarnaby

What?

If you make significantly more money and you pay the same percentage of your income in taxes, then that is not progressive.

I was under the impression that even liberals recognized the silliness of corporate taxes nowadays.

Not when you have a 15% dividends rate.

I think the global corporate tax system has suffered from a race to the bottom and it may be irreversible. But a corporate level tax still makes good sense because you have a choice. You can choose a corporate structure that does not pay a corporate level tax but hits the shareholder with the corporate level income every year (like an LLC, partnerhship, S Corp REIT, etc.). But if you are going to insulate the shareholder form the corporate level income in the year in which it was earned, then we must tax at the corporate level otherwise corporations will become a vehicle to indefinitely defer income.

[sqweels]

Can we simply get a basic figure for comparison’s sake? How much did the average household making $250K to $2M pay in all taxes in the 1950’s vs the 2010s?

[tim-n-va]

@Evil_Economist

You may be under a misunderstanding on how tax deductions work. Let me give you a simple example: The tax rate is 60%. You earn $100. If you give $50 to charity then you pay $30 in tax. Your income statement looks like this:

Income: 100 a
Less charitable deductions: (50) b
Taxable income: 50 c = a - b
Taxes: 30 d = c*60%
After-tax income: 20

I would think that your after tax would be 70 and you’d have an effective tax rate of 30%. That is you calculate after tax and effective based on gross income.

[Manlob]

@sqweels

Can we simply get a basic figure for comparison’s sake? How much did the average household making $250K to $2M pay in all taxes in the 1950’s vs the 2010s?

The table below compares effective federal tax rate for 1952 and 2012 for married filing jointly with 2 children, and taking standard deduction. Adjusted gross income (AGI) is inflation adjusted to 2012 dollars.

       AGI   1952    2012
$    40,600   8.5%   0.0%
$    55,000  11.4%   6.0%
$   100,000  16.6%  10.3%
$   250,000  28.7%  20.2%
$ 1,000,000  58.1%  31.0%
$ 2,000,000  71.5%  33.0%

Those who benefited the most from the changes since 1952 have the lower and higher levels of income. Those with AGI between $55,000 and $1 million saw a 47% reduction or less since 1952. Those with AGI of $2 million saw a 53.8% reduction, and those with AGI of $40,600 saw a 100% reduction.