So, now that we know the Tax Foundation / IRS data might have some “issues”, one can recompute this story using the CBO data instead. And…wouldn’t you know it, you get a somewhat different story when you look at the same years and the same tax (i.e., the federal individual income tax). The numbers are that the top 1% paid 18.3% of the individual income tax in 1970 and 36.5% in 2000. Their shares of the income in these two years were 9.3% and 16.7%. Working out the factor, we find that the ratio of the income tax share of the top 1% to the income tax share of everyone else excluding the top 1% went up by a factor of 2.57. The ratio of the income share of the top 1% to the income share of everyone else excluding the top 1% went up by a factor of 1.96. So, by this CBO measure, some part of the increase in the income tax share paid by the top 1% is really due to their effective rate increasing more than everyone else, although the largest part is still due to the large growth in their income share. It should be noted, however, if you do the same computation using the share of total federal tax liabilities, not federal income tax liabilities, then the ratio of the tax share of the top 1% to the tax share of everyone else excluding the top 1% went up by a factor of 1.89. So, their total effective tax rate increased a bit less than everyone else.
This tax stuff is freakin’ confusing! I could make a full-time job out of this.
But come on yourself, jshore. You are still missing the point that supply side economics was not merely about lowering taxes to increase GDP. The point was to lower the tax rates in order to increase the tax revenue. Some claimed that the growth in the GDP would be enough to do this. As you rightly point out there is little evidence that it could ever be so large. As you also rightly point out, there is little argument that such a change in the tax code can have a growth effect.
And so I’m being clear, and unless I’m much mistaken, the growth effect of tax changes would seem to be more pronounced when the effective tax rate is closer to the legal tax rate. That is, when investors and entrepeneurs can look at the tax code and tell easily what their tax burden will be, they are more likely to invest. It simplifies the math when trying to figure out if a business idea will make money. When the legal rate is much higher than the effective rate, they have to take into account many more contingencies.
My point being that lowering the tax rates was not simply about lowering the effective tax take. It was very much about transforming the tax code from a social engineering tool into a simple way to fund government which left markets to function on their own.
I know this was not your intention, it just seems that way from here sometimes.
But I don’t understand how the idea that everyone is advantaged is a contradiction at all. Unless, again, you are sneaking in the concept of a zero sum game.
I agree that defining a supply sider is somewhat subtle. But that is exactly my objection to your constant harping at the WSJ OPED pages and claiming that GDP growth alone is the mark of supply side theories. Your suggestion that the 1986 Tax Reform Act was a reversal of supply side theories suggests that. It was a comprimise, certainly. But only in so far as it became obvious that Reagan could not get significant cuts in spending.
Actually, explosion implies, to me, a sudden increase. If you want to say that income inequity increased significantly, that would be ok by me. But “explosion” seems to imply that it was not increasing before 1979 and then suddenly did. To be honest, I’m pretty sure that is exactly what you meant when you said the economics policies of the 80s were responsible for said “explosion”.
I just joted some notes about your last post in this one. I’ll bow out of the thread now. Let me leave you with this last thought.
But what you keep missing about the early Reagan tax cuts, is that they were not simply intended as revenue cuts. They did that, sure. But that was not their complete and only purpose. The whole idea was to simplify, shrink, and streamline government. By 1986 it became obvious that even Reagan would not be able to get the level of spending cuts needed to accomplish the shrinking. So, they changed the tax code to simplify it even more than had been done earlier, and to increase revenue. Think of it like you think of capitalism and liberalism. The law did not so much reverse supply side politics as save it.
Yeah…and it is actually worse than that. First off, most economists argue (and the CBO data assumes) that the part technically paid by the employer is really a tax on the employee’s income too, since it behaves in all ways equivalent to that.
Also, the SSI/Medicare tax is only assessed on wage income…not dividend, interest, or capital gains income.
Jshore: I think you missed one big aspect of ‘supply side economics’ -
Supply siders say that high taxes don’t just reduce incentives, they create distortions which drive money away from taxable income. The classic example is a tax-free municipal bond paying 3%, vs investing in a stock or taxable bond that pays a greater rate of return. Because tax is paid on one and not the other, the added return required to divert money away from the tax free investment is very high. If you lower taxes, more and more taxable investments begin to make sense, and capital starts to flow away from tax-free shelters and into taxable investments.
Thus you have an increase in tax receipts, without a corresponding increase in GDP. This may be what happened to the tax simplification of the 1986 tax restructuring. Even if it were revenue neutral in a static-evaluation sense, it may have boosted revenues substantially by diverting resources into investments that paid tax. I’d have to study it more carefully before saying whether I not I believed that to be absolutely the case, but I’m throwing the possibility out there because you seem to be honestly looking for answers to what happened.
Well, like I said, at some point it becomes a matter of semantics. I think everyone likes to simplify the tax code in theory. However, everyone also likes to provide proper incentives. Basically, one person’s “proper incentives” are another person’s “social engineering tool”. For example, when liberals introduce various tax deductions for things like education and stuff, particularly deductions that tend to benefit the poor and middle class, the conservatives sometimes cry “social engineering”. However, when conservatives introduce lower tax rates for capital gains and dividend income (which tend to disproportionately benefit the rich), they talk about “proper incentives” and other such things. And, then there are some complications, like the mortgage interest deduction, that seem to get pretty broad support across the board.
Well, some things are zero sum. After all, the idea of everyone being above average is non-sensical. I also think it is good to have a measure of how income shares and tax shares change that does not end up claiming that such shares changed in such a way that everyone was better off in the sense of paying a lower share relative to their income share.
Well, I think the specific policies of the 1980s were only partly responsible for the increase in inequality. I think there are probably some factors at play in the economy itself too. And, some subtle policy factors that have been maintained under both Dems and Reps. (After all, we saw inequality increase in the 1990s too, although at a somewhat slower rate).
Also, like I said, although I don’t have the data to prove it, my general impression from what I have read on income inequality suggests that the rate of increase of inequality probably did take a dramatic turn upward starting around 1980, so my use of the word “explosion” may be correct by your interpretation too. In fact, I think there were periods in the middle of the 1900’s when inequality actually decreased. But, again, I’ll have to leave this point as conjecture since I don’t have the data handy to flesh it out.
I know I said I’d bow out. I will, I just have to say one thing.
Can you do me a favor and think about this over the next few weeks? I don’t want o hijack this thread any more, but this paragraph taken in the context of the discussion of tax policy over several years does not seem to make sense. Perhaps we can debate it in another thread.
It’s good to see you think you have something worthwhile to contribute with. But in order to help you make sense, you’ll have to tell me whether your inability to understand stems from your general stupidity or from your ideological blinders. I don’t know if it’s “economics” or “deficit“ you find too fancy, but if you another time have difficulty following a sentence perhaps you could simply ask for clarification instead of indulging in a bit of mudslinging.
While I’m sure blowero appreciate the toadying perhaps you could simply suck his cock and be done with it.
Hmm… Thanks for reminding us of the “October Surprise”!
I’m a skeptic by nature and education, and I side in many if not most areas with the debunkers on this issue. But there’s enough left over to make Reagan and his cronies look awfully damned guilty of deliberately delaying the hostages release until after the election! Former president Carter believes it, as does former Iranian president Bani-Sadr, and they were in ideal positions to know. The balance of the evidence supports their beliefs. After all, this would not be the only time Criminal Reagan dealt duplicitously and illegally with Iranian hostage-takers.
And that has caused considerable damage to the country’s overall well-being.
The top bracket after WWII and then for some years was approximately 80%, yet the U.S. grew and prospered more widely and grandly then than at any other time in U.S. history. And few of the rich and super-rich felt they had any justified grounds to complain.
One of the most beneficial aspects of such high tax rates on the super-wealthy was that it brought about a great era of philanthropy that benefitted the public good enormously! But Reagan’s (and now Dubya’s) unconscionably huge transfer of wealth from the public coffers into the private hands of the rich that Sam praises has left the ideals of the public good and the philanthropic era dead, dead, dead.
These are just a few of the reasons why Reagan will be remembered by clearer-headed analysts as a criminally bad president.
My appologies, Rune. I meant the post ironically. Coming from this particular poster, the comment he made was funny. My bad for not communicating this properly.
The fact that the size of the Defense budget for weapons is inversely proportional to our military strength and effectiveness is compellingly established by Col. James Burton in his extraordinary book: The Pentagon Wars: Reformers Challenge the Old Guard
Burton’s reports of the analyses of arguably the most brilliant and successful minds the Pentagon has ever seen reveals that the cheaper and less complex weapon system will always outperform and “out-defend” the more expensive and more complex system. These analyses make plain that, for example, the Reagan shopping spree was one of the very worst things ever to happen to our military strength and our national defense! Dubya’s has doubtless had the same strength-sapping consequences for precisely the same reasons: complexity and high cost yields far fewer, far less reliable, far less effective weapons.
That’s another of Reagan’s most horrific crimes! If it were not for Reagan’s incredibly stupid intransigence, we would not today be faced with the fact that there are – as a direct result of his idiocy – twice as many Soviet nuclear warheads left around for terrorists to buy or steal!
Ya. Sure. That is why the cheap and simple T-55s and T-72s of the Iraqi army devestated our beleaguered force of expensive and complex M1s and M2s. That completely explains why the simple Mig-23s spewed death and destruction on our poor and fragile F16s and F15s.
:rolleyes:
Again, show me the real-world examples of this. Show me how the M1, M2, F-16, F-15, etc and so forth, are less reliable and effective than whatever you can come up with. Until then, I will have to assume you and the good Col. Burton are, uhmmm, ‘exaggerating’ the problem, to put it politely.
If you know me at all, pervert, you know that I very rarely comment on matters of grammar or word usage in GD (Logic, yes - grammar, no). But in this case, there were so many malapropisms that it was impossible to discern the meaning of the paragraph. And since Rune was being so pretentious, I really don’t feel bad about pointing it out.
Maybe you were, but just about no one I knew felt that way. That was a Raw Deal.
That’s already been debunked. That, too, was a Raw Deal.
Not really. As previous posters have established, the USSR was already dead before your boy took office; it’s just that the corpse didn’t stink too badly yet, so Reagan was able to make PR hay out of it.
I’m guessing that maybe General Pinochet and Criminal Ollie North were also your heroes?
I certainly don’t presume to know the actual explanation, but a tax increase one year followed by an even bigger waste of taxpayer’s money on the the stupidly counter-productive Reagan arms buildup would explain the phenomenon you describe.
My fault entirely, I had just awoken, barely had eyes and my irony-detector was still booting.
If you didn’t understand a word how did you figure out it was pretentious? In any case I’ll rephrase it just for you blowero – and be extra careful to avoid all those fancy words. What does it mean to you as a liberal (ElvisL1ves) that some of the most downtrodden and oppressed people of the day had such high regard for Reagan? That they 20 years later still think of him and his policies as a very important aspect of their liberation? Is this not something that bears notice, or perhaps speaks of policies that, at least on this one particular matter, were very successful and admirable?
Just one, from yesterday: ”In 1983, I was confined to an eight-by-ten-foot prison cell on the border of Siberia. My Soviet jailers gave me the privilege of reading the latest copy of Pravda. Splashed across the front page was a condemnation of President Ronald Reagan for having the temerity to call the Soviet Union an “evil empire.” Tapping on walls and talking through toilets, word of Reagan’s “provocation” quickly spread throughout the prison. We dissidents were ecstatic. Finally, the leader of the free world had spoken the truth - a truth that burned inside the heart of each and every one of us."
Natan Sharansky
This infamous “evil empire” speech was the very same that was so widely ridiculed as being stupid, dangerous and simplistic by the liberal groups in the west. I remember the howls of indignation and “star wars” insults from leftist commentators when it was first aired. How it was admired by the people less fortunate that I (and those commentators) was a thing I first discovered much later. That many people still insist on calling it (and Reagan) stupid is somewhat ironic confronted with the evidence of how well it was received by those on the other side of the iron-curtain, especially so when one thinks how hard it is to imagine a single speech from Carter or any of the Reagan critical liberal commentators with the same great impact.
I was in Berlin during the 1990 New Years celebrations, and remember the ecstatic wide eyed, East Germans flooding West Berlin. Everybody had heard Reagan’s “Tear down this wall” and everybody was wildly pro-American (funny how the most oppressed people always also tend to be the most pro-American). Though I didn’t ask, I doubt few would have known who Carter was, let alone could remember a single line from his mouth. Come to think of it, I can’t remember a single Carter speech either.
Responsible independent cites, please? Especially those documenting just how “huge” and influential these groups were?
“A.N.S.W.E.R.”? Who the holy fuck are they? Any relation to C.H.A.O.S.?? How “huge” could they possibly be??
I never heard of any of them, and I was then, as now, very much an active liberal. No one in my experience – not even far-left Marxist types – would do anything but laugh out loud at such a stupid idea! I can’t help thinking that you are exaggerating wildly. Or at least quoting from the ultra-right propaganda playbook…
Joking aside, Supply Side economics, isn’t. The basic dogma was that certain kinds of tax cuts are so successful that they pay for themselves. In virtually all real world cases, including this one, however, they don’t. Reagan’s tax legacy did quite a lot to streamline and fix a lot of the problems in the tax code. But even that didn’t make a big enough jump to pay for the loss of revenue. It was the tax increases under Reagan’s watch that made the shortfall not as large as it could have been (though Republicans now seem to enjoy pretending that it was George Bush Sr. who was the one that finally broke faith and allowed a tax hike.)
I also notice that jshore did quite a number on Stone’s attempt at using Gorby to silence his foes as being too out there even for a Commie, and yet it was Stone that was silent in the face of it.
