Don’t really want to go around again, but I do not feel that that is a good summation of my argument, not at all.
I was saying that the extremely wealthy would cut their income relativity modestly because of a fairly drastic increase in income taxes.
People who may reduce their personal incomes from 10 million a year to 9 million a year in order to avoid 2-3 million in taxes, but still be able to control that wealth through ownership of a growing company.
I specifically said a few times I wasn’t talking about people making a paltry million or less.
Actually when I asked if the wealthy would reduce their incomes by $200k to avoid a $100k increase in taxes, you didn’t say they would not, nor did you say that the ultra wealthy would reduce their income by 1x to save 3x in taxes (a rather unrealistic situation anyway). You said my scenario of reducing income by 2x to save 1x in taxes was too simplified.
I personally am not necessarily defending the rich; I’m just curious if there’s that much more income tax to be gained from them, or if a lot of this is just class warfare stuff.
In other words, would raising taxes 40% on the rich get you a significant amount of money versus raising the overall tax rate by say… 1%? My gut feeling is that the 1% would be far more money overall, and that the 40% tax would essentially be more in the nature of a penalty than a real revenue generator.
According to the data below, the top 1% paid $542 billion in Federal income taxes, with an average tax rate of about 27%. All taxpayers paid $1.3 trillion in taxes, with an average tax rate of 14%.
If you raised the average tax rate for all Americans to 15%, you’d get about $1.45 trillion in revenue by straight math (excluding all the important discussions we are having about whether increased taxes lower incomes, etc). If you raised taxes on the top 1% by five points (to ~32%), you’d also get about $1.45 trillion in revenue (with the same caveats).
I don’t mean this to be a prediction of what would happen under new tax policies, just simply as insight into who pays the taxes and how much income comes from all Americans versus the very wealthy.
I see that the figures I quoted upthread were for 2012, when $435k was enough to get into the top 1%. For the latest year (2017?) it took $607k. That works out to 12% annual gains for that threshold. Did you average a 12% raise for each of the past three years?
The logic is that with lower taxes, the rich will invest more of their money. Those investments will increase the productivity in the economy, as it’s assumed that investments will improve things and make us a more productive society. Then, as productivity goes up, wages will then go up. So, with these higher wages, people have more money, and they buy more stuff, and the economy grows more, and everyone gets a pony.
In reality, there is a logic to it that seems to make sense. So, this has been tried a few times, and it’s generally not worked. Let’s take the most recent corporate tax cut. It’s still early, but so far there’s no indication that investment has gone up this year. What is likely to happen is an increase in stock buybacks & maybe more payment of dividends. This isn’t going to lead to that boom that was predicted. This is basic trickle down economics that hasn’t worked.
So, I guess it’s been tried a few times, and the empirical evidence doesn’t back it up. There’s still time for me to be wrong on the corporate tax cut. But I doubt it will do what the proponents predicted. It might generate some growth, but not nearly as much as advertised.
One thing about the current tax cuts is that the timing was wrong, even if you liked the logic. We didn’t need anything like this in 2017, because the economy had already recovered and was reasonably healthy. If anything, we needed a tax increase to start lowering our deficits more. Instead, we got a decrease and higher deficits. The best time for tax cuts is when the economy is going into a recession. And the most stimulative group for tax cuts is probably the middle-class, who will have more money and buy more stuff…moreso than the rich. Our economic growth responds better to consumption, which a tax cut on a guy making $60K a year is going to result in more consumption.
I’m not a class-warrior. I have nothing against the rich or anyone at any level of society. But the logic behind tax cuts for the rich just doesn’t hold up…or it hasn’t held up in real-world experience yet.
I suppose you could make the tax rates so high, that the logic about taxing the rich holds. But we’re nowhere near those levels, as our top rates are in the 30’s. And even when we had 70% marginal high rates, via deductions and shelters, most people never paid anywhere near that.
Reagan was actually a smart, pragmatic guy. He had an ideology. But he adjusted his tactics when the evidence pointed him to do that. I liked Reagan. And yes, after he initially cut taxes, he came back later and raised them.
If he were alive today, and he stayed true to what he was in the 80’s, he would not be a Republican.