Getting mildly off-topic, but…
“Almost always”? You mean all those things like state income tax, property tax, and the like which strikes the poor so much harder than the non-poor? Granted, sales tax is regressive (after a certain point - I would wager the middle class pay a higher share than the uber-poor), but this doesn’t constitute “almost always.”
Jeff
Well, if you want to look at the progressivity or regressivity of the social security system as a whole then that is another question. It turns out to be a rather difficult question to answer because the system involves intergenerational transfers and so the answer you get depends on what you assume for how you deal with that. However, it is worth noting that some of the conservative/libertarian groups (such as Cato) that argue for privatizing social security actually have been making the case that the system is now regressive (as a step in arguing that a privatized system would be better for the poor). See, for example, what CATO’s Michael Tanner says here or what the NCPA (another conservative group) says here.
The other issue is that you have to be careful not to double-count. (Not saying that you have, but I have seen this sort of thing done before.) You can complain about the tax system being too progressive or you can complain about social security being a transfer of money to the poor. But, you can’t look at the entire S.S. system (both tax and benefits) to determine its progressivity and then separately go on to complain about its benefits being progressive. In the end, I see no reason to group out social security taxes independent of other taxes, because I could argue that certain things that the federal income taxes go to benefit the rich disproportionately, for example. Also, it should be noted that at the moment, the revenues coming into the S.S. system are greater than those being paid out and the surplus is being used to fund other government programs. This is supposed to be paid back eventually but it is not clear what the distribution will be for the revenues to do that, so in the meantime it makes some sense to count some of the S.S. taxes as going to general revenues.
Well, there are a couple of problems here:
(1) You implicitly define “redistribution” as anything other than a flat tax system. However, that is somewhat arbitrary. There are other possible definitions such as looking at the difference between how much someone would get in the absence of government vs. in its presence. It is hard to say how much each person gets out of the collective enterprise of government but I can pretty much guarantee you that Bill Gates wouldn’t be able to amass even a small fraction of his present fortune without the benefits he gets from having the government to enforce contracts, corporate law, etc. Furthermore, every political decision has distributive implications. The fact that we have chosen to have corporate law the way it is has allowed the accumulation of vast amounts of wealth into a small number of hands. The wealth distribution that comes out of this decision is by no means written in stone as the correct one.
(2) Again, you are not looking at everything. As I noted, state tax systems are generally regressive, so that (by your definition) there is redistribution upward. If you look at the tax structure in toto, it is said to be pretty close to flat over most of the scale.
Well, statistics are available on what has happened to real (adjusted for inflation) incomes over the past 20 years or so. The basic summary is this: The top 1% have seen their real incomes (after taxes even) rise by 150%…i.e., go up by a factor of 2.5. Those at the median have seen a much more anemic rise (I think it is like 10%). And, those near the bottom have essentially just been staying even.
Another statistic is median real hourly wages which were essentially flat between 1980 and ~1997 and then gained a bit of ground in the last few years of the Clinton Administration. They may have lost ground again the last couple of years.
No…This is something that we have to decide as a society through the political process. Some argue that we have no right to decide it, but as I noted above, since every policy decision has implications on distribution, this really amounts to the argument that we will adopt policies that make income distribution very unequal and then refuse to consider any policies to even it out.
See this analysis. Here’s a quote from the press release:
I suppose I should have devised a “tongue-in-cheek” smiley first.
As has been pointed out, my binary, hyperbolic reasoning is absurd. It was my (wholly unsuccessful) attempt at lampooning those posters who “debate” in such unproductive fashion.
My gratitude to Huerta88 and jshore for their wisdom in divining my intended debate, over the intended goals and unintended consequences of this tax cut.
Once more unto the breach:
Bush Signs Tax Cut Bill, Dismissing All Criticism
The White House projected in February that “the economy would create 4.4 million jobs in the next two years even without the stimulus of a new tax cut” – and yet the administration is claiming that the cut itself will result in one million new jobs next year. Will they accept blame if it does only that – at the expense of 3.4 million jobs projected sans tax cut?
One wonk asserts, “The administration’s policy was never really about job creation. It was about shifting the burden of taxation onto wage earners and off people who have capital income, and about shrinking the government.”
The tax cut has been sold as a way to boost the economy. Per these guys (warning – IANAEconomist), “low-income families are more likely to spend additional income they receive through a tax cut than higher-income families are. Only if tax cuts are spent will they boost the economy now. For this reason, the deleted Senate provision would likely have been more effective, per dollar of cost, in boosting the economy than most or all of the tax-cut provisions that were enacted.”
When the cost of giving the lower income tax credit was apparently only 1% of the cost of the dividend reductions, why not just shave a bit off the latter?
jshore:
First of all, I find it interesting that when the rich have an effective federal income tax rate more than 150% that of the poor, it’s “somewhat progressive”, yet when the state/local tax rate on the poor is 150% that of the wealthy, it’s a “far greater share of income in taxes”.
Secondly, part of my problem with the regressive taxes vs the progressive ones is that the regressive ones are considerably more avoidable. You’re going to get hit by income tax, regardless. There’s no way to avoid it. However, do you want to avoid sales tax? Try to buy as few non-staple items as you can. Stable foods aren’t taxable. Don’t want to pay property tax? Don’t buy a house.
And thirdly, the problem of state and local taxes I see as a state and local problem. The fed uses a highly progressive tax system to fund its duties (as well as a large number of duties that should damned well be state-run). If the poor don’t like their tax burden, attack the state and local sources - those are the people supposedly “screwing” the poor.
Oh, and lastly, your point about the incomes of the various classes changing over the years conveniently ignores one very important point - class mobility. People tend to get wealthier as they get older. A couple years ago, I was comfortably in the “lower class”. Now I’m in the middle class. Within the next five years, I expect to be upper-middle. And I’m hardly an anomaly. Face it, class mobility is extremely possible here, if you’re really motivated. It’s not always quick, and it’s rarely easy, but most people who want to be financially comfortable have a pretty good shot at it, if they’re willing to make the necessary sacrifices.
Land of opportunites, remember? 
Jeff
Here is a cite on this point. The figures are for 1979 to 1997. I think the few years after that did give some rise to median incomes (as well as top ones), and then there has likely been a bit of backslide the last couple of years.
Another statistic is median real hourly wages which were essentially flat between 1980 and ~1997 and then gained a bit of ground in the last few years of the Clinton Administration. They may have lost ground again the last couple of years.
As for real hourly wages, here is a link that talks about that (and the relation to family income gains):
Well, “These guys” are rather full of it. Yes, the poor spending their extra $300 would boost the economy. A little. However, it would boost it in a very sporadic, inefficient way. The poor use their tax cuts to buy extra cigarettes and lottery tickets. The wealthy use their tax cuts to expand their businesses, and start new ones, creating jobs in a very direct and immediate way. Alternately, they take their money and invest it in other companies (through stocks, and the like), which is just as effective as Joe Sixpack buying… well, a six-pack. There are two main reasons to give the poor a tax break: fairness (if the wealthy are getting one, too), and politics (tax cuts only for the wealthy are political suicide). Good economic sense doesn’t figure into it much, though there are exceptions.
One more point:
This “wonk” is partially right - one goal of the tax cut is to shrink government. Saying that we’ll cut taxes right after we cut spending is nice in theory, but it ain’t gonna happen. Ever. Politicians will spend every last penny you give them, and then some, if they humanly can. (An exception to this was the late 90’s, when revenues literally grew so fast that spending couldn’t keep up, though Congress certainly tried.) The only way to curb spending is to give Congress less to spend in the first place, which you accomplish by cutting taxes.
Jeff
We agree that govt. policies (including those beyond tax and fiscal policy) influence everyone’s benefits and burdens. Reasonable men can probably disagree about how/when/if the policies ought to be implemented, whether there’s such a thing as a neutral (or more/less neutral) policy, etc.
The good thing is we’re beyond “The only reason for liking tax policy X is because you’re evil.” We may well be into the territory where arguments about incentives and moral desert bog down. What encourages people to work/create jobs/stimulate the economy? What is a living wage? What is a fair income distribution? I suspect we could find dozens of threads on those issues. I don’t know that anyone has an economic model that definitively predicts anything that hasn’t already happened. I assume that both rich (in their caricature as tophatted fatcats who want to avoid anarchy to keep the Jacobins from knocking down their doors to steal their caviar and wimmen) and poor (in their caricature as layabouts who need the manna to keep falling from heaven and the electricity gods to keep keeping the l ights on) have some incentive to keep the Republic rolling in something resembling a steady state. Whether their actions (or the committee-created policies that come out of the clash of disparate interests) are always in accordance with respective self interest, or the viability of the American economy/polity, is perhaps a different question.
Well, okay, I too might quibble with CTJ’s choice of words in saying “far greater” when the figure is 158%. But, note that, unlike the WSJ editorial page, they actually give you all the data you need to decide for yourself how regressive it is.
I really don’t see this distinction that you make. While sales taxes often exempt food items, they hit many staples such as clothing and various non-food supplies (paper towels, detergent, etc.) that you get in the grocery store. [By contrast, sales taxes generally do not apply to services, which is one of the reasons why the rich pay less of there income in sales taxes…They tend to spend a larger proportion of their spending on services as opposed to goods.] As for not buying a house, well, then you have to ask things like why there is a big deduction for mortgage interest but none for rent and why the landlord and not the tenant gets to deduct the property taxes even if the tenant probably in effect ends up paying much of them. (Actually, when I lived in more progressive Quebec, the tenant did get to deduct his/her share of the property taxes on the property.) Finally, the rich can avoid or reduce income taxes in various ways. For example, now both dividends and capital gains will be taxed at a lower rate than earned income.
Well, it is an interesting question why the states and local taxes are so regressive (perhaps rich folks have even stronger control over state and local government than the federal government). However, I think if you create this division and say, “I am not going to look at these when considering the federal tax structure”, you are in essence biasing the result toward a more regressive overall system of taxation.
Sure, class mobility is an issue. And, there are some studies of it although it is difficult to perform them well. The general conclusion seems to be that the inequality is not as bad on a lifetime scale…but that it is still quite large. And, there still seem to be a lot of folks who aren’t very mobile.
I would argue that the sort of poor to rich assention with age that many people (like myself) who came from upper middle class (or higher) backgrounds experience is a sort of “faux-mobility”. I.e., they always had the advantages to give them the potential of earning a lot. More real would be mobility that occurs from one generation to the next…i.e., someone who comes from a poor family and sees significant income increase. That certainly happens…it did between my grandparents and my parents generation in my family, but it doesn’t seem to happen for lots of folks unfortunately.
Yeah, we’ve heard these claims before but with a decided lack of evidence that this actually works very well. Besides which, if you give the poor money and they spend it as you say, the money doesn’t disappear…It ends up in the hands of someone else, and rather quickly in the hands of a rich person. (I think there is more ample evidence that percolate up economics works than the evidence that trickle down does!) So, the rich person gets to invest the money in the end anyway, but in the meantime you have given the poor person some extra money to spend.
I’ve never such elitist bullshit in my life.
Of course you can’t provide a cite for your elitest drivel.
Well, would you want to be poor?
FREE REPUBLIC?!?!
:eek:
Please, please tell me you’re kidding.
And:
Since WHEN? Reagan cut taxes and continued to spend, I believe. But I could be wrong.
Not sure if this makes it better, but the link is simply to someone’s free (if likely copyright-violative) re-post of a WSJ article (hey, the WSJ’s fatcats are way too smart, and way too busy evicting orphans, to give anything away for free).
Source: http://www.nytimes.com/2003/05/29/politics/29CHIL.html
NBC News (no online cite) further reports that Bush never had any intention of allowing for child credits in his original bill. Bush only wanted the dividend credit (for the rich). Bush says it was Congress that put in the child credit, then removed it for the lowest paid people (who would benefit the most from it) in a backroom deal among Republican leaders.
I am in the bracket that will receive no tax check this summer.
It doesn’t bother me in the least.
Why? Because I already got a big fat check in March, paid for by people who have good jobs and are being overtaxed. Is this fair? No. I’m certainly not going to turn down the money, though — what? I’m gonna give it back to the government so they can fund another butterfly reproduction study?
I’m glad to see hardworking people get a break for a change. I don’t understand why people are screaming about “the rich” getting a tax break: how is a family of 4 earning $41,000 a year “rich?”
The only reason I don’t have a big case of the guilts over getting a tax check without paying into the pot is because I know my time is coming (plus in years past I HAVE paid into the pot and there have been years where I didn’t get a refund at all). Soon as I’m out of college, I’ll be paying out the nose and probably my ass too. And I’ll do it without complaint, because I will know that at least some of my money is going to somebody who is busting their ass in college, trying to improve their station in life. Kinda like me, now.
And to the person who claimed that the poor spend their refunds on cigs and lotto tickets, kindly kiss my ass. This year I spent mine on clothes and bills. (I now have no credit card debt whatsoever.) Yep, clothes and bills: frivolous things indeed.
Another reason I am skeptical of this: Is there any serious economist out there now who is arguing that the problem in the economy is that people and businesses are being too stingy in investing despite robust demand for their products? My vague impression was that most economists believe that business is not investing and expanding because they don’t see the demand for their wares necessitating such investment and expansion.
I would add that the job market has historically followed demand by something like 6 months. I expect that to change in the future because of the short inventory cycles adopted by manufacturers but it will never go away.
The faster money is injected into the economy the faster the process will work.
What I learned on my first day of Econ 101:
“If you lined up all the economists in the world end
to end, they still wouldn’t reach a conclusion.” [George Bernard Shaw]
An argument against that (and I’m not claiming to know exactly what stage of the economic cycle we’re at, else I’d be over at www.ameritrade.com, not here), is that capital investment and R&D are long-term needs that can’t be switched on and off depending on the short term economic climate, i.e., whether someone gets a big Christmas bonus or whether it snows over Presidents Day weekend (i.e., the kind of microeconomic phenomena that can definitely have a serious effect on consumer-level “demand” in the short run), but are long-term Good Things to encourage.
That is, goes the argument, to create incentives for research on, say, cancer drugs or wireless broadband or nanotechnology or [fill in the hot/universally beneficial, but currently unviable/unprofitable, consumer product of 2-5 years from now] requires not just goosing short-term demand (assuming this is possible to do effectively with fiscal or tax policy), but building in predictable and long-term incentives to persuade the business owners that big capital/R&D projects started now and amortized over a period of years will pay off due to favorable tax conditions.
This is another example of government using tax policy as an incentive (or an anti-disincentive) to preferred economic conduct, but as you’ve pointed out, so is most every tax decision.
Listen, while all of us knuckleheads are arguing amongst themselves, the Dems and the Xcans are ripping us all off, rich, poor, black, white, male, female…we’re all getting it in the collective pooper. My problem with all of this blythe chatter is that
I don’t believe that Republicans hate the poor, any more than I believe Democrats hate the rich, because they are all intertwined, there are poor repubs and rich dems, no, what unites the politicos here, is just plain old self-interest. The kind of self interest that creates things like the “golden parachute” for congressmen, senators, CEO’s and such. (tell me it’s worth it, or isn’t true… my wifes’ boss was axed in budget cuts, he leaves with one full year of salary as a CEO, an extra 259k just to walk out the door) Imagine, after five years work, at an incredibly overblown salary, you walk out the door with an extra YEARS’ worth of pay!! You can bet the city ain’t gonna do that for me, and your employer ain’t gonna do that for you.
My solution is this…let’s put down the sticks and rocks, and keep an eye on the assclowns sneaking out of our back doors with all of our hard earned scratch.
—What Would Scooby Doo?