Whatever. Let’s see what you come up with.
Funny that no one pointed out this mistake.
There has been no “redistribution of wealth from low/middle income people to the wealthy”. You can’t redistribute something away from some one who never had it in the first place.
Regards,
Shodan
“Low/middle income” is not quite the same as penniless. Not yet, at any rate. Here’s your Participation Ribbon. Congratulations!
All the same, Shodan (gack) has a point. The rich got richer while the lower-middle class got lower-middle classer, but they didn’t take it. Their income disparities widened, while the lower middle class’s real purchasing power and wealth decreased after adjusting for inflation. A fine point, perhaps, but a real one.
A ruthless sense of fairness is a fine quality. A pity it must be squandered on the unworthy, but I take your point.
That’s because it isn’t a mistake, it’s an accurate description of US tax policy over the past 30 years.
In 1981 Ronald Reagan made his first famous Reagan Tax Cut where he slashed income tax, something that is paid mainly by top earners as I’m sure you’re aware, drastically. Unfortunately tax revenues then collapsed and so to cover the shortfall Reagan then spent almost every year he was in office after that instituting Reagan Tax Increases to cover the revenue gap, failing and running up the national debt by epic amounts to cover the gap.
These Reagan Tax Increases were on taxes mainly paid by low/middle income earners such as social security, which is obviously a regressive tax, gasoline tax increases, which hit low/middle income earners more heavily as gasoline expenses are a high proportion of their wages, and TEFRA, which hit utility bills and cigarette excise duty, the largest single tax increase in American peacetime history.
George HW Bush also put up taxes on gasoline, utilities, alcohol, tobacco etc., taxes which are obviously borne more by low/middle income people.
Clinton slightly reversed the change of direction in the tax burden but that was undone by Bush 43 in an unfortunately very big way.
But the real big change came under Reagan, and the debt nmbers have never fully recovered. Clinton did a stunning job with the benefit of hindsight that was undone by Bush 43 but the huge increase in the national debt and the change in the emphasis of the tax burden mainly came under Reagan with the 70% to 28% income tax cut for top earners and the big increases for everybody else aand then Bush 43 with more huge cuts for top earners although to be fair to him he made no attempt to balance those cuts with low/middle income tax increases, he just put them on the national credit card. Here’s Reagan’s former chief economic advisor writing in some Communist journal taling about those Reagan Tax Increases :
http://www.nationalreview.com/nrof_bartlett/bartlett200310290853.asp
I agree with what you argued, except your conclusion. It hasn’t been a (direct) redistribution of wealth - it’s been a redistribution of tax liability - putting a heavier burden on the 95% of the bottom of the pyramid, and lightening the load on the top. And, honestly, it’s been a policy of ignoring the growing deficit.
Anyway. A government that taxes everyone, the rich especially, and gives welfare to the poor, may be fairly said to *redistribute *wealth. A government that relieves the rich of a tax burden, and puts a heavier tax burden on the lower classes, could be categorized as reckless, but does not *redistribute *wealth.
Yes, technically it’s a shift in the tax burden. I think I made that explicit point earlier or in another thread discussing the same thing. But the redistribution thing is effectively correct. For instance part of every dollar of the first 100000 everybody earns every year since 1982 is going in SS taxes to bail out the general fund which was decimated by the Reagan tax cuts. In 1982 the payroll tax was specifically raised well over and above the levels needed to help cover the revenue shortfall caused by the 1981 tax cut so that’s money going directly from the earnings of low/middle income earners to cover the revenue gap caused by giving huge unnaffordable tax cuts to people who were paying the 70% marginal rate in 1980 and should be paying higher taxes today.
First off, can we all (on both sides) drop the insults, name-calling, and motive-assignments? Liberals didn’t categorically fail economics 101. There are very very smart honest well-intentioned economics professors who hold generally liberal views. There are very very smart honest well-intentioned economics professors who hold generally conservative views. Furthermore, the vast majority of people on both sides of this issue aren’t primary trying to maliciously injure the rich or the poor or anyone.
OK, so the question is, or at least has drifted to: is it a good idea to raise taxes on the rich to pay for government spending? (I’m talking about this in a “in 2009 America” context, rather than a purely philosophical context.)
This seems to have 2 general subquestions:
(1) is it ethical/fair to raise taxes on the rich? Is doing so “stealing” or asking them to pay an unfair burden or anything of that sort?
(2) is it economically wise to raise taxes on the rich? Will doing so generate increased revenue with drawbacks that are livable, or will it stifle economic growth and crush the US and the Chinese will use our skulls for soupbowls?
I’ll address them one at a time.
(1) I think it’s a bit tricky to talk about “fair” here, for a couple of reasons. First of all, on a purely practical matter, it’s pretty much fait accompli that we have a graduated income tax, as does basically every other country in the world. So unless you’re one of the few people who are arguing for a totally flat tax (such as Crafter Man), then it seems a bit contradictory to say that the current system is fair, but one where the top tax rate went up would not be fair. More importantly, though, even a “flat tax” is in some ways “unfair”. I mean, what about a REALLY flat tax where everyone paid $10? That would certainly be “fair”. Or a system where you paid as you go, and every single thing was done with road-use-taxes or police-use-taxes or what have you, so you actually paid for the services the government provided? That would be “fair”. My point being, “fair” is really pretty meaningless in this context.
I can come up with some things that would be UNfair: a tax system where the top marginal rate was >100%, for instance. But I don’t think “fair” is a particularly meaningful concept when comparing flat tax to graduated tax to hypothetical-super-flat-tax etc.
So let’s ignore “fair” for a second and talk about ethical. What kind of society is most “good”? Well, a useful way to think about it (I think this has a name as a rhetorical device, I saw it on an episode of The West Wing) is to try to imagine how you want society to be without knowing what rung on the ladder you’ll occupy. Sure, if I know I’m rich, I can selfishly want to lower taxes as much as possible. And if I know I’m poor I can go hogwild screwing the rich (or, to be much more fair to liberals, putting as many programs in place as possible to allow me to learn how to get richer through hard work and so forth) (particularly education) (but I digress). But if I don’t know, then what is going to give me the better average life if I’m inserted into US society somewhere at random: ultra rich rich people who can bathe in pools of champagne and poor people with no net and no health insurance and crappy educations for their kids and no housing; or slightly less rich but still super rich rich people who are stuck bathing in pools of California sparkling wine and poor people whose gets kid good educations, who have access to job training and public transport to help them get ahead, etc. Seems like an easy choice to me. (I’m quite sure that many of you reasonable conservatives are now thinking “aha, a false choice, because in the second case the economy as a whole will suck way more”. Not a prima facie ridiculous comment, and I will get to that in part…)
(2) So does taxing the rich result in economic suckage? Bluntly, no. Top income tax rates have been MUCH higher than they are now and the economy has done just fine. This is not a case where we’ve for 100’s of years had a 10% top income tax rate and some crazed nut is proposing raising it to 60% and people are genuinely concerned that that will destroy the economy. The top tax rate has been up and down and up and down and lately has been WAY down compared to where it’s mainly been, and there have been massive economic booms, and super insanely rich people, during all of those times. People can poke around in those stats and find trends, and I’ve seen them honestly argued in both directions, but it’s absolutely 100% clear that the top income tax rate can be MUCH higher than it is right now at the same time the US economy is doing absolutely utterly fine.
Nice post, Max.
I like the idea of imagining yourself inserted anywhere along the spectrum. It appeals to the pessimist in me. (I would dread being insanely rich OR insanely poor.)
At the peak of his popularity, Jack Benny was by some accounts, one of the wealthiest men in America. Yet, when questioned about his success, he said this:
So your statement that “One thing wealthy people seem to have in common is a single-minded determination to achieve their goals regardless of the obstacles.” is false. Some do, some don’t, Jack Benny being one; I am sure there are others. But one is sufficient to falsify your statement.
Ashlee Simpson!
No it isn’t. There’s a difference between things wealthy people have in common and things that every wealthy person has in common.
Nice post Max, but like elucidator’s and legalsnugs’ posts before it, it misses the point (several of them, in fact). I’m having a busy day and have to leave now, but will try to flesh out what I mean later tonight or tomorrow.
Do you really believe Jack Benny just sort of floated through life and fell into a successful 60 year long entertainment career? He had a passion for entertaining and through hard work and trial and error was able to be successful at it. He may not have always known how he was going to get there, but he seemed to know he didn’t want to be a steamboat captain or a haberdasher or attorney or anything like that. He knew he wanted to entertain and didn’t allow the occassional setback or bombed performance stop him.
Having goals doesn’t necessarily mean having your entire life roadmapped ahead of time. It also means taking advantage of opportunities as they present themselves.
To take another example, NYC billionare mayor Mike Bloomberg was born to immigrant parents. He became an investment banker until he was ultimately fired from Soloman Brothers. He then took his $10 million severence package and created what would become the Bloomberg company.
But let’s say you are right. Some people just fall into money. They take a job with some start up that happens to become Microsoft or they are just naturally talented or gifted or whatever. Do you think you have a better chance of becomming wealthy or even just comfortible through hard work and planning or by waiting for luck to strike you?
And how does that change how we view wealthy people (or poor people for that matter)?
That’s more the product of Joe Simpson’s ambition.
Bolding above mine.
The answer to your question is quite simple, from a given point of view: it’s the one with no taxes and no safety net and no health insurance and no education because that’s the one where the people who think that doing away with that stuff is a great idea are sure they’d be able to use their grit and determination and work ethic and general Gaultness to become champagne bathers, and why should they have to settle for sparkling wine just for the sake of some dumb lazy bastard who’s going to be average, let alone poor?
A surprisingly small percentage of the people holding this point of view can actually afford a bathtub full of champagne, but they have great marketing.
bump…
"Bathing in California sparkling wine? How delightfully plebian.
Mary, do see that the Bollinger is nicely warmed before filling the tub today, won’t you? I would not care for a bout of pneumonia."
High fives to **Max **and elucidator!
Well, you missed the point first. I’m just a follower.
I feel left out.