That type of nonsense needs to stop.

Our tax system is extraordinarily progressive with the top 10% of earners paying ~70% of income taxes. The bottom group of income earners pays zero to negative taxes (getting back money from EIC or the dopey making work pay program). In fact our tax code became increasingly progressive under Bush (yes, even with the evil Bush tax cuts!).

For those who want to return to the Clinton era tax rates, well those rates were 50% higher at the lowest marginal rate (15% versus 10%). Oh but wait, it is only a return to the rates for the highest level of earners because, well hey, the economy was great then!

That may be the single dumbest assertion made with seriousness. The economy grew in that era NOT because of high tax rates but because of a generational disruptive technological innovation – the Internet and Web. Companies grew at an astounding rate resulting in huge capital gains tax revenues. Oh, but that was a bubble too and it ended badly and to date the NASDAQ is still only 60% of the bubble highs!

The tax code is progressive but it is way too complicated to be effective. Simplification has to be a part of reform and fairness. Scapegoating the financially successful (the Obama way!) is evil.

On #2, my proposal has ancillary benefits that may also relate to fairness. It should make the pretax income distribution by reducing the ranks both of the highly-paid lobbyists who seek to further corrupt the tax code and of the tax accountants and lawyers whose relatively high income is propped up by the code’s complexity. Another group of beneficiaries on the after-tax side are the pension funds that would see higher after-tax returns.

Revenue neutrality is about #4, right, although if it increases fairness, I don’t know why you’d have a problem, given that higher deficits are purportedly more stimulative and I understand you to support more stimulus.

While Europe does run more of their economy via the state, that’s not a matter of tax code fairness. By your principles, we have a fairer tax code (I presume) and an insufficiently fair spending profile.

Curious about your thoughts on my favorite tax regime, Robert Frank’s progressive consumption tax. It reslices the pie of goods and services, rather than income, which seems much more relevant to our daily lives. Unspent income gets invested, producing more jobs and more stuff.

–yep, state taxes, all in, are worse than flat–see here: http://www.ctj.org/pdf/taxday2012.pdf

–our code does not rearrange the pretax income distribution such the ordinal rankings of rich, middle, poor change at all in the posttax distribution–that’s what I meant.

–you’ve got a point re #2, but I want to see score before I sign off–must be revenue positive, not just neutral.

–Europe much more progressive when you consider taxes and transfers, which is what you should do…that’s why the pols always rant on the Euro welfare state!

–#3 just means you don’t take from poor and give to rich, ie, as in Ryan budget (cuts food stamps, Medicaid, etc. and uses some of those savings to cut taxes disproportionately at top).

- Part of this is because their income has shifted towards investment income. Saving and investing can have that effect over time!

a fair tax system doesn’t incentivize the underpricing of risk, leading to busts that invariably whack the have-nots who are then called upon to bail out the haves; in practice, this principle would militate ending the favored treatment of debt financing in the tax code…hey, I like that…let’s call it principle #6!).

- How did the tax system contribute to underpricing risk?

Anyway, that’s the rationale for claiming the Buffett rule increases fairness: it partially repairs the diminished progressivity with respect to certain millionaire+ households, specifically those with most of their income from capital as opposed to wages.

- So more progressive is more fair? But at some point more progressive becomes “confiscatory” and “redistributive”. Does “fairness” show us where to draw the line between the two?

The fact that tax code has become less progressive in a period when the pretax income distribution has become more unequal is another dimension of unfairness–a violation of principle #2.

- Now we’re deeply ensnarled in contradiction. We still don’t know how progressive you have to be in order to be “fair”.

The figure below shows that the system of taxes and transfers (which are, of course, related as the former pays for the latter) has become less of a bulwark against inequality over time. It shows that inequality grew 10 percentage points faster after taxes and transfers than it did before.

- Now we’re introducing inequality into the discussion. Is inequality the measure of fairness? If so, how income-equal do we have to achieve fairness?

I won’t go through all the above principles, other than to say that #4 is clearly in trouble and this redounds to #3. Were we to follow the roadmap in the House Republican budget—for that matter, any Republican, supply-side, trickle-down tax plan–we would very much be violating those two principles, as these reverse-Robin-Hood schemes redistribute upward.

- The tax code in that budget is still progressive, i.e., still fair by the official principles except for the pay-for principle, unless the Reps are right that a faster-growing economy will produce higher revenues.

- Thanks for taking this one on. I’ve asked this question on many leftie econoblogs, but noone ever responded!?

1) Progressive: those with more income pay a larger share of it in taxes;

- Isn’t the US tax code the most progressive in the developed world? E.g., we rely much less on (regressive) consumption taxes than Europe.

2) One that doesn’t exacerbate inequality by giving preferential treatment to the wealthy (e.g., by favoring capital over labor income);

- Since the lower investment taxes are allegedly to balance the corporate profits tax, why not get rid of both? Tax investment income at ordinary rates and dump the corporate income tax. Would that be fair?

3) One that doesn’t disproportionately benefit those who are already doing the best at the expense of the rest;

- Not sure what that means. Trying to be literal, any progressive tax system would seem to qualify.

4) One that raises enough revenue from those with lots of resources to provide a leg up for those at a disadvantage;

- Our current system provides lots of such legs. I guess fair means that we need to pay for them by increasing taxes enough to eliminate the deficit immediately. Please correct me if I missed something.

5) One that does not rearrange the pretax income distribution, as in a confiscatory, highly redistributive system;

- Any progressive (or regressive) tax system rearranges the pretax income distribution. I don’t see how to square that circle, unless “…does not too much rearrange…” is implied instead of what was actually written.

Conservatives invariably counter that it’s not fair for 47% of households to pay zero federal income tax (most recent data from 2009).

- You’ve seen conservatives argue that taxes on some group should go up? Grover Norquist would eat them for breakfast.

And state tax rates tend to be pretty flat.

- What state is that? While sales taxes are regressive, state income and property taxes are generally quite progressive.

(Didn’t Ross Perot once say something to the effect that your best tax base was a fully-employed work force?)

Also, in reality, they’d prefer a head tax over a flat tax– that’s their real definition of fairness.

…by not extracting all the wealth from the bottom to the top, where the wealth is only hoarded for their future generations, instead of being circulated throughout the present economy.

Organizations such as The Family Wealth Alliance have members who meet regularly and strategizes preserving family wealth for many generations to come.

Jaime Johnson, an heir to the the Johnson & Johnson family fortune, discusses this in his excellent documentary “The Top One Percent”. Paris Hilton, Kim Kardashian and Jaime Johnson are but just a few examples.