Tax fairness: what it is and why we ain’t got it

October 26th, 2015 at 7:59 am

Over at the WaPo. Also, tune into the Diane Rehm show this AM as we debate the topic.

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5 comments in reply to "Tax fairness: what it is and why we ain’t got it"

  1. Marko says:

    “…..Put it all together and you have the mildly progressive tax system you see in this useful table by Citizens for Tax Justice. ”

    This would be about 10,000% more effective and informative if it showed a comparable table for , say , the 1960s.

    The Golden Age was golden for good reasons. Why is everyone afraid to highlight those reasons ?

  2. Smith says:

    I don’t have time to answer questions raised by the graph and paper cited, but partnerships are taxed at personal income rates. Why that would become a preferred way of business or result in lower collection or rates is surprising mystery. The rising use of the S corp is also a surprise because of the popularity of the LLC. As someone who found Piketty and Saez data before they became famous, this is really interesting.

    I would comment that tax rates of the 1940s through the 1960s, an era of unparalleled growth and productivity gains were hugely higher than today’s. You are very much mistaken to say:

    “First, our federal income tax rate system is progressive, though less than it used to be.”

    No, this is the understatement of the year, century, take your pick. The top tax rates up to 1960, and including that communist Republican war hero Eisenhower were 90% on income above in 2015 dollars $2 million. Talk about your causes of inequality, right there.
    Mankiw (and naively Krugman) may point to the 1% in Obama era now hit with historical highs of 21% effective rates while ignoring they’ve doubled their share of GDP, taking in an extra 10% of the entire economy. Double your income and get taxed at the same rate, not progressive at all. Piketty advocates 80% on $1 million. Change the debate by advocating that and see what the Republicans counter offer. A revolution restoring the New Deal is needed.

  3. Bob Wyman says:

    More should be expected from those who receive the most benefit from government. The greater one’s income, the more it depends on government. One can be poor without government, but you can’t get rich without it.
    Thus, it is fair that those who receive the most should pay the most.

    • Smith says:

      The benefit argument is important, but other features of higher taxes on the rich are of equal or greater value.
      1) The rich benefit the most so they should pay more (your argument)
      2) That’s where the money is
      3) It redresses inequality by lopping off the top earner incomes (lower ceiling)
      4) It redresses inequality by taking away incentive for excess salary in the first place.
      5) It redresses inequality by funding universal government services like education which disproportionately and inversely benefits those with lower incomes
      6) It builds infrastructure the 1% doesn’t need (subways, mass transit) or would otherwise privatize (private schools) big Pharma vs NIH, Space X vs NASA (they both have a place, but stop cutting the govt branch)
      7) Helps the economy by spending the money instead of savings and asset bidding by 1%
      8) From 4) it follows more money might be available to seep down to actual workers
      9) From 4) and 8) it follows workers might be able to get wage increases without causing inflation
      10) Cutting income of 1% through higher taxes removes some of the money corrupting our democratic process.

      Finally, you should ask yourself if anyone really ever needs over $1 million in income, ever. There is only so much food you can eat, clothes you can wear or wear out, and space you can occupy. Though we supersize everything, why? Travel? Twelve round trips to Europe would cost $12,000, stay at a hotel for $250/night for ten days, you got $50,000 with airfare. It’s possible to buy $1,000 suits and $500 shoes, and a penthouse for $10 million or just a $1 million McMansion. How many SUVs can you drive at once? Retire? Put the $1 million in a low load diversified portfolio and average over $100,000 a year in gains and income. Invest? Most startups start with much less than a $1 million ( typically a few hundred thousand or less). And remember we’re talking about $1 million every year! Artwork and penthouse prices will stop being artificially bid up. Tax the Eisenhower rate of 80% as Piketty proposes, the extra income is not needed, except to create a nobility, aristocracy, and line of kings.