27 September 2011

"Rich people pay most of the taxes in this country"

From the Wall Street Journal:
We are often reminded these days that the top 1% of earners in America pay about 40% of the nations federal income taxes–nearly double the share they paid in 1980...

Republicans say the high share is due to our overly progressive tax structure and growing programs for the rest of the non-taxpaying Americans. Democrats, to the extent that they even concede the number, argue that it’s because the rich now make all the money.

Who’s right? An article in the Economist states the answer quite simply: “In America the income share of the rich has grown faster than the share of taxes paid.” Data from the Tax Foundation bears this out. Between 1987 and 2008, the share of income controlled by the top 1% grew to 20% from 12%. That signals a total share growth of 67%. During the same period, their share of taxes went to 28% from 24%, suggesting share growth of 17%. In other words, the top 1% share of income grew nearly five times faster than their share of taxes.

As The Economist points out, this same dynamic is true in much of the developed world, as globalization showers larger rewards on winners...

The reason behind the 40% number doesn’t answer the larger question of whether it’s “fair” to tax the rich more.


  1. Considering that the top 1% have managed to amass 42% of this nation's total wealth, I would fully expect that group to pay more taxes even with the massive tax cuts they've received over the past few decades.

  2. Oh, and the bottom 80% own only 7% of this country's total wealth.

  3. The last sentence there is the most important: all this talk about numbers doesn't really tell us much about the equitability of the tax code. For me, it comes down to whether or not my relationship to the state changes as my personal financial situation changes. Obviously, I would say "no". The state should treat me the same regardless of my gender, race, religion, sexual preference, profession, or financial situation. I've never found any argument about social contract even remotely persuasive enough to allow violation of this principle. This idea of a constant relationship isn't just a feel-good principle but there is some evidence that more predictable, deterministic legal frameworks produce higher levels of trust and happiness.

    The biggest problem with the tax code isn't the progressiveness or lack thereof but rather (1) the enormous loopholes pushed by large, incumbent corporations (generally from "well-regulated" industries), and (2) the enormous burden put on the middle class to navigate the system. Both of these issues deal with complexity, something that is radically out of hand.

  4. This idea of a constant relationship isn't just a feel-good principle but there is some evidence that more predictable, deterministic legal frameworks produce higher levels of trust and happiness.

    What country are you describing?

    Real world evidence shows that countries that have progressive 'social contracts' are generally superior in all measures of success. Nordic countries, Canada etc.

  5. Steve,

    I think you'll find that those countries, especially the nordic countries, are very consistent and deterministic in their treatment of people and events. Take, for instance, the recent reaction in Norway to the mass killing. I'm crudely expressing this, but the reaction from the Prime Minister was essentially "bad things happen." Contrast that with the post 9/11 security bureaucracy explosion. Also, the small size of these countries make them more amenable to getting broad consensus on intangible moral judgments like "social justice". That's just never going to happen in the States.

    Before you go congratulating all those nations, however, you might want to look into their human rights records. Their abuses are slight when compared to egregious offenders like we see in the Middle East, but I wouldn't call Canada with its Human Rights Commission "generally superior in all measures of success".

    To me, freedom is the only metric that matters, regardless of outcome. Some of the nations you mention do well and some do not.

  6. Bret,
    I'm not sure the "those countries aren't the U.S." is a good argument. Overall, in health, wealth, and well-being, those countries beat us. I was asking which country you were referring to when you were talking about evidence of success in regards to expecting the exact same from the wealthy as the poor.

  7. If you are talking about simpler, fully transparent systems, with few loopholes, then I'm with you. Those are hallmarks of more progressive countries.

  8. I have a question about what we mean by "share". For taxes, I think the description makes sense. We have a budget and I pay my share of taxes toward that budget. But we don't limit the amount of money an individual can earn. So can you really have "share growth" of income? Isn't it just income growth? Saying share growth when it comes to income makes it seem like those who are rich have more than they should...

  9. 100% of taxes are theft and/or robbery; thus everyone overpays.

  10. @032125 - Raise you a reductio ad absurdum: 100% of US taxes are paid in a fiat currency printed by the US government; everyone should barter.

  11. @Z. Constantine Better yet, let's allow the best natural medium of exchange to manifest itself through a free market.

    The current inflationary system is certainly a tax on the very poorest people in society; what little wealth they can scrape together destroyed to the benefit of wealthy bankers, who get the freshly counterfeit money first. One wonders why self identified "progressives" who are the self appointed protectors of "the poor" aren't foaming at the mouth about the Fed.

  12. The missing statement is about the marginal tax rate. The super rich's marginal tax rate is basically the low capital gains tax rate (what is it now, 15%?) while the middle and upper class marginal tax rates on salaried income is in the 30% range.

    I remember when George Bush's tax return was published publicly, and noting that his average tax rate was less than mine, even though his income was an order of magnitude higher.

  13. One wonders why anarcho-libertarians aren't foaming at the mouth (rather kneeling in fealty) to the neoliberal, elite business class that guides all U.S. policy.

  14. @Steve Because we recognize that when businesses and corporations that use the state to force their agenda, they are wrong. They are not sacred cows to us, as they may be to some conservatives.

    We don't worship big business, or pretend that they can do wrong. Read any of Murray Rothbard's books on history and you will find just as much suspicion reserved for corporate lobbyists as the politicians that they collude with.

    Please don't confuse anarcho-libertarians with neo-cons.


Related Posts Plugin for WordPress, Blogger...