"itself a word more suitable to paranoid world where we are willing to trust no one to be in fact particularly honorable"

Nah, it's a world where we are human, though this means the vetting is in various ways human (imperfect) too.

"the elites in our society can no longer be trusted"

Yes, since they were trusted say in biblical times! :)

Illuminate away Balkanites!
 

Tom Paine was correct when he noted that power corrupts and absolute power corrupts absolutely when he argued for strict limits of government power.

This is not a Dem or GOP thing, it is a human condition thing. (BTW Sandy, there are plenty Dem "masters of the universe." See the Obama donor lists.)

The elites can never be trusted with power, which is why we need all those checks and balances in the Constitution against which Sandy has been campaigning. Indeed, it appears we could also use a balanced budget amendment to further check the insanity of bankrupting the nation by spending over a Trillion dollars in borrowed money each year as far as the eye can see.

I am less afraid we are traveling Italy's path than that of Peronist Argentina.
 

So, comments are back on now?!
 

we could also use a balanced budget amendment to further check the insanity of bankrupting the nation by spending over a Trillion dollars in borrowed money each year as far as the eye can see.

# posted by Bart DePalma : 1:46 PM


Don't worry, Baghdad, we're getting out Iraq soon.
 

So, comments are back on now?!

# posted by Charles : 2:02 PM


No, they're still shut off.
 

Italy's government periodically collapses and corruption is rife and environmental laws are rarely enforced. We have a stable government in which the mere appearance of impropriety is a basis for unyielding public investigation and the present administration takes environmental protection so seriously that global warming experts are cheering from inside the White House. We are nothing like Italy.
 

Bartbuster:

Then how are you posting? Seriously, though, my question was directed as to future threads.
 

The new rule was that individual members could decide whether or not to do so. Perhaps, SL saw some good comments over at NYT, and decided to give us a try.

Jack Balkin announced the new policy and he didn't say it has been changed. So, apparently, SL individually put the comments on.

Sorry, once we get out of Iraq (and we won't totally), we will find some other means to spend cash. The military budget for next year will be more than it is now.

A federal balanced budget amendment is a suspect enterprise, but it won't suddenly be made unnecessary for that reason.
 

This comment has been removed by the author.
 

Joe said...

A federal balanced budget amendment is a suspect enterprise, but it won't suddenly be made unnecessary for that reason.

I would suggest that allowing our government to borrow at will for anything at all upon a majority vote has become the suspect enterprise.

Requiring a declaration of war or a 60% supermajority vote of both houses of Congress to borrow money is a reasonable response to this problem.

I do not want to get off on a major tangent because there is not a chance in hell that the states suckling on the federal government tit to avoid their own balanced budget amendments will approve such an amendment. Thus, we have to hope that our government gains some semblance of fiscal sanity before foreigners reduce our credit rating to junk bond status or we default on our debt when the boomers' entitlement liabilities come due.
 

Requiring a declaration of war or a 60% supermajority vote of both houses of Congress to borrow money is a reasonable response to this problem.

That ... if you bother to think about it ... is an absolutely insane idea.

Cheers,
 

I would like to return to what seems to have been Professor Levinson's concern:
[our] realization that the elites in our society can no longer be trusted to engage in a most basic task of citizenship, which is to pay their taxes voluntarily.

I believe this is a serious concern. This is not a partisan issue. The well-off in our country seem to believe that - according to various rationales - they need not contribute what the society has determined to be their 'fair share.' I think it can be evidenced that the better off people are, the less they feel they should contribute. (Admittedly, my own belief in this regard is based on anecdotal evidence, but the track record of different economic classes in paying their taxes seems to support the claim.)

One question we might pose to ourselves is whether this is, in fact, a new trend. I suspect that the rich have long protected their wealth in any way they can. That may be, in fact, a key to increasing and preserving wealth. My guess is that it is also connected to a sense of privilege: not only that 'I have earned this' [or, my grandfather did] but also that 'I am too special to obey the rules imposed on others.' But I also think something has changed (as Professor Levinson's comments suggest).

One of the motivating principles of our founders - imperfect and privileged though they were - was that citizens are persons committed to the well-being of their communities/states. This is what they meant when they spoke of 'civic virtue.' We seem to be be at a point at which civic virtue is valued primarily by the least-favored members of our society; a fact which is used by politicians to garner votes which favor 'elites.' This is the inverse of what our founders predicted and desired. How did we get here?
 

"We seem to be be at a point at which civic virtue is valued primarily by the least-favored members of our society"

First, this reminds me of those who cynically think that only weak nations need to follow int'l law. They forget we aren't as strong as we might think.

Second, I'm not sure about the "least favored" members. The worst off probably are often fairly cynical or desperate, not worrying about the society overall, having more immediate things to worry about.

And, all classes have a "for me" sentiment; people across the board cheat on their taxes and aren't very civic minded. Voting levels are often low. People try to get out of jury duty. They don't trust or appeal to local officials or even know who they are in various cases etc.

This suggests the depth of the problem though surely elites do have a special sense of privilege. (Some do also have a sense of nobilesse oblige.) Civic-mindedness today comes from various places. More options are present than in the days of the Framers who often had a limited view of who truly belonged to the citzenry.

In fact, sometimes, the least favored need to be more drawn into the process, given more reason to believe that they have a cause to be civic minded.
 

I think it can be evidenced that the better off people are, the less they feel they should contribute.

Leona Helmsley certainly felt that way: "Only the little people pay taxes."

One of the motivating principles of our founders ... was that citizens are persons committed to the well-being of their communities/states. This is what they meant when they spoke of 'civic virtue.

Well said. Civic virtue is directly undermined by far-right ideology which boils down to 'every man for himself.' Or, "You're on your own" in Clarence Thomas's words.

When a conservative ideologue like Bart writes,

Tom Paine was correct when he noted that power corrupts and absolute power corrupts absolutely when he argued for strict limits of government power.

he conspicuously omits any mention of the corrupting influence of private power. If it is true that power corrupts then that is an excellent argument for progressive taxation.
 

*Department of Public Service*

Professor Kerr at the Volokh Conspiracy recently had these words of advice for our friend Bart De Palma:

Bart,

I would be happy to help.

First, always add appropriate caveats and limitations to your arguments. If the law is murky, admit it up front: Never pretend that the law is more certain than it is. Relatedly, if someone points out an argument or case that cuts against you, thank them for it and ackowledge it: Don't come off as if you cannot be moved by a good argument.

Part of it boils down to attitude: Be humble. You write as if you think you are the smartest and most principled person in the room, and that you are being unfairly victimized by the leftist hordes. Assuming you genuinely think that, do your best to hide it: It comes off like you're just whining.

This is intended as both a heads up and a friendly reminder.
 

Good find mattski. I think it also can be used to apply across the board. For instance:

"If it is true that power corrupts then that is an excellent argument for progressive taxation."

Better than "Jane, you ignorant slut."
 

chris said...

I would like to return to what seems to have been Professor Levinson's concern: [our] realization that the elites in our society can no longer be trusted to engage in a most basic task of citizenship, which is to pay their taxes voluntarily.

A couple reasons come to mind:

1) The wealthy are burdened with paying nearly all of the income taxes:

The Top 1% of earners paid 38.8% of the tax bill.

The Top 5% of earners paid 60.7%.

The Top 10% of earners paid 72.7%.

The Top 20% of earners paid 86.3%.

The Top 40% of earners paid 99.4%.

The other 60% of the country including most of the middle class paid only 0.6% of the tax bill, with the government actually paying the bottom 40% money through the EITC and other rebates.

2) The wealthy tend to live in larger cities in blue states where the addition of state and local tax rates confiscate upwards of half of their income if they play by the rules.

This begs the question of why the wealthy should consider paying income taxes to be a civic duty when most of the rest of the citizenry does not share that duty.
 

Bart:

The wealthy pay nearly all the income taxes because they make nearly all the income and own nearly all the wealth.

It's true we have net-progressive federal taxes. But if you look up the hard number at the CBO, you'll see the top 1%, who average over $1M a year in income, pay on average ~ 30% or so, where those of us closer to the middle run between 10-20%. I think that's an appropriate difference (actually I'd like a bigger difference).

You quoted Tom Paine above. If he were alive today, he'd also note the power of a large business. Just like our government needs internal checks and balances to limit its abuse, we need strong government to balance the abuse of power of private institutions. One might argue the financial collapse is an example in point.
 

2) The wealthy tend to live in larger cities in blue states

posted by Bart DePalma : 9:11 AM


If the blue states create most of our wealthy people, why are you so anti-blue? I thought that creating wealth was one of your favorite things?
 

I just noticed Bart cited the data I referred to. Let's point out some other details in this data. First of all, Bart talks about income tax alone, but when you look at all taxes, the bottom 60% pay 15%. That's down 1/4 from "average," but their income is down more than 1/3 from "average," and it should be noted that for the bottom 60%, most of their income is covering basic living expenses.

It should be noted too that state taxes tend to be regressive, which mitigates the differences mentioned above.

Bart is asking us to sympathize with top 1% earners, whose average after-tax income exceeds $890k, relative median and below earners, whose after tax income is less than $50k.

Is it possible to make $890k without other people making $50k? I dare say not. There are no people in small or disconnected 'societies' with standard of living that remotely approaches that of the wealthiest US citizens. The reason is it takes a strong, coherent society with a lot of people on the "bottom" to empower a few people at the "top" to get more bang for their decision-making and thus create circumstances to draw in that kind of income.

The people on top need the empowerment of society to make their big wages, they benefit more from society from the simple fact that they live so much more nicely because of it, so when it comes to paying for society, they should bare the greater burden.
 

As someone born in 1930, I have observed over the years what appear to be changes in "the middle class." When this term is used today, it seems much more inclusive than in my youth (when most of us were poor). Can someone provide a definition of "the middle class" and perhaps its various subsets within its range? Just how large is "the middle class"?

Back in my youth, a millionaire was someone who had annual income of $1 million +. Today, people are described as millionaires who have net worths (until recently?) of $1 million or more (attributable to inflation, real estate and equities), even if their annual incomes are well below six figures.
 

One question we might pose to ourselves is whether this is, in fact, a new trend. I suspect that the rich have long protected their wealth in any way they can.

They certainly did protect their wealth at all times. Before about 1800 or so, though, there were social factors which mitigated this. First, the general attitude of religious doctrine (not necessarily practice, but doctrine) which disparaged wealth. Second, and a corollary to the first, an attitude of noblesse oblige. This led to a culture of public service among at least some of the upper classes (and criticism of those who failed in this).

After 1800, the more poisonous attitude we see in today's Republican party began to take over.

One of the motivating principles of our founders - imperfect and privileged though they were - was that citizens are persons committed to the well-being of their communities/states.

For a good example of this, here's Benjamin Franklin:

"The accumulation … of property … and its security to individuals in every society must be an effect of the protection afforded to it by the joint strength of the society in the execution of its laws. Private property is therefore a creature of society, and is subject to the calls of that society, even to its last farthing; its contributions therefore to the public exigencies are not to be considered as conferring a benefit on the public, entitling the contributors to the distinctions of honor and power, but as the return of an obligation… The important ends of civil society, and the personal securities of life and liberty, these remain the same in every member of the society; and the poorest continues to have an equal claim to them with the most opulent…."

You quoted Tom Paine above.

It was Lord Acton, not Tom Paine, who said "Power tends to corrupt, and absolute power corrupts absolutely."
 

Mike:

1) Not counting the theft from the SS fund, general revenues are primarily gained through income taxes on individuals and business. Sandy raised the issue of individual taxes, so we will not go into the issue of how US corporate rates are nearly the highest in the world.

I do not count withholding for social insurance programs like SS and Medicare because these payments are for pensions and insurance that the taxpayer him or herself will allegedly enjoy in the future. We will not get into the fact that these programs are a ponzi scheme very similar to that for which Madoff is being prosecuted.

2) Your equity arguments concerning individual income taxes do not address the issue raised by Sandy - whether the wealthy should consider paying income taxes to be a civic duty when only they pay nearly all of these taxes and a majority of the citizenry pays little or nothing at all.

A civic duty is something we all share as citizens. Paying taxes to support a government producing public goods we all share is supposed to be one of those duties. However, we no longer share this burden to any appreciable extent. Instead, the tax system is simply another redistribution of wealth scheme.

Thus, while you may think it is "fair" for 1% of the population to pay over a third of the taxes and 40% of the population to be paid by the government rather than pay their fair share of taxes, surely you can see why the 1% might not view this system as a shared civic duty.

3) BTW, on the subject of equity, if you claim that the government makes our earnings possible, then an equitable system would be a flat tax where everyone pays the same share of their earnings to finance the government services that provide those earnings. A system that requires 1% to pay a third of the freight while 40% are paid by the government rather than paying any share of taxes is in no manner "equitable."
 

We will not get into the fact that these programs are a ponzi scheme very similar to that for which Madoff is being prosecuted.

Given that this claim is a complete load of crap, it's probably a good idea for you to not get into this "fact". You want to see a Ponzi scheme, look at your Apple stock.
 

Keeping in mind the admonition concerning counter-arguments and selective use of "facts":

The Top 5% of earners paid 60.7%.

The Top 10% of earners paid 72.7%.

The Top 20% of earners paid 86.3%.

The Top 40% of earners paid 99.4%.

This neglects some taxes. Wouldn't it be nice to include these other taxes in the argument?

Then there's the related question of income received by these various demographic groups. Once you look at that, at least some of the disparity above disappears.

Then there's a question for the person advancing this "argument":

Here's a choice for you: Would you rather earn $100M and pay an 80% [just for the sake of conversation] marginal tax rate or earn $10,000 and get your meagre EITC handout? Which would it be, "Bart"? Do you really propose that we weep for the 'unfairness' of the rich paying a large chunk of taxes? What's your 'fair' solution?

Cheers,
 

[W]e will not go into the issue of how US corporate rates are nearly the highest in the world.

Well, yes, because this RW "talking point" looks at nominal tax rates, and ignores the fact that effective tax rates are much lower. An honest disputant would acknowledge that.

Cheers,
 

Our tax system is lenient for the rich and corporations, and strict for the poor. It is, in practice, fundamentally unfair.

Under Dwight Eisenhower the highest income tax bracket was 91% for those earning more than $400,000. The rich have it much easier now.

Let's audit a few legislators and see what turns up. Audit some Wall St. managers, too. Simple probability indicates that there must be some tax cheats amongst them. Turn the rock over and shine some light on the cockroaches.

As for the corporate tax rates, I suggest a reading of "Free Lunch" by David Cay Johnston. The corporations do not pay their fare share of taxes. Our tax system is long overdue for an overhaul.
 

John P said...

Our tax system is lenient for the rich and corporations, and strict for the poor. It is, in practice, fundamentally unfair.

My friend, the genuinely poor do not have to pay a lick of income taxes and qualify for EITC.

Under Dwight Eisenhower the highest income tax bracket was 91% for those earning more than $400,000. The rich have it much easier now.

Amazing.

If you were the target, would you think that your beneficent government was being "lenient" by declining to take 91% of your earnings and being satisfied with only a bit over a third?

As a point of comparison, serfs generally only paid a quarter of their crops to their liege lord.
 

As a point of comparison, serfs generally only paid a quarter of their crops to their liege lord.

# posted by Bart DePalma : 2:56 PM


How exactly is that a point of comparison? Those weren't the serfs paying 91%, those were the lords.
 

arne:

Here's a choice for you: Would you rather earn $100M and pay an 80% [just for the sake of conversation] marginal tax rate or earn $10,000 and get your meagre EITC handout? Which would it be, "Bart"?

I would take the $10,000 and the EITC in a heartbeat.

Assuming that my law firm would compensate me $100,000 per year under your scenario, I would rather stop working after about 5 weeks when I reached $10,000 and go on vacation than to work the remaining year for another $10,000 (less the EITC I would be foregoing) only to give the government $80,000.

In reality, I would probably be working off the books as they do in Italy to keep enough income from the government to live a decent life, but not so much that I would be noticed by the IRS.

Your example is extreme, but it does illustrate the disincentives of a progressive income tax system on the creation of wealth.

What's your 'fair' solution?

I prefer the FAIR sales tax and the abolition of the income tax, with the next best alternative being a flat income tax.
 

Assuming that my law firm would compensate me $100,000 per year under your scenario, I would rather stop working after about 5 weeks when I reached $10,000 and go on vacation than to work the remaining year for another $10,000 (less the EITC I would be foregoing) only to give the government $80,000.

$100 million, you clown, not $100,000.
 

If you were the target, would you think that your beneficent government was being "lenient" by declining to take 91% of your earnings and being satisfied with only a bit over a third?

I think one should not complain about rising up to a higher tax bracket in a system with a progressive rate. I have plenty to eat and a roof over my head. I don't channel Grover Norquist. I agree with Prof. Levinson that paying taxes is a civic duty. You know, to defend the republic and build bridges and stuff.
 

Arne and Mr. DePalma's discussion illustrate the problem with the simplistic way the debate about tax structure is conducted in this country. Instead of recognizing the economy is dynamic, many flat tax advocates and people upset with progressive marginal rates pretend the market won't correct for a fixed cost.

Even though Mr. DePalma got the number from Arne wrong (and seemingly felt he could get $10,000 in five weeks, when actually it would take half a year, since the withholding would be distributed evenly throughout the year, which doesn't even get into the fact that Arne's example – when applied to the $100k amount, since the $100M would actually approach an 80% marginal rate as prior marginal brackets are overwhelmed by the higher bracket – assumes a marginal rate apparently at 0% at $10k and 80% starting at $20k, but I digress), the fundamental question in the market economy is what value the market places on a good or service. If the tax rate is a known 80%, and the income Mr. DePalma can expect to receive is $100k, will he bother to go to college, law school and take the bar, and pay back student loans, for a net of $20k? If the answer is yes, then its all good. If no, and he is not a irrational actor, than the market will push the compensation up. As Mr. DePalma demonstrates, people probably will not become lawyers for $20k after tax income. Therefore, demand will be high, supply low, and the price should rise. So, the market will push the cost of being a lawyer up to $500,000, so Mr. DePalma could net an after tax income of $100k, if that is what the market deems his services are worth. The beauty of the income tax (that stays constant) is that it is a fixed cost of business for the person selling his labors that can be easily computed to realize gross profit.

For instance, if said law firm asked Mr. DePalma to work Saturdays, he would probably want compensation for his lost leisure time. The market – in this case, Mr. DePalma - should decide how much that Saturday is worth. Let's say he would need a 10% increase to work half days on Saturday. Well, in a 20% fixed rate tax world, he would need (to net $110k) a total pre-tax salary of $137,500. In Arne's world, we have already determined he has a pre-tax salary of $500k, and would therefore need a pre-tax raise of $50k. The post-tax value of Mr. DePalma's time does not change because of the sunk cost of the income tax. If Mr. DePalma wants a $10k to work Saturdays, he's no fool – he's not gonna take a $12,000 increase in Arne's world, though he would accept that in the flat tax world.

Think of it with the sales tax. If the widget you want has a price point of $100, it doesn't matter if the sales tax rate is 1% or 50%. The thing is worth what it is worth. Now, people are gonna have a harder time purchasing it at $150 instead of $101, but the intrinsic value of the widget doesn't change. In the income tax setting, the widget is your time or labor. It is worth the same no matter what the tax rate is, and that value drives the pre-tax dollar figure require to return that value, not the other way around. No one goes to a job interview and gets offered $50,000 thinking they'll actually take home $50k. If the $38k-ish they'll take home is not sufficient, a market economy says no one with take that job, pushing the offered wage higher as the labor supply at that price point is not sufficient to meet demand. To take home the $50k, the interviewee will need about $67k-ish.

All a higher marginal rate on higher incomes does is create inflationary pressure for incomes as they increase. That's how the market should see it. (with the caveat that a higher marginal tax rate should correlate to a greater number of government services, so demand for higher incomes should face deflationary pressure, too.) If Mr. DePalma is an attorney, and Joe the Janitor (making $30k at a marginal rate of 10%, with two marginal rates, 10% up to $50k, 50% for $50k and above) is a janitor, but both value their Saturdays the same ($10k), Joe will require less of a pre-tax wage increase to work Saturdays ($11k) than Mr. DePalma ($20k), but both will receive the same value for their services (assuming the market in janitorial services and lawyers are equally strong).
 

Nerp:

Your argument assumes that demand for legal services (or any service that would fall under the higher marginal tax rates) is inelastic and folks will pay more for the same services to cover my increased tax. burden. In reality, I will either have to eat the tax increase or will sell fewer services at the higher rate, which is indirectly eating the taxes.
 

Mr. DePalma,

Your argument assumes that demand for legal services (or any service that would fall under the higher marginal tax rates) is inelastic and folks will pay more for the same services to cover my increased tax. burden. In reality, I will either have to eat the tax increase or will sell fewer services at the higher rate, which is indirectly eating the taxes.


But you are assuming supply will remain constant, or that demand will also sharply drop. You said yourself you wouldn't work at the rates Arne gave you. If you are a rational economic actor, and your fellow economic actors agree with you, there will suddenly be a sharp decrease in the supply of legal services. I do not see anything in you or Arne's hypothetical world that has changed the demand side. Therefore, the price of legal services must rise. That's pretty fundamental. I held demand constant - I didn't really assume it to be inelastic - What is your reasoning for why the demand for your services will decrease when the only variable we have changed is your marginal tax rate?
 

Hmmmm. I think this explains a lot:

[Arne, to "Bart"]:Here's a choice for you: Would you rather earn $100M and pay an 80% [just for the sake of conversation] marginal tax rate or earn $10,000 and get your meagre EITC handout? Which would it be, "Bart"?

I would take the $10,000 and the EITC in a heartbeat.

Which may explain a DUI practise that can't afford Lexis/Westlaw.

Yet this is a person that claims the wisdom of the masses manifests itself in a free market to the grand benefit of all concerned.

Cheers,
 

Innumeracy (as BB pointed out):

[Arne]: Would you rather earn $100M and pay an 80% marginal tax rate or earn $10,000 and get your meagre EITC handout? Which would it be, "Bart"?

["Bart"]: Assuming that my law firm would compensate me $100,000 per year under your scenario, I would rather stop working after about 5 weeks when I reached $10,000 and go on vacation than to work the remaining year for another $10,000 (less the EITC I would be foregoing) only to give the government $80,000.

Of course, if you had a $100M yearly salary, and it was taxed at 80%, you'd still earn over $1M in three weeks. So you'd get 49 weeks of vacation with a cool $1M to spend on it, rather than 52 or so, with your $14,000 or so.

"Bart" is just being disingenuous here. The alternative is too horrible to contemplate.

Cheers,
 

All this neglects that a fair amount of the income at high brackets is "passive income" too. It doesn't require that you go in to work on Saturdays....

Cheers,
 

Nerp:

When you increase the cost of a good or service and the demand is elastic and unchanged, you sell less of the good or service.

At best, I will break even, assuming my increased hourly fee makes up for being able to sell fewer hours of services. Under this scenario, I still eat the increase in taxes as I attempt to produce more wealth, discouraging the incentive to create wealth.

More likely, I will suffer a drop in income raising my hourly fee. Instead of losing a percentage of that income through taxes, I have lost it all. Therefore, it makes more economic sense to eat the increase in taxes as I attempt to produce more wealth, once again discouraging the incentive to create wealth.

To the extent that the demand for legal services is inelastic, I will recover my increased tax cost and the higher marginal rate in taxes will not discourage my incentive to create wealth. However, the tax will now be passed onto my presumably less well off clients, defeating the alleged purpose of a progressive tax code.

There are nothing but downsides to a progressively more punitive tax code.

A flat income tax would still punish wealth creation, but at a constant rate that will not discourage working harder to create more wealth.

A FAIR consumption tax would actually encourage investment in wealth creation by not taxing it, but would instead tax consumption and perhaps dampen demand for the goods and services whose production is no longer taxed.

Every tax system is destructive. The key is to find the least destructive system. I think the FAIR consumption tax best fits that bill.
 

BTW, Obama's nominations of tax dodgers appears to be now up to four. President Obama's nominee for Labor Secretary, Dem Rep. Hilda Solis, had her confirmation hearing suspended as it was discovered that her husband just paid $6400 to satisfy 16 year old tax debts that the couple blew off until she was nominated to the Obama Administration.
 

There are nothing but downsides to a progressively more punitive tax code.

A flat income tax would still punish wealth creation, but at a constant rate that will not discourage working harder to create more wealth.

And yet progressive taxes have been the norm during the last 80 years, years which have seen the greatest explosion of wealth in history.

Any tax at all "punishes" work, your words. You refuse to acknowledge or credit the potential benefits conferred by gov't products and services, of which there are a multitude.

In addition to dismissing the value of public works you show no concern at all for the dangers inherent in failing to constrain the aggregation of private wealth. You say "power corrupts", but you only care about public corruption. In the Plutocracy of your dreams most of us are reduced to 2nd and 3rd class citizens while the rich purchase the levers of gov't power.

You don't seem to have taken Orin Kerr's advice to heart in the slightest, Bart. Unable or unwilling?
 

Mattski:

I never posted that our progressive income tax system stopped all creation of wealth. However, I would note that the US economy outstripped the EU in economic growth with a less progressive income tax system over the past century and our growth accelerated substantially every single time we reduced marginal income tax rates and flattened the tax code.
 

And yet progressive taxes have been the norm during the last 80 years, years which have seen the greatest explosion of wealth in history.

He also regularly trashes the tax policies of blue states in the US, and yet he admits that is where most of the wealth in this country is generated.
 

Back in 1954 when I was admitted to practice in MA, I had a discussion with a neighborhood friend who had just become a CPA. He was more versed in taxes that I was. He complained about the confiscatory nature of the then 90% (or was it 95%?) tax bracket. I pointed out to him that not every dollar of taxable income was taxed at 90%, but only the income within that bracket. I agreed that if ALL of the taxable income were to be taxed at 90% that that would be confiscatory, especially if taxpayers with less income were taxed at lower rates. So one must look at the total tax paid relative to taxable income to determine the impact of progressive tax brackets.

We are all limited with 24 hours a day, etc, and the need for sleep, and other non-income producing activities. A person concerned with whether or not to seek additional income that would be taxed at a higher bracket rate might consider how much "heavy lifting" might be required for such additional income (within the limitations of 24 hours a day, etc, and non-income producing activities). For example, back in 1954, we had hod carriers. A hod carrier might not want to work too much overtime for additional income, perhaps to be taxed at a higher bracket rate, because of the impact upon his/her health. But executives who have the opportunity, with the limitations referred to, to earn an additional $1 million a year may not have to do serious "heavy lifting" (in comparison to the hod carrier) especially with a sympathetic Board of Directors, since the after tax amount may be significant. In the 50+ years I have been practicing law, I never heard of a lawyer passing up a legal fee because it might get him into a higher tax bracket (unless he had to bill for more than 24 hours in the day). Consider a sucessful personal injury lawyer and contingent fees. (I know that there are limitations upon contingent fees in many states on criminal cases, including DUI cases.) It's been a long time since we've had 90% + tax brackets. The current progressive taxation is really not that progressive. And has any Wall St. bonus ever been declined because the recipient might get into a higher tax bracket? No, any sensible person would do a back-of-the-envelope cost/benefit analysis: cost = real heavy lifting required and benefit = net after taxes. I'm sure even Homer Simpson understands this even though his male progeny might not.
 

However, I would note that the US economy outstripped the EU in economic growth with a less progressive income tax system over the past century and our growth accelerated substantially every single time we reduced marginal income tax rates and flattened the tax code.

I would note that bare assertions hardly pass for argument. I have no cites, but in my case the evidence is directly before you.

Cheers,
 

On the subject of tax cuts, Koppelman's new post asserts that the DeMint substitute stimulus package (getting 36 out of the 41 Republican senators voting for it) "makes clear that most Republicans fundamentally disagree with the Keynesian premises of Obama’s stimulus package [therefore] bipartisanship is a delusion. Democrats and Republicans have nothing to negotiate about."

No wonder he won't allow comments on that thread. The truth is that tax cuts would stimulate the economy better and faster:

http://www.heritage.org/Research/Economy/wm2191.cfm
 

This comment has been removed by the author.
 

Charles:

The head of Obama's economic team, Christina Romer and her husband David wrote a paper entitled "What Ends Recessions?" NBER Working Paper No. 4765, June 1994, describing that their research found that tax cuts brought about a high rate of economic growth while fiscal stimulus had no track record of success at all.

Of course, that was back when she was an objective academic and before she had given up her integrity for The One. Now, Romer is a born again New Dealer Keynsian.

On the plus side, I am pretty sure Romer has paid her taxes.
 

The truth is that tax cuts would stimulate the economy better and faster:

# posted by Charles : 3:37 PM

Chucklehead, we just had 8 years of tax cuts for the wealthy. That is what got us into this mess.
 

No, those tax cuts gave us six (6) years of growth -- and recovery after the 9/11 attacks -- you are aware that the Democrats took over Congress in 2006, right?
 

Mr. DePalma,


When you increase the cost of a good or service and the demand is elastic and unchanged, you sell less of the good or service.

Again, you are ignoring the fact that the supply of legal services has dropped sharply. So there is less of the good to be had at the given price point. An efficent economy isn't based on changing prices, but the available supply and the correlated demand. Say you compete with 9 other attorneys for business in your area. There are 100 people willing to pay for your services are price p1. If you, acting alone, try to increase your hourly rate to p1+x, you should lose consumers, and the nine other attorneys at p1 should gain. Moreover, if all of you increase your rates to p1+x, each of you should lose some demand from consumers who have now been priced out. (If you are acting in concert, its an artificial oligopoly; if the increase is due to an increase in cost (like a large marginal tax bracket) its simply a market effect of reaching a different equilibrium price). So now each of you will have 9 clients, paying p1+x. This is what you are describing. If you want to argue it's bad policy for the 10 people to be priced out of the legal services market, that's one thing. But it is the market reacting to a shift in the available supply.

But, in Arne's world, there no longer are attorneys who will work at p1, since it is insufficient for them to make a living. So, five of your attorneys drop out of the business, and now there is you and four others around to take in 100 clients, whose demand has not changed. So each of you can raise your prices to p1 + 3x, and hold on to 7 clients a piece. Because the supply has decreased, but the demand has not, the equilibrium price goes up. That's really basic macro. Now, you price some people out, but that doesn't mean they don't demand the services, it means they cannot get the services at the price they want. Again, arguably bad policy, but it is just the way the market works.

So, if we went and increased the marginal rate, for lawyers only, to 80% of all income, perhaps half of the lawyering population would drop out. The lawyers remaining would be a smaller supply, and therefore the equlibrium price would shift up. How far up? As far as the market will bear. If we assume the right market price for your services is $100k post tax ($500k gross), and you try to get $150k, two things can happen – you will lose to competition, in which case the market forces you to bring down your prices, or the market bears the new price of services above the equilibrium, in which case, attorneys should return to practice due to the higher than equilibrium income they receive, and supply will increase until it drags prices back down to equilibrium. But because the income tax would affect all attorneys the same at the same marginal rate, it becomes a fixed cost across the board, factored into the price of services. Those that can bear the higher price will, and the supply will contract until the equilibrim is reached.


At best, I will break even, assuming my increased hourly fee makes up for being able to sell fewer hours of services. Under this scenario, I still eat the increase in taxes as I attempt to produce more wealth, discouraging the incentive to create wealth.

No, if you break even, you are at the same place your were, proving the point – the income tax does not affect the value you demand for your services. It just affects the nominal price, and the supply. You will still attempt to increase your wealth as far as the market can bear. There is no discouragement to creating wealth, because you have already factored in the cost the tax will place upon you. The only question is how much more do you want to work?

In other words, when you try to determine the price you will place on a billable hour, you consider a variety of factors: overhead, profit, taxes, etc. All you are doing is changing the equation - your billable hour should go up proportionate to the amount a cost goes up, in this case taxes.

We can think of it another way - say the marginal tax rate is cut from 30% to 20%. Now, your costs have been reduced by 1/3 of whatever proportion taxes were to your practice. Are you going to make more money? NO. The other attorneys, who have also had their costs reduced, will either reduce their billable rate to try and bring in more business (competition), or the market will note attorneys are living high on the hog, and supply will increase to bring rates down to the equilibrium price (added supply). In the end, attorneys will be forced to reduce their billable rate over time, and will return to the correct profit margin the market will bear.


More likely, I will suffer a drop in income raising my hourly fee. Instead of losing a percentage of that income through taxes, I have lost it all. Therefore, it makes more economic sense to eat the increase in taxes as I attempt to produce more wealth, once again discouraging the incentive to create wealth.

No, that doesn't make sense. Some attorneys will drop out of the market at that supply price point. Those that remain will be able to raise their prices because of the shortage of supply. You are not looking at it right – you aren't raising prices to test elasticity; supply has diminshed, so the equilibrium price has increased on its own.


To the extent that the demand for legal services is inelastic, I will recover my increased tax cost and the higher marginal rate in taxes will not discourage my incentive to create wealth. However, the tax will now be passed onto my presumably less well off clients, defeating the alleged purpose of a progressive tax code.

First, this isn't about elasticity, its about a supply shift. So don't worry about that yet. Second, this gets into the ripple macro effect the increase would cause on the value of a dollar. If the marginal rate is applied across the board, that cost affects everyone. If the cost of goods remains the same, wages will be hit with a huge inflationary effect until equilibrium (supply of labor will shift left). If wages stagnate, the price of goods will be hit with a huge deflationary effect. (demand will shift down). It will, in the end, leave everybody at about the same place they started, since the shift affects everyone.


There are nothing but downsides to a progressively more punitive tax code.

It is the most successful tax system ever devised, and while there is always room for improvement, nothing has been better at promoting growth and prosperity across the board.


A flat income tax would still punish wealth creation, but at a constant rate that will not discourage working harder to create more wealth.

A flat income tax creates a huge burden on the poor and the lower clases, sucks away demand and purchasing power away from them, and alows inequity to run rampant.


A FAIR consumption tax would actually encourage investment in wealth creation by not taxing it, but would instead tax consumption and perhaps dampen demand for the goods and services whose production is no longer taxed.

A consumption tax encourages investment in wealth creation with one drawback – it takes tons of money away from those who would consume. Makes it hard to turn investment into weatlth when the vast majority of people don't have any extra money to buy your goods.

Every tax system is destructive. The key is to find the least destructive system. I think the FAIR consumption tax best fits that bill.

It would result in an even greater inequality, discourage consumption, and grind our 70% consumer driven economy into the ground.


I never posted that our progressive income tax system stopped all creation of wealth. However, I would note that the US economy outstripped the EU in economic growth with a less progressive income tax system over the past century and our growth accelerated substantially every single time we reduced marginal income tax rates and flattened the tax code.


Ahh – but that's the key – its the change, not the actual rate, that causes a temporary increase in growth. The capital gains tax cut under Bush is an excellent example. Once the capital gains tax decrease was passed, federal revenue jumped that year. But it was a temporary blip, because it was a manifestation of people holding and waiting for the most tax advantageous opportunity to sell. Afterword, revenue decreased (when normalizing for market conditions), as the per trade tax realization was diminished.

As far as Europe, it is very difficult to compare, and I don't have the time (probably need a grant) to do it. But one must consider that they have socialized medicine, the VAT, and a better social safety net. Ironically, France, for instance, has an income tax structure fairly close to ours:

France

Below 7,183 0%
7,183 – 14,328 5.5%
14328 – 31,826 14%
31,826 – 85,322 35%
Above 85,322 40%

US
10% $0 – $8,025
15% $8,026 – $32,550
25% $32,551 – $78,850
28% $78,851 – $164,550
33% $164,551 – $357,700
35% $357,701+

(obviously, this is a little apples to oranges, but still)
The point is, the reason why Europe economically drags behind the US, if it is because of taxes, is more likely because of the VAT, a consumption tax that kills demand, rather than an income tax, since people always want to make more money.

I would rather see a tax structure banning all sales and consumption taxes, and focusing more exclusively on income. This allows the markets to function more freely, and the sunk cost of income tax to be accounted for in the labor markets. It also allows policy to be implemented through benefits and punishments in income tax law. It also removes the regression from the system. I'm tempted to get rid of property tax too, but I haven't thought about it enough to know how I should feel.
 

No, those tax cuts gave us six (6) years of growth
# posted by Charles : 4:31 PM

And then one really massive crash. Now we have to clean up the mess you clowns made.
 

Bartbuster:

You are confusing Causation and Correlation. I actually blame Obama cronies for the subprime mortgage fiasco causing the massive crash -- crooked Chicago politicians like Blagojavich don't help either -- at least the nomination process brought a couple tax cheats to light.
 

You are confusing Causation and Correlation

No, I'm suggesting that running up a huge debt while giving tax cuts to the wealthy might not be the best fiscal policy.

I actually blame Obama cronies for the subprime mortgage fiasco causing the massive crash

So, the GOP has been running most of our government for the last 8 years, but the mess is Obama's fault? Good luck selling that pantload!
 

I said "Obama cronies".
 

Chucklehead, that's not really a significant difference.
 

Sure it is. Before January 20th, Obama was only one of many responsible for this mess.
 

Chucklehead, that is not what "cronies" implies.
 

What's your definition?
 

Joe:

Of course you are correct that the least favored are alientated, etc. I suppose I was thinking of the working class as the apparent seat of civic mindedness at this time.

However, I think you are correct that our culture has, in general, moved to a 'me and mine' attitude. This is partly because of the stories we, echoed by our politicians, tell ourselves.

Oddly, many people at the top of the food chain have no illusions as to pure meritocracy; it is the less well-off who buy the 'rugged individualist' line.

Thanks to all who replied to my comment.
 

I think that today, most citizens, in most countries think that all means of avoiding or evading taxation are "fair game". In part this may be a reaction to the very wealthy "avoiding" by way of tax shelters what others cannot.

How many times does one find going to a garage or having a workman round to the house that there will be one price for the work if paid for with a card or if a receipt is required and another if paid in cash? And should I insist on paying by card and getting a receipt?
 

nerpzillicus said...

So, if we went and increased the marginal rate, for lawyers only, to 80% of all income, perhaps half of the lawyering population would drop out. The lawyers remaining would be a smaller supply, and therefore the equlibrium price would shift up...because the income tax would affect all attorneys the same at the same marginal rate, it becomes a fixed cost across the board, factored into the price of services. Those that can bear the higher price will, and the supply will contract until the equilibrim is reached.

We do not disagree. You are offering an excellent illustration of my point that progressively more punitive marginal tax rates punish and reduce the creation of wealth.

...the income tax does not affect the value you demand for your services. It just affects the nominal price, and the supply. You will still attempt to increase your wealth as far as the market can bear. There is no discouragement to creating wealth, because you have already factored in the cost the tax will place upon you. The only question is how much more do you want to work?

What? Did you just forget what you typed above? Let us repost:

So, if we went and increased the marginal rate, for lawyers only, to 80% of all income, perhaps half of the lawyering population would drop out. The lawyers remaining would be a smaller supply, and therefore the equlibrium price would shift up...

To racap. my scenario envisioned my firm staying in business, but becoming less productive. Your scenario took the next step by envisioning that 50% of the less productive firms would go out of business entirely, reducing the supply of legal services by half.

Nerp, the production of legal services is a production of wealth. You have just illustrated how a progressively more punitive tax system reduces the creation of wealth.

And yet you offer this nonsensical response to my concluding comment...

BD: There are nothing but downsides to a progressively more punitive tax code.

It is the most successful tax system ever devised, and while there is always room for improvement, nothing has been better at promoting growth and prosperity across the board.

???

BD: A flat income tax would still punish wealth creation, but at a constant rate that will not discourage working harder to create more wealth.

A flat income tax creates a huge burden on the poor and the lower clases, sucks away demand and purchasing power away from them, and alows inequity to run rampant.

Every single flat tax proposal that has been offered has a large personal deduction for basic living expenses that would remove the truly poor from paying taxes.

By definition, a tax code that applies proportionally to disposable income cannot be inequitable. If you earn ten times more disposable income than I do, you pay ten times more taxes. This is the epitome of equity.

A FAIR consumption tax would actually encourage investment in wealth creation by not taxing it, but would instead tax consumption and perhaps dampen demand for the goods and services whose production is no longer taxed.

A consumption tax encourages investment in wealth creation with one drawback – it takes tons of money away from those who would consume. Makes it hard to turn investment into weatlth when the vast majority of people don't have any extra money to buy your goods.

At worst, the shift from a income tax to a sales tax would be a wash as to the effective cost of goods. The added sales tax would be offset by more money in your pocket and lower costs of production passed onto the consumer in lower prices.

In reality, current tax payers would receive a jump in their income as the sales tax captured money from the substantial minority who evade income taxes.

BTW, the poor would largely escape the FAIR tax with a personal refund instead of a personal deduction.

What may reduce demand is that fact that a FAIR tax encourages tax free savings and investment rather than consumption. However, I suspect that this would also balance out as increased savings and investment would lead to an increase in the number of goods and services available at a lower cost.

BD: I never posted that our progressive income tax system stopped all creation of wealth. However, I would note that the US economy outstripped the EU in economic growth with a less progressive income tax system over the past century and our growth accelerated substantially every single time we reduced marginal income tax rates and flattened the tax code.

As far as Europe, it is very difficult to compare, and I don't have the time (probably need a grant) to do it. But one must consider that they have socialized medicine, the VAT, and a better social safety net. Ironically, France, for instance, has an income tax structure fairly close to ours:

France

Below 7,183 0%
7,183 – 14,328 5.5%
14328 – 31,826 14%
31,826 – 85,322 35%
Above 85,322 40%

US
10% $0 – $8,025
15% $8,026 – $32,550
25% $32,551 – $78,850
28% $78,851 – $164,550
33% $164,551 – $357,700
35% $357,701+

The two systems are nothing alike. The marginal tax rate hikes from one level to the next are far higher in France and extend far lower down the income range.

Your nominal rate chart above also does not include the transfer of income payments to the large number of structurally unemployed caused by the EUs artificially high labor costs. A permanent dole that amounts to a substantial percentage of a wage creates perhaps the largest marginal income tax hike of all because the unemployed would have to forego dole check and his leisure in exchange for having to work for a wage that is only somewhat larger and subject to income taxes. This is why we keep our unemployment insurance coparatively low and temporary.
 

I believe that Mourad and John P have both hit on something: there is, at the very least, a perception that the wealthy are not paying their legally determined share. I recall hearing someone on the Lehrer News Hour referencing a recent news discovery that a group of hedge-fund managers had been managing [forgive the pun]to pay no more than 15% of what the IRS thought they should have paid.

Combined with the recognition that we all benefit from a civil society, this perception that the rich do not pay their 'fair share' erodes the civic virtue of everyone else. If one is in a lower economic class - with the consequent social disadvantages - it appears the rich are gaming the system, reaping all the social benefits, and avoiding the burdens.
Chris S
 

Chris:

I had earlier noted your asking if I had read Denby's "Snark" but this request seems to have disappeared. I have not read it as yet. Here is a link to the book indicating what snark is:

http://www.powells.com/biblio/9781416599456

It's like pornography, you know it when you see it.
 

Shag: Thanks. I think I asked about the book on another thread.
 

thanks so much i like very so much your post
حلي الاوريو الفطر الهندي صور تورتة حلى قهوه طريقة عمل السينابون طريقة عمل بلح الشام بيتزا هت كيكة الزبادي حلا سهل صور كيك عجينة العشر دقائق طريقة عمل الدونات طريقة عمل البان كيك طريقة عمل الكنافة طريقة عمل البسبوسة طريقة عمل الكيك طريقة عمل عجينة البيتزا فوائد القرفه