It is incorrect to separate Social Security Trust Fund from Income Tax.  The Trust Fund is used to fund CURRENT expenditures.  This is the equivalent of an INCOME TAX reduction.  Thus, the two should be counted together (David Walker doesn't mind counting them together when sounding the alarmist horn for the future).  When you do this, the share the rich pay shrinks enormously.

Their real fear is they may have to pay a fair share when SS Trust fund bonds come due. 

In old days it was possible to argue that the rich, unlike the middle class and the poor, have no return on their money paid as taxes, as they do not rely on state provided services.

Now I conjecture, due the general conservatism at the top of the income scale, that the rich wished to have the current war and in general, expansive military posture that requires massive military spending. (If they do not like it, they could contribute to Nader who also does not like it).

I also do not accept the numbers of CBO. The last time I read them, they apportioned corporate tax among the individuals who own stocks of corporations, which I find unjustified (unless you apportion unrealized capital gains too).

Good piece, one small point. I'm not sure our tax system is progressive anymore. Or, alternatively, it is progressive in the wrong way.

By which I mean that I understand that capital gains (dividends, long term capital gains, real estate, etc.) are taxed at a significantly lower rate than earned income. As such, while it's true to say that the top 1% pay a higher rate than other brackets, it would be even more true to say that the top 1% of income earners pay a higher rate, but that people who sit on their fat asses and collect interest on their inheritances pay a lower rate. (Although I guess plastic surgery and designer gyms have made the fat asses part less true).

What I've never understood is why progressives don't attack the dual taxation system for capital gains vs. income gains. The classic libertarian response that this is double taxation, as with all libertarian tax arguments, is misleading, insofar as we are all double (and triple and quadruple, etc.) taxed, as we get taxed on income, on consumption, on production, etc. etc. etc. The fact remains that someone who works for a living pays more in taxes than someone who, by virtue of accumulated wealth, does not need to work for a living and collects the bulk of her income through investments.

I have yet to hear a convincing argument that this is fair, efficient, or otherwise desirable. And I think the vast majority of Americans would agree that earned income should be taxed less than investment income, if not for all the propaganda out there.

Kudlow's fantasy is helped by the fiction that cutting marginal taxrates generate more revenue for the govenent than is lost. I hope Bruce Barlett's piece in the Times does away wit this nonesense for good.

There is no doubt that unless all taxes are taken into account there is no way to judge fairness. I have had made payrolls in which we withheld not income tax but did have FICA to withhold.

I do not quite understand why the percentage of the whole revenue paid by which group is not any issue of fairness. It would not be fair to have just the wealthiest to pay for all of government if that were the outcome. It is also unlikely an extremely dangerous political outcome.

A question about efficiency. If allowing high income earners a disproportionate low rate of income tax spurs investment allowing everyone a higher income would that be worth the tradeoff.

One last point. The conservatives love talking about the marginal rate of tax. What is rarely discussed is the effective rate of tax. My understanding is that it is about 19% and has been about that for years.

Daniel A. Greenbaum

If you make 60% of the money, you should pay 60% of the taxes.

It's really that simple.

Seems like one way to make the tax burden fairer is to remove that $97,500 cap on SS contributions.

"If this all sounds class warfare-ish, it’s not meant as an attack on the wealthy."

Don't get defensive like this. The term "class-warfare" is an invention of the wealthy to use in the lowest form of political debate. You can see how successful they've been when people on the other side of the debate start using the term.

Progressive taxation does not equal "class warfare" any more than questioning the government makes you a traitor, despite what the right wing would have us believe.

You're right. According to CBO data, the top 1% pay 37% off all income taxes and 25% of all federal taxes.

That's because their share of social insurance taxes are low--they pay 4% of those taxes compared to 16% for middle income families. Their biggest tax from this perspective: the corporate tax, because CBO assigns it based on their wealth holdings. The top 20% of households pays 87% of corporate taxes (see figure b).

I was mindful of that point while writing this--'fair' is surely a normative concept, in the eye, or wallet, of the beholder.

I'm implicitly arguing that a more progressive system is a more fair system, based on the widely (though not universally) accepted notion that those with greater ability to pay should pay more.

Moreover, much of the wealth they've accumulated was accomodated by public infrastructure. They benefit more from society, so it's fair for them to give more back.

But others will surely feel differently.

I’m not sure what you mean by the Trust Fund in relation to the income tax. SS payroll taxes are borrowed for general obligations, but must be repaid in the future, thus lowering future payroll tax requirements. Thus, it can easily be argued that SS taxes should be separated from other taxes when talking about the “fairness” of the funding of general revenue.

Good points. I invented a new statistic yesterday to get at this point, but I'm not sure it's useful. According to CBO, in 2004, the top 1% paid 25% of fed taxes, and held 15% of all income, for a ratio of 1.55. It's a measure of progressivity: your tax share relative to your income share. In 1979, that ratio was 1.65, 1.60 in the mid-90s, so by this measure the fed code is less progressive--their tax share has gone up less proportionately to their income share. Still not sure if it's useful.

No it was not possible to argue that the rich did not rely on state provided services.

Who uses consular services overseas? Who resorts to the Federal Court system more? Who is more likely to need an assist from the Coast Guard? Or have some military helicopter get them off the ski-mountain? Who is more likely to own a private plane or have access to a corporate jet and fly in and out of taxpayer subsidized general aviation airports?

I could go on endlessly and not even get into the military argument. The notion that rich people do not rely on public services as if those navigational aids and lighthouses, as well as the roads, and the benefits from government funded drug research all somehow come out of nowhere has always been a cartoon notion akin to the one that has us spending huge money on foreign aid. Which when examined is a small fraction of government spending that generally comes with mandates the spend the money on American goods which ends up making it a backdoor government subsidy to corporations. Which goes largely back to the rich. As do the bulk of agriculture subsidies generally.

Such suggestions don't survive the first examination of the budget pie sliced by sector. The rich get plenty of government spending, the notion that they never did is just Reaganism akin to the Cadillac Welfare Queen. Long on anecdote, short on numeric analysis.

Piotr says

"In old days it was possible to argue that the rich, unlike the middle class and the poor, have no return on their money paid as taxes, as they do not rely on state provided services."

While it may have been possible to make that argument, it was not a good one. The rich have always benefited much more from tax funded services than the poor, not less. Who gets more benefit from the highway system or air travel that supports commerce? Or from the police and fire departments that protect private property? Or from the military, no matter what the war? I could go on and on. Social services that aid only the poor were always a tiny share of the federal budget. The rest of the budget gives the most benefit to those who have most to lose.

I see I messed up and should have replied to the original post above, as Bruce Webb did, much more eloquently than I. Thank you Bruce! This is one of my Tax Day hot buttons.

Some points I'd like cleared up:

1) What ratio of services are rendered to poor vs. rich? (Piotr touched on this.)

2) Since we have had a progressive tax code for a pretty long time (varying around a range) isn't it fair to conclude most Americans think it's (close to) fair now?

3) Why is unearned income not income?

The first is one I have not seen addressed by those most capable--economists and other aficionados of government policy arcana. I find it easy to accept that since our diplomacy and military support our "state interests" (read "trade") it is almost exclusively to the benefit of shareholders when we run up a military budget larger than the rest of the world combined. Arguments that export means jobs surely are thin nowadays. (More likely it means exporting jobs.)

This infatuation with flat tax is a 1) a pipe dream, since many exceptions will be added, and 2) contrary to the wishes of voters.

Dividends are most definitely not taxed twice. When the profits are called corporate income, they are not yet dividends. That happens at the moment of distribution. They are not taxed in transit, only after becoming an individual's possession. Death tax is another lie--no one dead is taxed, nor is dying taxed. Recipients are taxed, who are supposedly alive.

Would Mr. Bernstein be willing to tackle the cost/benefit ratio of rich vs poor? Factors other than military would include efforts of the Commerce Dept, Agriculture Dept, and agencies such as weather and air traffic control, along the copyright and patent protection, the civil court system, GPS, NASA solar monitoring and satellite support (tracking space junk, etc.).

Even local police are more useful to rich than poor. The question is proportion, on which my hunch is that it is wildly disproportionate, with only basic and meager services to poor individuals compared the panoply of attention lavished on wealth.

    Why is it when the needy expect the government to assume some of their personal responsibilities it is called entitlement, and when the wealthy expect the government to do the same respectively, it is not?

      Generally in the churches, it is the member who give the most that sit in the pews at the front.  Heck, my family even bought one out right.  It seems that today the wealthy are sitting right up front yet sitting on their hands while the donation plate floats by.

    They should be critical of their own behaviors when talking about personal responsibility. 

    They once used "entitlement," a misappropriated term, for promotional politics.  Now, they are manipulating "class warfare" to be a concept that invokes over simplified and negative beliefs.  If this trend of ever widening gap in wealth hoarding combined with unequal taxation continues, the term that they condemn just might give some the wrong idea with a strict observation and literal reading.  When connotation becomes denotation.

This discussion -- and many of the comments are bright, thoughtful, and well-stated -- is pointless.

Tax policy is always fair -- we're a democracy.

A key thing the Kudlows of this world keep peddling is that tax cuts increase revenue to the Treasury. They don't. The evidence is overwhelming that they don't. They cut revenue. The first three years of the Bush administration saw declining tax revenues for the Treasury, and they didn't reach year-2000 levels until 2005!

It's amazing that supply-siders seem to get away with their lies, year after year after year, even in the face of actual government statistics, readily accessible on government websites, to the contrary. It would be refreshing to see reporters actually check stats once in awhile.

Every single time supply-siders have done their thing, they set records for deficits and new debt. If their voodoo economics worked according to their claims, that would never, ever happen. We'd see surpluses, not record deficits. By definition.

I think until we completely crush that myth--the myth of glorious increases in tax revenues due to tax cuts--we won't be able to bring about true tax fairness in America. Until we show the flat-earthers (supply-siders) that the world is NOT flat (tax cuts do not pay for themselves, ever), enacting truly progressive taxation in America will fail.

Some random points:

1. Much of the wealth these days in inherited. The Walton family is worth $80 billion. Sam earned it, they inherited it. Their efforts to get the estate tax repealed will save them about $40 billion.

2. Capital gains at death are not taxed, this allows multi-generational dynasties to escape the bulk of the tax burden.

3. Rich people get more value from public services than poor people (Social Security aside). A simple example. If I earn $100 per hour and a new public highway is built which saves me an hour per day in travel time it is worth $100 to me. For a person earning $10 the same hour is only worth $10. The same goes for the benefit of protecting my property that the police provide.

4. The EITC may be a practical way to help the poor, but what it does is allow firms to underpay employees and then shift the costs to the general public in the form of a federal expenditure. The underpaying firms are getting a free ride. A guaranteed minimum wage would shift the costs to those currently escaping them.

5. All proponents of a flat tax always propose a level which is less than the current top income tax rate. Simple logic shows that they will gain and that everyone else will lose under such a scheme. The number of conservative policy proposals that aren't motivated by self-interest can be counted on the fingers of the hand of a three-toed sloth.

--- Policies not Politics
Daily Landscape

I do not agree that the “effective tax rate” is a good indicator of fairness. The economic system we earn our livings in is set up within certain structural and regulatory parameters that heavily favor the welfare of those with assets, ie the wealthy.

One good example of this is the way recently relaxed bank regulations specifically regarding lending rules, along with low interest rates (determined by mainstream economists who support the basic business models that favor the wealthy), have led to a huge influx of cash/demand into the real estate market, leading to very generous gains in property value. While this has led to a general economic surge in many sectors (buoying the supply-side myth of rising tides floating all boats), it has benefited wealthy land-owners far more than it has lower and middle income property owners.

In addition, the real estate boom/bust functions as yet another transfer of wealth from poor to rich first, by liberating all that cash that was previously frozen in long-term real estate assets through questionable financing schemes and moving it into the retail marketplace (where guess who is the major beneficiary?) and second, by seizing real estate assets through foreclosure when the high risk loans kick into their less favorable, higher cost modes, untenable for those who are already in modest financial shape.

It would be far fairer if wealthy people were to understand their good fortune to be a function of the very system by which their financial fortunes have blossomed, and were to pay high taxes with enthusiasm, as a measure of their appreciation for, or as an investment in, the economic system that has so favored them. Perhaps as a token of their hopes that the rest of society were also well supported within the larger “society,” wealthy taxpayers could see paying into the system as a net good, while they themselves remain well off.

Said more simply, wealthy people benefit inordinately from an economic system that favors inherited wealth and capital assets over labor assets. This is not a result of laissez-faire capitalism, not the invisible hand (neither of God nor consumers), nor some mystical force particular to the good ol’ U.S. of A., but rather a set of rules and regulations implemented and held in force by the Keepers of the Golden Rule. He who has the gold makes the rules.

Wealthy people should be liable for the lion’s share of tax liability. That would be fair. And they should be thankful to the government for fostering and protecting their good fortunes. That would be generous. This would require us to abandon the tired myth of the yeoman government-hating entrepreneur finding success as a marketplace gladiator slaughtering the competition, in favor of a vision of America in which all members are part of the whole and the welfare of one is tied to the welfare of all, with a government dedicated to promoting the welfare of all.

Fat Chance.

I think you are talking about "fairness" all wrong when suggesting that because the rich make more money they should necessarily pay more in taxes.

The fact is a rich person benefits far more from the government that a poor person.

Someone who has $1000 in the bank and rents a crappy apartment furnished with leftovers and a cheap TV/stereo doesn't need FDIC protection for their money or police protection for their goods.

But a rich person with 100,000 in the bank and million dollar jewelry stashes in the house does.

Rich people benefit from the government granting incredible personal liability and other protections for corporate stock owners.

Rich people benefit from roads and other infrastructure than poor people, because the rich own the companies that transport goods over those roads and rails.

Rich people benefit from the "free" trade pacts negotiated by the government far more than poor people.

Rich people benefited far more from the bailout of the Savings and Loan industry than the poor, from the bailout of the airlines than the poor, form the bailout of the auto industry than the poor.

Hell, even the pension guarantees the government has to ensure people don't lose everything when Chevy or Ford screw up their pensions is of greater benefit to large stockholders than to a guy who worked and EARNED his pension for 30 years.

The fact is that the rich would be nowhere near as rich as they are without government protections and handouts, far more than a measely annual $15,000 welfare deal with no childcare built in.

And because they benefit far more than the poor from the programs and protections offered by our governments, they should be paying far more than anyone else.

--
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Corallein,

Actually, tax cuts never, ever pay for themselves. There is no evidence, whatsoever, that they do or ever will.

No reputable economist buys into voodoo economics. And, yes, that is what supply side should be called.

Hand-me-down myths continue to distort the picture and make it all too easy to cherry pick the data. As in, you've forgotten to mention the impact of spending as economic stimulus. Our current budget of 2.9 trillion is nearly one quarter of the economy. It's beyond absurd for people to forget that and to assume that when the government sends money back to the people in the form of tax cuts, that's the sole source of stimulus.

It's not. Tax cuts create deficits. Deficits force borrowing (Bush has borrowed more than three trillion already. Reagan borrowed more than two). Obviously and naturally, if the government pours in trillions of dollars in borrowed funds, and sends back tax cuts, the economy will be stimulated. But the tax cuts do not pay for themselves in the event. Even Bush's own economists say the usual scenario is less than 20 cents returned for every dollar sent back out in the form of tax cuts.

(Read Sebastion Mallaby on this: http://tinyurl.com/fk3vl)

It would not gain a stimulus, however, if the government ever cut spending, dollar for dollar, with those tax cuts. Because it would take back with one hand what it gave with the other.

That would cancel things out. In short, it would be a wash, with some minor play here and there.

Supply-siders have been very clever with their strategies. Notice that spending goes up at a faster rate whenever they gain office and enact supply side programs. Again, naturally, the economy is going to be stimulated when you hit it with increased spending and tax cuts; when you borrow trillions, put the tab on future generations, and inject that funny money into the economy now.

Government spending is a huge source of additional economic stimulus. It creates jobs, subsidizes industry, spins off new jobs, purchasing, companies, etc. Again, people conveniently forget that. There can not be any real scientific proof of the efficacy of tax cuts alone unless or until we control for spending, natural business cycles, and population growth.

No supply-sider has ever done so, and our government has never, ever cut spending, dollar for dollar along with tax cuts.

The best measure of fairness is really simple: it’s your tax liability over your income, called your effective tax rate.

I think another poster alluded to this but just because you have the same income doesn't mean you have the same wealth.

For example, a million dollars generates $50,000 in interest income whereas a job that pays $50,000 means that the worker actually has $950,000 less.

Or, if you have a pension (deferred income), two incomes might look equal but the statistics cannot communicate the disparity in the future.

And, if you are good with tax sheltering, you only have to pay taxes on the tip of the iceburg, not the rest of it.

OK, so I didn't factor in the effects if a $1 tax cut also removed $1 in federal spending. If that were the case, then tax cuts would never add revenue, though it would shift some spending from federal to personal (though the personal spending would only be a percentage of the federal spending it replaces). But as you pointed out, that isn't the case: tax cuts and decreased federal spending don't go hand in hand (deficit spending).

However, all that doesn't prove that supply-side is a hoax; just that it's been horribly distorted and misused to justify the tax cuts.

I wish that rather than demolishing my straw man, someone would address my conjecture that CBO is significantly exagerating the "effective tax rate" of the top 1%.

By the way, the case that can be made is that the rich do not rely on communal services, not that do not use them. For example, they avoid fire hazards in their estates, and thus they do not have to rely on the fire companies. (Mostly true, with a spectacular exception of California). But does it mean that the rich would be better of if massive fires were sweeping periodically through our cities? Well, the Nero-minded ones do not get value for money. Which is a feature, not a bug.

Military spending does create jobs though.

It might work, if I could understand it. I'm too old for new math.

It does explain how the tax system is becoming less progressive but that's not a "winning" argument in "these parts." (My secretary who listens to Limbaugh is the person I try to reach...at least when I'm talking to myself.)

Find a breakpoint where the numbers "favor" our argument: Americans in the top 5% earn 33% of the income and pay 40% of the taxes (or the top 2% earn 20% and pay 26% or whatever), factor in FICA and a medium state income tax, I've made up the numbers for my example but I'll bet I'm not terribly far off, use the same % for 10 years ago and 20% ago and I'm guessing even Kudlow could understand. The tax system is fair but becoming LESS so and arguments to the contrary wilt when all the facts are presented in crayon.

Actually, as much as I want our 500 billion dollar defense budget decreased, defense spending creates a tremendous amount of jobs, and its ripple effect is considerable when it comes to purchasing equipment and all kinds of goods and services.

Decreasing it would have to be done carefully, and money would have to be shifted to spawn new industries to replace the old. I would favor Green industries, clean, homegrown energy, health care R and D, education spending, etc.

We spend more on defense than most of the rest of the world combined, and our Iraq spending isn't even on the books. That adds to our total Debt, but not the "official" yearly deficit.

We really need a complete overhaul of our tax and spending policies, with an eye to drastically changing our priorities. I don't think we need to increase taxes overall. Though I would increase in some places in order to lower it in others. We need to better allocate our finite resources to help those who need help, and stop helping those who don't, like Halliburton and Exxon. No more corporate welfare.

Tax fairness is one part of the equation. But the total picture needs to be looked at and acted upon. And soon.

There was some research done on the labor supply impacts of the supply-side cuts in the early Reagan years. They found no labor supply responses from men and some from married women, but as many posters have commented, and as the Reagan deficits showed, the tax cuts did not have the predicted effects re growth and investment. Neither have the Bush cuts worked out that way. Investment and job growth in particular were stronger in the Clinton years when the fed tax code was made more progressive (and of course, those years ended with a budget surplus).

Well, in the 1950s and 1960s, the marginal tax rate peaked around 90%. The 1950s had a few setbacks, but overall it was a good decade for GNP growth. They called the 1960s the Go Go Years back on Wall Street, because the stock market went on a roll until Nixon came in with his antitax policies.

If you actually look at history, high marginal tax rates CAUSE economic growth. Lincoln's short lived Civil War income tax led to the boom of the 1870s which transformed the West. The Great War taxes in the late 19-teens led to the Roaring 20s. The tax cuts of 1926 led to the Great Depression. The WWII tax increases pushed the economy through the 1960s. Look at Clinton's modest tax increases. I'll even give Bush 41 some credit here. Does anyone remember the 1990s?

The simple FACT is that income tax increases, particularly progressive increases, lead to economic growth that raises ALL boats, even yachts. Despite modern conservative rhetoric, rich people are not all stupid. They will invest when their are opportunities, and rising working class and middle class incomes are the biggest.

In the 1960s, Business Week magazine used to report regional income growth as a sign of economic opportunity. Nowadays, income growth is seen as rising labor costs, a sign of economic trouble. Of course, if you want to get rich, you'll follow the rising income and ignore the rising labor costs.

FYI: the CBO data in my analysis include interest, dividend, rental income, earnings, gov't transfers, and income from realized cap gains.  So it's a very complete source, but doesn't capture  everything you mention.

But it's fools gold. Those jobs are not producing anything that anybody else wants. Yes, it's good for those who hold those worthless jobs, but it ia a drag on everyone else.

Ever heard of the "tyranny of the majority". Democracies are not always fair. Ask some black people who grew up in the south.

No. Intuitively it seems there would be a point where one would rather spend more time on the golf course than see more clients. It no doubt depends on how much effort one needs to make for that marginal income, whether one can pass the tax on to someone else, how much one is married to ones work, ect.

Mr. Bernstein, thanks for the article on the new progressive budget.

I like what you say about it. But I'd go even further with the alternative energy proposals. I'd double the investment and hopefully get results in half the time. The bogus "need" for war . . . or, more accurately, the desire for it, would be greatly reduced if we were energy self-sufficient. If we're green in the bargain, life for everyone improves. Actually, the green part is essential as a part of improving quality of life for all citizens. Obviously so.

Also, I think we could solve our health care problems in America by lifting the ceiling on FICA tax. Lift it entirely. Take the trillions in new revenues to lower the overall rate for everyone, and expand Medicare to cover all citizens with the massive amount of added revenues. Universal health care that does not depend upon the workplace. Let citizens opt in or out of the system, buy additional insurance coverage if they desire. Their choice. But, make it clear to insurance companies (and citizens) that the wave of the future is to opt in. They get the best deal when they do. And businesses get a break in the bargain.

With the largest group policy pool in the history of the world, our government would have tremendous bargaining power to lower prices and make health care affordable to maintain. Medicare costs could even go down overall, with an aggressive policy of negotiation for best prices.

With additional savings from reducing the defense budget over time, we could fund truly progressive "womb to tomb" kinds of educational and jobs training programs/opportunities. If possible, I'd also create a nationwide network of trade schools that promoted owner/operator businesses, arts and crafts, and artisans in general. Build upon that with a network of "masters" and apprentices, and we could start a truly viable new class of skilled artisans, capable of being their own bosses, proud of what they produce.

Build this country back up from the ground. From the ground up, for the first time in world history. From the ground up.

There are economic reasons to have progressive taxation. It's the most efficient way to raise money. It automates the Keynesian fiscal policy of running up surpluses when the economy is strong and deficits when it's weak. It controls inflation without letting bankers decide what's best for the country. Republicans made the tax code less progressive and look what happened: surpluses turned into deficits, massive asset inflation rocked the housing and mortgage markets, and the economy is barely where it was when Bush took office.

When rich folk and economists cover their mouths, that's 'cause they know where they stand on the Laugher curve...

There is little empirical evidence to show that taxation is suppressing income production.  Period.  It must pretty much confiscate income to do that.  And if it is the marginal rate that is suppressing the production, then the best solution is to lower the point at which that marginal rate bites, making it harder for those rich folk to feel comfortable without actually putting in a full day's work.

The fact is, once your income goes above $97.5k you get a marginal tax REDUCTION of 14% (your and your employer's shares of your social security tax).

All those rich folk are laughing at you when you believe the tax system is hard on THEM. 

Tongue in cheek never works in this medium.

The abstract concept of Laffer curve seems obvious, but of course the salient fact is: where are we on the curve?

I think that at some point Scandinavian countries decreased taxes with the desired effects, but from a very high level to high. According to our supply siders, there should not be any economic growth in Scandinavia, yet, there is.

It is my anegdotal observation that Swedish high tech workers, come five o'clock, hop on their bicycles and pick kids from the state run preschools and go home to spend time with their families. Sweden is very much country of "Protestant work ethic", but very different than here. (They had to make sick leave rules much less generous than before to maintain that ethic, but even so.) Their fetish is good organization of the work place, with good organization you should not need to stay in office overtime, otherwise something is wrong with you.

Europeans also tend to have a totally different concept of what "family friendly" means. In USA it means (a) lower taxes so families have more to spend (b) saving children from though crimes like pornography, the sight of female breast (c) keeping homosexuals down (d) bemoaning the calamity of out of wedlock children. In many European countries, this means (a) well run preschools and schools, free of course, (b) aid to families with children, including single mothers, so hardly any children are in poweverty (c) very exotic: making sure that families have time to spend together, so overtime is frowned upon, as are long store hours, Sunday shopping etc.

From that point of view, encouraging upper and upper-middle class to work beyond 40 hours a week is fraying the social fabric.

If you, especially at your income level, put a large proportion of your investment decission on the taxes involved, then you are either foolish, or you need to educate yourself more on how to make investment decisions.
By the way...'
If you take some of that money that you've paid taxes on to hire a contractor to paint your house, well congradulations! You've helped improve the economy. But, should that painter not pay income taxes because because that money has already been taxed???

Something people don't seem to get. We are not talking about a money-printing tax, a dividend tax or whatever. It is an INCOME TAX. If you have income it ought to be taxed. It gets real funny when somebody declares they are in favor of a flat tax and you ask them if they actually mean a flat "Income Tax".

dc

Good points. I would add...
Why is it that conservatives say they want to run government like a business, but they are completely opposed to running it at a profit? What exactly is wrong with a surplus that puts aside money to lower deficits and thus lower future taxes for everybody?

Barlett makes precisely the phony arguments I'm inveighing against in my post.

He argues that the fact that a larger share of taxes are paid by wealthy households represents "higher and higher burdens on the wealthy."

But he fails to remember that their income is rising faster than their tax payments, and thus their effective rates--share of income paid in taxes--are falling.

The punchline remains that in a progressive system--and there are many wonderful arguments for progressivity in the comments for this post--when growth flows to the wealthy, their share of total taxes pay rises, which is well and good.

Therefore, beware of anyone who labels 'share of taxes paid' as a measure of tax 'burden!!'

He also makes the bogus argument that tweaks in marginal rates have big effects on growth. History shows that's wrong: they effect distribution, not growth.

Comparing marginal tax rates paid by people with the income to meet them to racist oppression in the deep South is like comparing a guy with a couple of parking tickets to a mob hitman.

-Dave Adams-

The principle is the same, however.

I'd call FICA a flat tax, due to the fact that it funds one benefit, Social Security, and that benefit is based on the taxes you pay. "Flat tax" is an accurate description for everyone earning up to $97,500. If you earn more, you pay a smaller percentage of your income in FICA taxes, but receive a correspondingly smaller benefit amount relative to your income. The Social Security benefit for someone earning $100,000 is exactly the same as that for someone earning $1,000,000.

Jared, you should mention that while FICA taxes are flat or slightly regressive, they fund a benefit that's highly progressive. For example, compare two people retiring this year at the retirement age, one with an average income of $12,000, the other with an average income of $96,000. The first will receive a monthly benefit of $714.40, and the second a monthly benefit of $2,291.40. The second person paid 8 times the FICA taxes and receives benefits only 3.2 times as large. I'd consider that a net progressive system.

Only capital goods last very long. Money is NOT a capital good. This may seem to be a fine point until you try to do something like put away money not for one person or another, but for the whole economy. It doesn't work.

When the whole economy puts away money (Social Security Trust Fund Bonds), it just moves that money to spending in some other form (Income Tax reduction). When it tries to recover that money (Cash in SSTFBonds), it has to move the money back (raise income taxes at a future time).

The EASIEST way to do that is to tag on the SAME AMOUNT as the EMPLOYEE + EMPLOYER share of Social Security Tax as a tax surcharge for all income not subject to Social Security Tax and to tag on the SAME AMOUNT as EMPLOYEE + EMPLOYER share of Medicare Tax as a tax surcharge for all income not subject to Medicare Tax. These surcharges should not be eligible for exemptions of any sort.

Sigh.

Ellen suggested that tax policy is by definition always fair since we live in a democracy. I countered that democracies are indeed not always fair and I gave as an example treatment of blacks in democratically controlled America. Get it?

But you just make the argument that high marginal rates would make no difference. The whole premise of the Laffer curve that you dismiss is that there is a optimal marginal tax rate to maximize tax revenue, rates above or below that rate result in lower revenue. Do you subscribe to that premise or not? You can’t have it both ways.

Of course you are ignoring the concept of SS. The idea being that workers would contribute some of their wages to support replacement of a percent of the wages of retirees. The wage level subject to taxation was caped on the assumption that wage earners above that level do not need those wages replaced in retirement.

If you wish to convert SS to a welfare program, make your case.

Clearly you understand nothing about the economy.  Further discussion with you is pointless.

If this is your true view, then the you agree that curve is irrelevant.  It is "sand in our eyes" to take our attention from the real purpose which is just to redivy up the tax pie so that the rich pay less and the middle class pays more. 

The rich have been at this class warfare for a very long time, but when the middle class say, "Hey! Wait a minute!"  It is all communism and red herrings.

I think there is a curve in principle but quantitatively defining it is subject of many variables which is why I said advocacy groups make a fine living arguing about it.

Why yes I do get it.

You're trying to draw an analogy between the situation of paying taxes, which is is not inherently unfair, to racial oppression which by its very nature is inherently unfair. I can't think of any cases where racial oppression has been applied "fairly". On the other hand, while we can argue about what is fair and what isn't, I don't doubt that either one of us could posit a tax system that we think is "fair".

By inference, you're implying that tax systems are inherently unfair.

They aren't. In fact they're absolutely necessary for a civilized society.

-Dave Adams-

Aw, don't go away mad just because you got your butt kicked.

The falsehood is that the government is not part of the economy. The government produces goods and services in much the same way the private economy does. These are goods and services the private economy refuses to produce or produces poorly. So, suggesting that taxing takes money out of the economy is simply false.

The likely false hypothesis is that there is anyone anywhere who is trying, in the first place, to maximize the size of government. Asking the government to provide appropriate goods and services (see previous paragraph) is not "maximizing government." This is a red herring. I probably chose my words poorly. There are many people who want to raise a much tax revenue as possible, then look for ways to spend it. And there are many people that think the government should take over the health insurance industry and if pressed I think they would nationalize the pharmaceutical companies, hospitals and medical technology companies. I bet I could find some folks who would nationalize the airlines and the oil companies as well.

You continue to build the case that you are ignorant. In our economy private police (security guards) are productive, but (according to you) public police are not.

You are confusing an economically productive expense and a necessary expense. You would agree would you not that the economy would be more productive if therr were no criminals in the world and the police could go to work in the factory?

If you can't grasp that concept, I may have to give up hope for you.

funny how so much debate and discussion go into something (taxes-most notably federal income tax) and seem to simply accept the paradigm that its ok to even have it. What person voted to take money out of their own pocket on demand, and give it to a failed system run perhaps up to 3100 miles or more away?

Seems counter intuitive.

Once we account simply for state taxes and other types of federal taxes on services and goods, that's a bigger chunk than federal income tax. Seems like a double dip to me.

But what seems worse to me, is that I am a fish in the ocean of fish who are completely financially illiterate and thus easy to get large somes of money thru cohersion, threat, and manipulation. I don't remember consenting to that part of any equation.

As a family we often help people who have no home, and often at the risk of doing without ourselves if we do it too much. We just moved out of the inner part of our city, and feeding lots of homeless folks, or getting bandages with what little slush fund you have...is more useful than validating a bloated spending habit in DC.

I wish we could find a wise answer that would allow so many people like me to feel consenting about contributing to the General Welfare, instead of a sing-songy missing the point view I hear in lots of Americans, "jennifer welfare"...

the taxman cometh......why...don't remember invitin...or even knowin em

Would the crimnals then be on unemployment?

I guess "productive" means those activities that are not necessary.

Why is one necessity, food, part of productivity, and another, police (or other general-welfare service) not productive? Only because is private enterprise?

Somehow, a necessary expense has no benefits. Aren't the benefits the reason it is considered necessary? 

If productivity is limited to only profit-generating actions it should not then be considered a public good.

You are wasting your time with this ideologue.  He has an especially naive notion of productivity.  If it can't be consumed, it isn't produced.  I assume he has never actually read anything about productivity.  His view is typical of another sort of unproductive person, those with inherited wealth.

“If it can't be consumed, it isn't produced. “
Actually this is a pretty good definition of productivity. Do you think building B2 bombers is a productive activity?

My crocodile is crying.

The people who make out are the ones who come in and scoop up all the foreclosed real estate for a fraction of it's worth.