Now we are in a situation where the rich already are responsible for a greater percentage of the nation's tax revenues relative to the amount of the nation's income they generate. To tip the scales further may work on the margin, but how much additional revenue will we really generate? I don't think it will be enough to pay for healthcare.

Let me try a back of the envelope calculation.

In my previous blog I reported a reasonably authoratative calculation that if we reimposed 1957 marginal rates merely on the top 148,000 of income earners (who averaged $5.5 million) in 2007 that particular cohort would have contributed more than $200 Bn.

Next comes the far larger cohort who earned more than , say, $800K but less than the amount qualifying for that top 148,000. Let's assume there were five times as many of them and they averaged $2.75 million. That would have contributed another $500 Bn.

I don't in fact advocate restoring a 90% marginal rate. My gut feeling is that gets into Laffer territory so I'd stop at the 70% marginal rate which lasted from JFK to RR. That would leave the tax payer with the incentive provided by three times as much income from his earnings which qualified for a marginal rate in excess of 69%.
Enough to avoid just chilling out.

Assuming a bell shaped curve I doubt if capping the marginal rate at 70% would subtract more than $100Bn which would still leave us with $500Bn more revenue than at present. Not chump change.

Thanks for your attention. I think I'll now stop and see you another day.
F

And when that happens, how many of those people whose taxes double will decide to quit working or fold up their small business?

About as many as quit working under Ike. Not so many that the economy was handicapped. Which was many fewer than could have been calculated if you believed in the Laffer Curve.

Absent any real data my guess is it's as likely that increasing the marginal rate to 70% would double peoples desire to work as that it would cause them to quit. And in particular that the handful of irreplacable geniuses will be just as motivated to bring their dream to reality at a 70% marginal rate as at 35% .

We might lose a few of the financial engineers to gave us credit default swaps.We'd just have to struggle along without them.

And for each person who actually decides to retire to the Grand Cayman there'll be plenty of aspiring MBAs waiting impatiently in the bull pen.

For the most part industry is staffed with perfectly normal people who might otherwise be teaching school or installing TVs. It's a myth that corporate ceo's are uniquely gifted .There may be some percentage, of whom that's true but those I suspect are the ones who would keep working if the marginal tax rate was 98%. As for the rest,for the most part they are simply normally smart people who got to the top of the pyramid in competition with others who are no different.

Herod speaks:

…Civilization must be saved even if this means sending for the military as I suppose it does. How dreary. Why is it that in the end civilization always has to call in these professional tidiers to whom it is all one whether it be Pythagoras or a homicidal lunatic that they are instructed to exterminate?.......... I object. I’m a liberal. I want everyone to be happy. I wish I had never been born.

Auden's For the Time Being

In his post at Princeton he wasn't one of the pigs struggling at the feed trough.

I only discussed the yield from Ike level taxes on that 0.1% of the population, who averaged $5.5 million in earnings. Clearly we wouldn't extend the 35% top bracket all the way through 99.9% and then abruptly impose 90% on those last 148,000 tax payers. There would be an additional yield from those in the 50 ,60,70, and 80% brackets, those poor souls only earning between $500K and $4 million.

I certainly think spending control is required because I think it's unhealthy for any society to spend wastefully. But you have to pick the cherries where the cheeries is. Today's TPM carries the story of some prominent democrats who've been exploiting the DOD budget. A -they should be punished; but B-they can only have received those bribes if there was too much money available in the defense budget from which to pay them.

If we didn't already exist to show it's possible
you couldn't have written a believable novel in which you created a country which has the same marginal tax rate on someone who earns $40K as on someone who earns $1Bn and has a military budget=to the rest of the world's and allows 45,000 of its citizens to die each year from avoidable sickness (plus some high multiple of that who don't die but suffer from avoidable sickness). Speaking of sickness, this very misuse of assets is a sickness in itself.

Yes,since those spending programs include our astonishing military budget which at half the size would not only still be the world's largest by a wide margin but also our own largest entitlement with the beneficiary being the management,owners and workers of the military/industrial complex.

Something does have to give. It's not clear to me that that something has to be lives of the 45,000 americans who die each year because of our lack of a civilized Health Care System.

Not that I mean to imply Bill that you are indifferent to that human pain and suffering- that would be an unwarranted indictment to which you could properly object.
And I am not making it.

But it was also before the assassinations of the 60s. And economically we had had almost uninterrupted 2% unemployment since 1942 ,just a brief slow down in the mid 50s , so there was a sense of security which is long gone.

Returning to my theme, the progressive tax structure sopped up what would otherwise have been excessive buying power eliminating the need for FED-induced unemployment from periodic bouts of high interest rates and margin restrictions.

I can't quote statistics but it's my impression there was none of the shortage of investment capital which the Right now claims would be a consequence of progressive taxation.

Looking at the tax table which I linked,I realize I'd forgetten that it was not until Reagan that marginal rates dropped below 70%. And , says I, the seeds of the current financial crisis were sewn since the risk/return calculations of the Masters of the Universe automatically incorporate after-tax returns. Those AIG risk managers expected to keep 70% of their bonuses. They'd have made different calculations if that were 10%.

Applies equally well when dealing with any expert whether she's a cardiologist or a general.

For a long time it was a commonplace observation that we fought WW2 as well as we did because the vast expansion of the services meant that senior positions were extensively held by people who were civilians on Dec 7th

In WW1 the initial British military leadership was incompetent which was true of the French in both WW1 and 2. Also true of the Soviets. For the civilian leaders of any of those 3 countries relying on the initial military leaders was a mistake, in 1939/40 France a mistake from which they were unable to recover.

Clearly, what we think here is unimportant.But the President is continually advised by people who are expert in fields which he can not be. But if he simply accepts their advice he's not doing his job.

But I still like overwhelming force. Among other reasons, it saves your potential enemies from themselves. If there's a squad occupying your town you feel as if your manhood is challenged. You ought to do something.

It it's a division, you can relax.

likely to be the best?

If you've read any of the Iraq post mortems surely you would agree the military strategies pre Petraeus were far from being the best option.

we are entitled to judge the policy as wise or foolish, but are on shakier grounds in trying to judge the wisdom of the exact means of implementation

Why?

Sure ,at some level of detail, it is shaky to question implementation.Fiasco described the Pentagon's micromanagement of the Iraq invasion force's disembarkation. Rummy prohibited the planners from using the program designed for that purpose. (For example if it's a tank assault you disembark the fuel trucks next and the MPS to direct them.) Without the forbidden program the MPs disembarked late and Jessica Lynch took a wrong turn into capture.

But the further you get from 'disembarkation order' the nearer to the level at which the Commanders of the Iraq invasion force should
have been questioned on the wisdom of his implementation e.g. permitting the Baghdad looting.

Even generals put on their trousers one leg at a time. Nothing the military does should be immune from judgement. What should be avoided is micromanagement: not just questioning a strategy or a tactic but issuing specific instructions from your easy chair. If you actually need to do that, you've just been slow in replacing the Commander.

Then what?

Either this latest increase will be as successful as W's "surge". And Obama can take a bow.

Or as unsuccesful as LBJ's and O will accept the lesson of Vietnam and refuse the future requests.

Either way he'll have bought himself some protection against the Right's claim that he frivolously substituted his judgement for that of the professionals. And be better positioned to pursue the rest of his agenda. And run for re-election.

On its face that sounds like the cynical endangerment of 35,000 american for polical ends.

And may be. In fact,probably is.

Of course,it's arguable that under the "Powell Doctrine" the current inadequate force is at more risk than one the right size for the job. (Custer's last stand wouldn't have been "last" if he'd had an additional troop of cavalry.) Except that given the location and the mission the currently inaequate force will just be an inadequate force that's 35,0000 larger.

Unless an integral component of the decision is to so scale back the mission that these 35,000 become the equivalent of the extra troop that Custer lacked. If you believe that would you be interested in buying a bridge to Cadman Plaza?

What does the decision tell us about Obama? That he's a ruthless politician.

Good.

Those 148,000 wealthy cats in 2003 were the top 0.1% of tax payers and $5,500,000 was their average income. So the bottom of the bracket was lower than $5,499,999. Probably not much lower.