-
Small Steps Toward a Better Tax Code
November 17, 2011 | 11 comments
-
The Only Thing Worse Than Obamacare is Obamacare Without A Mandate
November 16, 2011 | 9 comments
-
Obama “Can’t Wait” to Target Waste, Fraud and Abuse in Health Entitlements
November 15, 2011 | 3 comments
-
Supercommittee Would Rather Change the Rules Than Make Budget Cuts
November 14, 2011 | 7 comments
-
As Supercommittee Faces Failure, Both Parties Have to Deal With Defense Cuts
November 11, 2011 | 4 comments
The Spectacle Blog
The U.S. already has a very progressive tax code and has actually gotten more progressive over the course of the Bush years. Nonetheless, one of the principles (if they have any at all) of Occupy Wall Street is that the rich and super-rich don’t pay enough in taxes, and that money should then be used to pay for a larger welfare state.
Jim Pethokoukis writes that that, in the past, the U.S. has had top marginal tax rates well north of 50%, and even up over 90% in the 1950s. But he also points out the problem with that line of argument:
Statutory tax rates can provide a misleading picture of the income tax burden. From 1950-1963, income tax revenue averaged 7.5 percent of GDP. During the presidency of George W. Bush — counting the years when the Bush tax cuts were in effect and the top rate was 35 percent — income tax revenue averaged 7.7 percent of GDP. This could suggest rates are right around the Laffer Curve equilibrium point in the current economy.
It would be useful to break it down even further. It’s unlikely that anyone ever paid an effective rate that high. Indeed, take a look at the table of average effective rates paid by different income levels over time from the Tax Policy Center. During Ronald Reagan’s presidency, the top tax rate was cut from 70% to 28%. And the average effective tax rate for the top 20% of income-earners fell all the way from 27.3% to 25.6%.
How about the top 1% that the Occupiers are so upset about? Well, in the course of having their statutory tax rate fall 42 points, they went from paying an average rate of 34.6% in 1980 to 29.7% in 1988.
Are “the 99%” really so furious about this five-percentage-point drop? Do they think we could fund the massive liberal agenda using an extra 5% in tax revenue from the top 1%?
The answer is that it’s a little more complicated than merely what the top rate is. The tax code is a mess of complexity, and no one pays the statutory rate. The truth is that the 70% top tax rate of the 1970s and the 50% tax rate for much of the 1980s didn’t actually have that much effect on the amount of revenue collected. There are complications with the capital gains tax, corporate income taxes, payroll taxes, deductions, credits, and other divots in the code that prevents that from happening. The fantasy world of Michael Moore where the rich faced a 90% tax rate simply doesn’t exist.
View all comments (4) | Leave a comment
More Blog Posts by Kevin Glass
http://spectator.org/blog/2011/11/10/its-about-more-than-marginal-t
Follow us:
ADVERTISEMENT
The Spectacle Blog
Democrat Dan Maffei Blames Budget Cuts for Girl’s Rape, Mother’s Murder
Robert Stacy McCain | 4:12PM
SPONSORED LINKS
FLASHBACK TO: 1995
-
Pope Culture
A man of faith in a godless age is hitting Americans where it hurts.
-
Why the GOP Does Not, Like, Totally Suck
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
-
Dames at Sea
-
In the Absence of Guns
In Britain, defending your property can get you life.
-
The Metaphysical Martini
-
Counting the Costs of Clintonism
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
-
Chuck McHagel
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
-
The Legacy of Old John and Mother Fresh-Roasted
-
It’s the Best Time of the Year
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
-
The Bush Crack-Up
Was the President done in by the economy, or by the politics of the economy?
Clip of the Day
ADVERTISEMENT
Soquel Creek | 11.10.11 @ 5:18PM
Here's a chart showing the effective income tax rate over time, by income category. The Top 0.1% benefited from lower rates, just like the Bottom 50%.
http://www.twitpic.com/71yhg9/full
The solution to our problems isn't an even greater tax burden on a small percentage of voters, er, I meant wealthy people. Even if we DOUBLED taxes and could actually collect the full amount from the Top 1%, it would barely close this year's budget deficit.
Those that pine for the "good old days" of the 90% marginal tax rate often cite the great 1950's economy. Few remember that the U.S. was essentially the ONLY industrial nation to escape World War II with our infrastructure intact. If you wanted something, you probably bought it from an American company. Europe and Japan were in ruin. The Soviet Union, China, and India were all trapped in Communist or Socialist economic policies, as was much of Eastern Europe.
Soquel Creek | 11.10.11 @ 5:18PM
I've written on tax policy as well.
Is Warren Buffett Paying His "Fair Share"?
http://soquelbythecreek.blogsp.....share.html
"Who Pays Their "Fair Share" in California?"
http://soquelbythecreek.blogsp.....ornia.html
gearjammer| 11.11.11 @ 9:01AM
The question to look at is the enormous rise in incomes of a select few. The left only puts focus on certain CEO's, and ignore income rise in a many other places. Athletes movie stars, media stars, trial lawyers,and others need scrutiny. Do all the rich actually work in a true free enterprise system ? The case of Steve Jobs seems to be a capitalist winning in a true free market arena. People are less inclined to attack a guy like him. The guys on Wall street who shuffle some stuff around and make millions raise concern that it is all on the uo and up. But, what about movie stars and media stars ? Ever since the advent of cable, etc. their money has skyrocketed. Is this all on the up and up ? We can't pick and choose on cable-we must buy it all-thus people like me pay for mtv and msnbc even though I despise them both. Their was glee when banks dropped a 5 dollar a month ATM charge. Imagine the glee when Republicans might offer a 30 dollar a month savings on cable and those kind of bills ? Of course, the stars may not make as much. This is the battlefield to fight on. How about democrats in Senate voting down proposal to cap trial lawyer compensation at 600k per hour. And, then we find so little is spent on smoker cessation programs. Of course, nobody here gives a hoot about this stuff-it is so populist and only concerns the little guy. Man we have clubs all over the place to beat the democrats with and nobody picks them up.
Dai Alanye | 11.11.11 @ 3:41PM
The prime difficulty with the income tax is that it is effectively a tax on work and smart investment. There are many ways for the wealthy to mitigate its effects, as Warren Buffett and the millionaires in Congress are well aware - trust funds and annuities among them.
We'd be well off to rid ourselves of the income tax, replacing it largely with taxes on accumulated wealth and imported goods. Taxes on sales or added value? Not so good, and will lead to enforcement nightmares. Wait until the IRS shows up at your next garage sale.