Apparently the line is drawn between the 99% and the 1%, although I prefer the 53% vs the 47% personally. Here is how the share of AGI breaks down between various income levels:
OK so what about taxes, the Rich don't pay enough. They don't pay their "Fair Share"
So right now they pay less of the tax burden than they did during the good times. In fact, under the Bush rates, at the peak of the boom the top 1% paid more of the tax burden. Does this mean that the 99% support the Bush economic policy? No probably not. Here's another observation, I am guessing that most of the so called 99% actually fall in the 50%. This is based solely on appearance, personal grooming, and photos of the signs at the Occupy Wall Street protests.
Please don't bitch about someone's fair share of taxes when you don't pay them. Oh winter can't come soon enough!
Still think some people aren't paying their fair share. Here is the Average Tax rates for various income groupings as defined by the IRS (AGI/Income Tax)
Taxes under Bush went down for everyone. Taxes on the bottom 50% are at Post WWII lows. What is missing from this graph is income growth. Taxes increased during the Clinton years, but income also increased so relative standard of living increased; not to mention other special circumstances defining the 90's that I will post about some other day.
These plots really don't tell the whole story. I came up with the Fairness Factor. I defined it as the ratio between an percentile group's percent share of Income Taxes Paid vs. percent share of AGI:
Here is a graph of The Fairness Factor from 1988-2009:
Throughout the 90's the top 1%'s share of the tax burden relative to AGI went down, even though they paid higher tax rates. I'm not sure what this means, but at least you can make up your own mind on what "Fairness" means.
Nice work.
ReplyDeleteI like the idea of quantifying fairness. Your approach is a good starting place, and it would be great if you could explore this further.
One argument that I find compelling and that tax conservatives find irritating is that it is "fair" for the rich to pay even more than they currently pay because they have disproportionately benefited from the environment that the government has created for them to build their wealth. Decent transport infrastructure, a secure and stable democracy, a strong central bank, a relative lack of corruption in the bureaucracy (at least the type of corruption that would hurt the rich), relatively weak regulations, favorable corporate tax laws (talking deduction rules, not corporate tax rate which everyone will tell you is the world's highest blah blah blah), trade laws, a well-educated pool of workers to draw upon. The problem with defending or attacking this position is that there are too many variables to tease out the significance of any/all of these factors. However difficult, an analysis of these factors that could quantify the financial benefit or detriment of the government's policies on individual wealth would be very beneficial to proponents or detractors of the "environment" argument. This could lead to a more accurate, if more complex, fairness factor calculation.
As far as the Occupiers, while their ideas are scatter-shot at best, I find it encouraging that our generation is trying to at least participate. There's no denying that the economy has serious problems, in major part because of the financial crisis caused by the bad loan assets created by certain banks. Those banks are now reporting record profits, but they only still exist because the government bailed them out to keep the country's economic ship floating. Does that not bother you? Maybe you were against the bailout, but is that where your dissatisfaction ends? Businesses that make bad decisions should fail. The rules (or lack thereof) that were in place allowed "too big to fail" to happen. And now that everyone's suffering the consequences (except, it would seem, those very banks that caused them) people think the rules need to change. I agree. Sure there are hygiene tragedies and unfortunate body modifications, but you can't argue that don't have a point about economic injustice. Sure complaints about individual debt are unfounded and the "99%" thing is just a misguided political slogan that takes aim at individuals rather than the business rules that created them, but the Occupiers have taken effective political action by assembling and wielded real political power by changing the conversation. Sure plenty of them are just there to create their own reality TV show, but I find it encouraging that they're not just at home watching one.
Sorry for the book, but we have a small number of readers and even fewer who are willing to comment so each comment gets my full attention. You made some good points and I wanted my responses to do them justice.
ReplyDelete>>>"I like the idea of quantifying fairness. Your approach is a good starting place, and it would be great if you could explore this further."
I do too. I’m not sure that I invented the Fairness Factor, but I am sure that if I were relieved from my job and given the chance to work at some think-tank or university economics department, I could explore this much further. The one thing that really intrigues me about my simple measurement is that during economic downturns the “Rich” actually pay a more “Fair Share” than they do during the boom. I’m not really sure which the chicken is and which is the egg.
>>>"One argument that I find compelling and that tax conservatives find irritating is that it is "fair" for the rich to pay even more than they currently pay because they have disproportionately benefited from the environment that the government has created for them to build their wealth."
While this may be true, the opportunities were there for everyone. Yes some people have a better starting point than others (blah blah blah) but American History, even recent history where corporatism and cronyism have attempted to “kick” the ladder out from under the already successful, is full of exceptional people taking advantage of these opportunities and producing very unequal outcomes.
That being said I don’t dogmatically believe that the ideal tax system would have everyone paying exactly the same rate.
>>>"Decent transport infrastructure, a secure and stable democracy, a strong central bank, a relative lack of corruption in the bureaucracy (at least the type of corruption that would hurt the rich), relatively weak regulations, favorable corporate tax laws (talking deduction rules, not corporate tax rate which everyone will tell you is the world's highest blah blah blah), trade laws, a well-educated pool of workers to draw upon. "
All good points, but not as true today as they were in the last half of the 20th century. The United States is not the ONLY place to safely invest capital anymore.
>>>"The problem with defending or attacking this position is that there are too many variables to tease out the significance of any/all of these factors. However difficult, an analysis of these factors that could quantify the financial benefit or detriment of the government's policies on individual wealth would be very beneficial to proponents or detractors of the "environment" argument. This could lead to a more accurate, if more complex, fairness factor calculation."
I’m just going to say that I don’t have the time or ability to really quantify those factors. I do have some Income Inequality charts in the works.
I know that quoting Hayek is quite the in vogue thing to do, but I started attempting to comprehend his work before it became fashionable:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
CONTINUED...
ReplyDelete>>>"As far as the Occupiers, while their ideas are scatter-shot at best, I find it encouraging that our generation is trying to at least participate. There's no denying that the economy has serious problems, in major part because of the financial crisis caused by the bad loan assets created by certain banks. Those banks are now reporting record profits, but they only still exist because the government bailed them out to keep the country's economic ship floating. Does that not bother you? Maybe you were against the bailout, but is that where your dissatisfaction ends? Businesses that make bad decisions should fail. The rules (or lack thereof) that were in place allowed "too big to fail" to happen. And now that everyone's suffering the consequences (except, it would seem, those very banks that caused them) people think the rules need to change."
My biggest complaint against the Occupiers is that they are not against bailout, or for economic freedom and the rule of Law. They just want the government to give other people’s money to a different group of people, namely them. Their position seems to be that taxes are unfair because some people have money and they don’t, and that anyone making more than them is doing so illegally. I’m sorry protesting Capitalism from your iPhone while you are skipping classes at your private university, where mommy and daddy can afford to pay your tuition because of their success is FUCKING ASININE. (PERIOD)
At the time I really didn’t know what to think about TARP and too big to fail. I do remember thinking that it was unfair to have privatized gains and socialized losses. NOT EVERY BANK was responsible for the crash. Some of the bailed out banks got too bigger to fail. We are told that interest rates are must be kept near 0% so that there will be money to invest, but banks and corporations are sitting on piles of it. Maybe the problem is the investment options don’t look good.
Basically the position today is:
“We are in a mess because of reckless mal-investment that created a bubble. We need to create new reckless mal-investment so that we can have another bubble”
The government helped create this mess and has escaped all responsibility. I don’t mean half the country saying this is all Bush’s fault and the other half saying that the economy would be booming if Obama doesn’t get re-elected. I mean actual blame. Let’s acknowledge that the change in tax law with allowed tax payers to continue to deduct mortgage interest but not credit card, auto, personal loan interest created the incentive to use your house as a piggy bank. Let’s acknowledge that the collusion between Countrywide and Fannie Mae resulted loans that should never have been made. Let’s acknowledge that the fact that the Federal Government guarantees loans in the first place helped create the mess. Let’s acknowledge that the H.R.A., and George Bush’s push towards home ownership put millions into situations that turned into financial ruin.
STUPID CHARACTER LIMIT. I'll need another pose
CONTINUED 1 more time (I really need an editor)
ReplyDelete>>>"I agree. Sure there are hygiene tragedies and unfortunate body modifications, but you can't argue that don't have a point about economic injustice. Sure complaints about individual debt are unfounded and the "99%" thing is just a misguided political slogan that takes aim at individuals rather than the business rules that created them, but the Occupiers have taken effective political action by assembling and wielded real political power by changing the conversation. Sure plenty of them are just there to create their own reality TV show, but I find it encouraging that they're not just at home watching one."
The real economic injustice is that we have a system that treats people differently under the rule of law by a vast amount. It’s legalized injustice. The tax code is a big part of this and so is the funding of our entitlement programs. The fact that two people with the same income can have drastically different tax burdens is economic injustice. The fact that I am going to be forced to pay into a system that won’t be around when I retire just so that the current generation (who lived high on the hog) can retire with unsustainable fiscal promises that the government made because they continually kicked the can down the road and pander to a particular voting block is economic injustice. The fact that the majority of political leaders see their chief roll as playing god and creating laws to steer individuals to a particular desired (by the politicians) outcome is economic injustice.
"They just want the government to give other people’s money to a different group of people, namely them."
ReplyDeleteI think you can say that about any almost entity that has lobbied the government for anything ever.
Like I said, the Occupiers' ideas/complaints are scatter-shot, but I think they are tapping into the valid and widespread feelings of economic injustice. Some of them are spouting bullshit, and people are calling bullshit on them. But it's a big diverse group and the ones I respect are talking about changing the "system that treats people differently under the rule of law by a vast amount".
Some people that lobby the government are asking to keep more of their own money and not to have the IRS act as a transfer agent for someone else's
ReplyDelete"Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame, danger, and scruple which their acts would otherwise involve. Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim — when he defends himself — as a criminal." - Frederic Bastiat
If this type of injustice is what the 99% want to end, I'm all for it. My view of them, however, is much more cynical. Sure about 1% of them probably feel that way, but I have heard very few articulations of that position. It's mostly END CAPITALISM or FREE EVERYTHING FOR ALL OF US!
I already made an expensive bet on the 2012 election, so we'll just have to wait and see who is right here without a wager.