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View Diary: Busy day for Republicans: protecting millionaires and screwing over the rest (80 comments)

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  •  Top marginal rates are MEANINGLESS (3+ / 0-)
    Recommended by:
    BigOkie, VClib, nextstep

    without consideration of things like exemptions/deductions.  

    I wish people would stop looking at top marginal rates ALONE to say things like "it's the lowest tax rate since Hoover."  That's what the link did.  That's really not intellectually honest  when you are talking about whether the top 1% are paying more, or less, in taxes.  It is effective tax rates that matter -- see the second chart here.  The top 1% paid more under Clinton's 39.6% than they did under Carter's 70%.  You simply cannot honestly compare top marginal rates without considering things like (1) the level of income rates apply to; and (2) deductions/exemptions/shelters (drastically changed in 1986).  

    Here's why this bugs me so much.    

    I SUPPORT a re-vamping of the individual income tax rates forth the top 1%.  It's crazy to have some in the top 1% pay an EFFECTIVE tax rate of 15%, and some to pay an EFFECTIVE tax rate of 30%, depending on which deductions/exemptions they can claim.  It is much, much better to lower the top marginal rates and get rid of most deductions/exemptions.  If you do it correctly, you could RAISE the effective rates a couple of points (maybe  back up from 19%, where it is now, to 22 or 23%) and get MORE money from the top 1%, without the wild disparities in what people are paying.  

    It is a fair criticism that Ryan has not designated which exemptions/deductions he would eliminate. That's absolutely fair.

    However, I wish Democrats would stop dismissing the approach of lowering top marginal rates while also eliminating deductions and exemptions a "massive tax cut for the rich."  That borders on disingenuous.   The approach is completely sound and is, in fact, the only way you are going to, as a practical matter, get increases in revenue from the top 1%.  Even the President has acknowledged that this approach is essentially what needs to happen, both with respect to individual rates and corporate rates.  

    If it is correctly done, the approach is not a massive tax cut for the rich -- instead (for a party so concerned about fairness) it is a way to increase what the top 1% pay in a much more fair and equitable way.

     What IS a fair criticism is that Ryan hasn't yet identified which deductions/exemptions to eliminate.

    •  But they ARE the lowest RATES, aren't they? (4+ / 0-)
      Recommended by:
      eXtina, wishingwell, PSzymeczek, Matt Z

      And Yes, deductions, credits and preferential rates on things like capital gains and so-called "carried interest" drop the effective tax rates of the wealthy (and some of the rest of us) even more.

      The virtue in emphasizing the highest rate bracket is that people get that message in a few words. Your explanation - valuable insight, I grant you - takes a lot more words and leaves the issue somewhat more confused for all the details.

      As for slicing out some - I suspect, in the reality, very, very few, if any - of the deductions, let's see what gets through a GOP-controlled House Ways and Means Committee before we pay that kind of proposal any compliments.

      Obama and strong Democratic majorities in 2012!

      by TRPChicago on Mon Apr 16, 2012 at 10:29:03 AM PDT

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      •  But it's dishonest and destructive in the long run (1+ / 0-)
        Recommended by:
        VClib

        It's dishonest when it's meant to imply that what the rich PAY in taxes is discernible by the rates.   That's clearly what it's meant to imply.  That's dishonest and it misleads people into thinking, for example, "going back" to the rates before Reagan is some kind of massive tax increase on the rich, when the rich paid MORE under the Clinton tax rates than they did in 1979, before Reagan.  It means that, when it's time for the real debate over tax reform, you've mislead people for a year.  

        Moreover, it's destructive in the long term.  Sure, it makes for a nice sound bite now.  But when it comes time for real tax reform -- probably after the election -- Democrats are going to HAVE to look to real tax reform -- lowering of top marginal rates and elimination of deductions/exemptions -- if they want any shot of increasing tax revenue from the top 1%.  If they spend a year telling people all you have to do is look at top marginal rates to see what "the rich" are paying, and that any decrease in top marginal rates -- even if it's coupled with elimination of deductions and  exemptions so that the rich pay more -- is a "massive tax cut for the rich," what happens when they want to adopt that approach as a way of raising more revenue from the top 1%?  How does any kind of meaningful tax reform get done?  

        •  Well, I don't want to argue (much) with someone (2+ / 0-)
          Recommended by:
          wishingwell, Meteor Blades

          ... who has studied tax issues and tax reform as you obviously have.

          You think people think "rates" are what what the rich pay. But we've seen stories about big corporations who pay nothing, or far, far less than the corporate rate. And we know Romney pays way below the top rate bracket.  I think people who are paying Federal income taxes this season know better than to equate rates with payments, because they themselves aren't paying the bracket rate on their own income. (Do some not pay attention? I don't know how you can fill our your own tax return and not, but you may have me on that point.)

          As for sound bite politicking at election time, I think that about matches the public's attention span. But if it doesn't, I'd rather see Obama surrogates reel off the names of corporations who don't pay "the rate." And the study groups trot out the numbers of taxpayers - in the tens of thousands - who do not pay at their rate bracket, than get mired in details about how deductions favor the wealthy, so they pay a lower rate ... and that is somehow even worse.

          You want "meaningful tax reform." Good night, so do I, but I watched Congress up very closely in the past when it had lots of chances - with some bi-partisan support - and I firmly believe it cannot muscle itself up to doing it. There are just too many powerful constituencies in favor of each and every tax break from the small one-company/one-industry breaks to the biggest ones like the mortgage deduction.

          What we're likely to get, at best, is a little chipping away that will authorize the GOP to cut top rates more. And I'm not at all confident of how some key Democrats in Congress would vote on these issues, either.

          I simply do not want to offer those untrustworthy bargainers any such fig leaves.

          Obama and strong Democratic majorities in 2012!

          by TRPChicago on Mon Apr 16, 2012 at 11:01:36 AM PDT

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          •  One deduction (0+ / 0-)

            For corporate and individual income tax.

            Money spent on wages and the labor associated with services is deducted.  Everything else is taxed.

            Bob "Trans-Vaginal" McDonnell...just saying...again ... and again....

            by NCJim on Mon Apr 16, 2012 at 01:07:34 PM PDT

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      •  TRPC - comparing marginal rates (1+ / 0-)
        Recommended by:
        nextstep

        before the Tax Reform Act of 1986 and those after is comparing apples and oranges. TRA86 transformed the IRS code for individual tax payers. While it may be useful political fodder comparing the pre-86 rates and those since is disingenuous.

        "let's talk about that"

        by VClib on Mon Apr 16, 2012 at 12:24:11 PM PDT

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        •  "Disingenuous". Why? The tax code changes ... (1+ / 0-)
          Recommended by:
          VClib

          ... almost every session of Congress. Would you have us get mired in the details of every alteration - OK, every major alteration - in the Code before we can compare rates? Will the other guys be so nuanced when they make their claims about rates and tax fairness?

          Obama and strong Democratic majorities in 2012!

          by TRPChicago on Tue Apr 17, 2012 at 05:33:47 PM PDT

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          •  TRPC - you don't have to discuss every change (0+ / 0-)

            But TRA86 was transformational and to not even give it a nod is not honest.

            "let's talk about that"

            by VClib on Tue Apr 17, 2012 at 06:01:56 PM PDT

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            •  OK, let's more than nod. Brackets were compressed, (0+ / 0-)

              ... and some deductions died. The 1986 act was billed as ground-breaking simplification. Perhaps it was, relatively. But not in terms of exceptions, conditions, rules and regulations that followed. And it screwed some middle income taxpayers with the alternative minimum tax which now produces so much revenue that Congress cannot afford to kill it ... all in the name of simplification.

              Now, help me understand why we can't compare rates. Perhaps we can agree after all, but to do so, we need more than just a declaration that rates aren't comparable because a lot changed in the tax laws.

              Obama and strong Democratic majorities in 2012!

              by TRPChicago on Tue Apr 17, 2012 at 06:35:01 PM PDT

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              •  TRPC "some deductions died" (1+ / 0-)
                Recommended by:
                nextstep

                An entire industry that structured tax shelter investments was wiped out with the stroke of a pen. Prior to TRA86 you could drop your federal rate as low as you wanted and all top earners participated at some level. At the time I was a top 1% earner and never had an effective federal rate higher than 10%, when the statutory maximum was 70%.  The effective rate for all of  the top 1% was about 35% prior to TRA86 and that dropped to about 25% when the top rate dropped to 28%. My personal effective rate tripled. Effective rates are a combination of what income is subject to tax and what rate that income is taxed. What TRA86 did was subject nearly all earned income to tax which was not the case prior to TRA86.

                So when you compare the top statutory rates prior to TRA86 what the reader doesn't know is that high income earners were sheltering their income from tax so they were not subject to those high rates. After TRA86 nearly all the earned income is subject to the statutory rate which makes comparisons not valid.  

                "let's talk about that"

                by VClib on Tue Apr 17, 2012 at 07:14:09 PM PDT

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                •  I see why you're sensitive about comparisons. (1+ / 0-)
                  Recommended by:
                  VClib

                  I agree that we should be focusing on effective tax rates, particularly those paid by the wealthy since their current tax preferences are things like (1) a much heavier reliance than the rest of us on preferential rates for long term capital gains and interest, (2) alchemy tricks like "carried interest" that magically changes income into investment, and (3) offshoring income in tax havens and untraceable accounts. Mitt Romney's 13.9% sounds pretty small compared to the rate for the top bracket. And it is!

                  What you and I won't be agreeing on is that rate comparisons can't be made without emphasizing a lot more detail about the tax code. Those levels of detail certainly can be significant when we talk about tax reform. But ...

                  But there's no way Progressives should help the GOP divert attention to raising taxes on the wealthiest by talking about how much lower their rates were in 1985.
                  I'll go with subtleties about taxes when the Republicans start using them. Then, I agree, there's at least a chance of having a square-on honest discussion. But the GOP goes the other direction every time it conflates tax increases with discouraging job creation by small businesses. And confabulates about supply side economics and trickle-down tax policy. And puts out proposals to bump off a few deductions as a way to euchre support for lower tax rates on high income brackets. And refuses to split the linkage in the "Bush tax cuts" of tax rate cuts between the high and the middle brackets. Or proposes a regressive tax structure that would, say, replace taxes on income with VAT-type taxes on sales.

                  Compared to those GOP positions, I think pointing out what the tax code was before 1986 with what it is 2012 is nostalgia, not good politics or even a good start on policy-making. After all, this is an election year.

                  Obama and strong Democratic majorities in 2012!

                  by TRPChicago on Wed Apr 18, 2012 at 05:23:18 AM PDT

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    •  But WHICH loopholes will you close? (1+ / 0-)
      Recommended by:
      eXtina

      And how loudly will XYZZY interest group squeal if you try?

      Ain't gonna happen.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      —Spike Milligan

      by polecat on Mon Apr 16, 2012 at 11:03:30 AM PDT

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      •  Simpson Bowles (2+ / 0-)
        Recommended by:
        VClib, nextstep

        does exactly that on the tax side -- proposed cutting deductions/exemptions, lowering rates, for a net additional $80 billion a year.  Details here.  That's why some Republicans reject it -- it's not revenue neutral, but raises additional revenue.   (Ryan's proposal is supposedly revenue neutral, but you can't validate that until you see the exemptions he proposes to eliminate -- which is why I said that's a completely fair criticism.

        You could raise even more revenue under a Simpson Bowles approach if you eliminated deductions/exemptions, and lowered marginal rates, but slightly less than S-B proposed, maybe a point or two.  

        A S-B approach to tax reform is the ONLY WAY you are going to get meaningful tax reform.  There is no way you are going to raise top marginal rates on a two-income family with AGI of $250,000 (many of whom already pay an effective tax rate of 26-28% under the AMT) while you still have those exemptions/deductions allowing some with much higher incomes to pay effective tax rates much lower.  No. Way.  

        •  like I said, "ain't gonna happen." /nt (0+ / 0-)

          Happy little moron, Lucky little man.
          I wish I was a moron, MY GOD, Perhaps I am!
          —Spike Milligan

          by polecat on Mon Apr 16, 2012 at 11:17:37 AM PDT

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        •  who cares what Simpson Bowles does? nt (4+ / 0-)
          Recommended by:
          wishingwell, wrights, cybersaur, agincour

          "I'm sculpting now. Landscapes mostly." ~ Yogi Bear

          by eXtina on Mon Apr 16, 2012 at 11:19:52 AM PDT

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          •  Because on the tax side, S-B had the correct (1+ / 0-)
            Recommended by:
            VClib

            approach.  There's general consensus on that.  Republicans and Democrats want to do the same thing -- eliminate deductions/exemptions and lower top marginal rates, especially for "the rich" who aren't zillionaires (two-income households with AGI $250,000 to $1 million).  The only difference is, Republicans want it to be revenue neutral, Democrats want it to raise revenue.    At any rate, S-B is the only approach that has any shot of getting through Congress.    

            When, after the election, Democrats turn to tax reform (they have to before "Taxmageddon") they are going to look very very silly when they adopt the approach they've been dishonestly denouncing as massive tax cuts for the rich.  

        •  and if you restored the Clinton rates, (4+ / 0-)

          you'd get $300 billion a year, not the $80 billion a year you're talking about.

          The top tax rates do matter. Restoring cap gains rates to match earned income rates does matter.

          Now, you may be thrilled by making the big Bush tax cuts permanent, but dicking around with exemptions is not enough to pay for them, which is why Simpson-Bowles had huge spending cuts to pay for your tax cuts.

          •  Only if you raise taxes on everybody (1+ / 0-)
            Recommended by:
            VClib

            Eliminating the Bush Tax Cuts on families over $250,000 raises only $700 billion over 10 years -  that's $70 billion a year.  S-B raises $80 billion a year.  You only get $300 billion a year if you eliminate the Bush Tax Cuts for families UNDER $250,000 as well.  Is that what you are proposing -- and what are the chances that happens?

            And why should a two-income family of $300,000 who now (due to the AMT) pays an effective federal income tax rate of 26 -  28% get their taxes INCREASED when people who make a lot more pay a far, far, far lower effective rate.  

            S-B proposed taxing cap gains as ordinary income, by the way.  Here's the detail.

          •  ferg - it's actually closer to $400 B/yr (0+ / 0-)

            Of which about $100 B comes from the top 2%. It would also raise the effective rates on the top 1% more than the Buffet Rule would.

            "let's talk about that"

            by VClib on Mon Apr 16, 2012 at 01:52:47 PM PDT

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          •  85% of Bush tax cuts go to household incomes (0+ / 0-)

            below the magic $250,000.

            Many Democrats operate under the false understanding the the bulk of the tax cut goes to the wealthy.

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Mon Apr 16, 2012 at 03:46:08 PM PDT

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    •  No. Let's go back to a time when... (0+ / 0-)

      ...of growing prosperity when the top EFFECTIVE rate was 55%, the mid-1950s, instead of your approach.

      A far cry from today's EFFECTIVE rate, and from the 91% marginal rate of the time.

      But getting a higher EFFECTIVE rate at anywhere near level is considered anathema.

      So we're probably stuck with lowering the top marginal rate. Therefore, we should first demand a vote on getting rid of deductions and loopholes. THEN, and only then, after that passes, we can have a vote on what the top marginal rate should be, a rate that should be a lot closer to the effective rate.

      Don't tell me what you believe, show me what you do and I will tell you what you believe.

      by Meteor Blades on Mon Apr 16, 2012 at 11:44:12 AM PDT

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      •  Who was that effective rate on, and what's your (2+ / 0-)
        Recommended by:
        VClib, nextstep

        source?

        The CBO only goes back to 1979 for effective tax rates.  

        I'd strongly suspect that any very high effective rate in the 1950's like that was only on the top .001%.  That 91% marginal rate only applied to incomes that, in today's dollars, are like $3.2 million a year and up.  There's never never never been a time when a two income family of AGI $300,000 (in today's dollars) paid anything near that.  And, a two-income family of AGI $250,000 - $1 million is likely to pay a FAR higher effective tax rate than anything in the CBO history because of the AMT, which gets them to effective tax rates of 26% - 28% on earned income.

        (One reason repealing the Bush Tax Cuts on families over $250,000 doesn't raise more than $70 billion a year is because if you couple it with fixing the AMT, a lot of families who were already paying very high effective rates under the AMT won't pay a lot more if the Bush Tax Cuts are repealed.)  

        All of this is to say, sure, raise the effective tax rates on millionaires incomes over $1 million.  I'm fine with that.  Even if you get it to 30%, which historically would be very high (I have never seen a solid number for what the effective tax rates were prior to 1979), you raise what -- $4 billion a year?  That's a rounding error.   You just aren't talking about a lot of money there.  You need to reach far, far down to talk about real money.  And an approach like S-B (lowering top marginal rates and raising effective rates) is the only way that is going to get done.  

      •  MB - I haven't seen any official data (0+ / 0-)

        on the effective rates from the mid 50's but most of the effective rates for the top 1% prior to the Tax Reform Act of 1986 were about half the top marginal rate or about 10 percentage points lower than your number of 55%. However, if you have a good reference it would make very interesting reading and would be valuable data set.

        "let's talk about that"

        by VClib on Mon Apr 16, 2012 at 02:05:17 PM PDT

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      •  A more complete picture of 1950s (0+ / 0-)

        includes we had 4 recessions in 10 years in the 1950s

        Federal + State + Local spending (including transfer payments) was 24% of GDP in 1950.  While in 2011 it was 37%.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Mon Apr 16, 2012 at 03:54:33 PM PDT

        [ Parent ]

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