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View Diary: Give Me One Good Reason Why The Rich Should Pay Higher Taxes (214 comments)

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  •  Eisenhower is not a legitimate comparison (2+ / 0-)
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    VClib, Huginn and Muninn

    as the statistics say, the definition of AGI was changed in 1986.  There were so many more deductions and exlusions before then that almost nobody paid those top marginal rates.  Nobdoy.

    The effective federal income tax rate on the top 1% was actually HIGHER during the Clinton years than it was in 1979, when the top marginal rate on that group was 70%.  

    •  cite your sources, please (3+ / 0-)
      •  Common knowledge. (2+ / 0-)
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        VClib, coffeetalk

        You should google it.  The revenue act of 1986 was a Very Big Deal.

        •  The revenue act of 1986 (1+ / 0-)
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          has no bearing on what percentage of the upper bracket actually paid their taxes during the Eisenhower years.

          •  I can't say how wrong that is (3+ / 0-)
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            burrow owl, Huginn and Muninn, DawnN

            It made a HUGE difference on what income was subject to tax.  If somebody pre-1986 made $10 million and could shelter 90% of that, and paid a 90% rate on the rest, they paid $900,000.  If they can shelter on $1 mlllion and pay only a 30% rate, they pay 30% times $9 million, or $2.7 million.  

            top marginal rates -- what you call the percentage -- are MEANINGLESS without also discussing what income is actually SUBJECT TO  those rates.  That's why every legitimate listing of marginal rates puts a caveat -- as did the one that the diarist cites -- that statistics pre-1986 don't correlate to statistics post 1986.  Because there was a huge difference in what income was taxed.  

            •  How about comparing what % they actually paid (1+ / 0-)
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              to their AGI?  

              Compare 1980 to 2007.  

              Those numbers are available in the Tax Foundation document sited in the diary and generally support the concept that while the 1986 "Reform" legislation did change the definitions, the amount reported before and after that year as AGI and the effective rate of tax based on how much of that AGI was paid in taxes were not radically different.

              Looking just at effective rate of tax paid tells much the same story.  They're making much more and paying a much smaller portion of it in taxes.

              It's 'redistribution' whether it happens before or after the money is made and whether it goes up to a small group or down to a larger one.

              by Into The Woods on Thu May 13, 2010 at 06:30:20 PM PDT

              [ Parent ]

              •  Yes, the rich paid more in (1+ / 0-)
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                Into The Woods

                1980 -- they paid an effective federal income tax rate of 22.3%.  Under Clinton, in 2000, they paid 24.2%.  In 2007, under Bush, they paid around 19%.  

                They are about to go back up to Clinton rates on post-1986 AGI when the Bush tax cuts expire, so they'll go back (most likely) to around 24% (or the highest rate since the CBO began keeping statistics in 1979).  

                What's scary to me, frankly, is that a return to the Clinton tax rates on post-1986 AGI is already built in to the budget projections and the projected deficits are still completely unsustainable,   even according to the Obama administration.

                That tells you that, while the rich are going to pay more -- it's already built in -- everybody else is ALSO going to be paying significantly more, as well.  

            •  1950s (1+ / 0-)
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              Into The Woods

              I do not accept your contention that during the 1950s someone who made $10M had access to shelters for 90% of it. Those shelters evolved later.

      •  Right here (3+ / 0-)
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        burrow owl, VClib, Huginn and Muninn

        here's a table by the Tax Policy Center based on CBO statistics.  (The CBO file is in PDF and takes longer to load.)

        Effective federal income tax rates are the second table.  In 1979 they were 21.8% on the top 1%.  In 1989, after the Reagan tax cuts AND after the 1986 Tax Reform act eliminated most deductions and exemptions. the effective federal income tax rate on the top 1% was 19.9%.  A drop, but not nearly as much as the difference in top marginal rates would indicate, because of all the pre-1986 deductions and exemptions.  In 2000, the last year of the Clinton administration, top effective federal income tax rates on the top 1% % were 24.2%.

        The rich paid MORE under Clinton in federal income taxes than they did in 1979 with those 70% top marginal rates.  

        •  Eisenhower left office in 1961. (1+ / 0-)
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          •  CBO doesn't keep statistics that far back (1+ / 0-)
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            but what these tables conclusively demonstrate is that the pre-1986 very high top marginal rates, like the 70% top marginal rate in 1979, applied in a situation where much of the income of the rich could be sheltered from tax.  The Tax Reform Act of 1986 dramatically changed what income was taxable so that much, much, much lower top marginal rates actually resulted in, during the Clinto years for example, the rich paying MORE.

            What I'm saying is not controversial.  It's basic fundamental principles of tax policy -- top marginal rates are only part of the equation.  You have to also look at what income is subject to those rates.  If I make apply a 90% rate to $1 million, but I can shelter $800,000 of that, I pay $180,000 in taxes.  If I have apply a  rate of 30%, and I can't shelter any of that million, I pay $300,000 in taxes -- MORE at a lower rate, because more of my income is taxable.  That's what the 1986 act did -- make a lot more income taxable than was taxable pre-1986 (like during Eisenhower).  This is basic, common knowledge if you want to discuss tax policy.  That's why you need to look at EFFECTIVE rates if you want to know what people are really paying.

    •  But they did pay a lot more (1+ / 0-)
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      burrow owl

      Maybe not the 90% highest marginal rate, but just based on what they actually reported and paid, the average effective federal tax rate for the top 1% in 1980 was 34.47%.  By 2007 that had dropped to 22.45%.

      (Source is same Tax Foundation document sited in the diary.)

      It's 'redistribution' whether it happens before or after the money is made and whether it goes up to a small group or down to a larger one.

      by Into The Woods on Thu May 13, 2010 at 06:25:55 PM PDT

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      •  You are looking at the wrong table (1+ / 0-)
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        burrow owl

        if you are talking about 70% or 90% rates, you are talking about federal income tax.  The table for efffective federal income tax is the SECOND table.  Similar tables are here.

        The table labeled simply "total effective federal tax rate" also lumps in SS, coporate income taxes, excise taxes.

        I cite the effective federal income tax rates to show that top marginal income tax rates (the 90% under Eisenhower or the 70% pre-Regan) are not an indication of what the rich pay in federal income taxes.  What is an indication is the effective federal income tax rates.

        I'm trying to talk apples to apples.  

        •  % of AGI paid in income tax: Tax Foundation (0+ / 0-)

          Average Tax Rate, 1980-2007 (Percent of AGI paid in income taxes)

          Your tables compare various types of federal taxes paid to what they define as "comprehensive household income" which appears to include all income, taxable or not, from any source including government assistance.

  (see note at bottom)

          Not saying there is anything defective with that, but the results differ in part because they are measuring not only different taxes but also comparing them to different defined incomes.  

          My diary is based on the Tax Foundation's comparisons of federal income tax and adjusted gross income reported on tax returns with positive AGI and their source is the IRS.  

          I usually choose a source that is coming from the opposite side of my general argument to avoid issues of bias and the Tax Foundation is pretty anti-tax and pro-rich as far as I can tell.

          It's 'redistribution' whether it happens before or after the money is made and whether it goes up to a small group or down to a larger one.

          by Into The Woods on Thu May 13, 2010 at 07:33:59 PM PDT

          [ Parent ]

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