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Maybe you think that raising the tax rates on the uber wealthy will raise more revenue.... I'm here to tell you it wont. This is one issue that Bill Clinton got right, increased economic activity will increase revenue. Clinton knew this and made sure under his stewardship the US economy bubbled and burped to a relatively healthy state.

While the top tax rate has gone up and down, from a low of 28% to a high of 94%, revenues have been fairly steady since 1940.

So then what the Farck is all the bruhaha about?

I'm sure if we raised the top rate to say....80% or 90%, like it used to be, we'd have a jump in revenue the next year, but we all know that the Uber wealthy will restructure themselves and the revenue party will be over.

What sort of society do we want?

I want a society where working and middle class families aren't taxed out of the economy. I want a society where most families can take care of their own, where most families don't have to resort to government handouts. I want a reality where most families can send their kids to college. And since the 1980's these realities became dreams and faded memories, while economic oppression became the reality.

Have you felt it, economic stress, sometime over the last couple of years?

Low tax rates like we've had since Reagan are still considered progressive, but they have a regressive effect, taxing the working poor and middle classes out of the economy, as a result families are less capable of taking care of their own, and more often than not rely on government hand outs.

When tax rates are high enough, the working poor and middle classes are engaged in the economy. The point is having a large and vigorous middle class that can participate as citizen legislators, send its kids to college, so those kids can invent lots of cool stuff for the corporations to make money off of. Consider kids as assets. How do you make best use of those assets? Educate those assets of course. Remember California used to have free college, until a certain Governor (Reagan).

I love the above chart, its from the Heritage Foundation, they made the chart to show that high tax rates don't raise more revenue, and whoops, it also shows that low tax rates don't raise more revenue. (This is one reason why we will the war of ideas in the long run). Just in case you aren't familiar with the top tax rates over the course of the last 80 years or so, I conveniently happen to have one from 2005:

The Progressive Policy Institute says basically the same thing, comparing real low tax rates to real high tax rates.


By itself, economic theory cannot choose between the two cases, and hard economic evidence does not fully support either side.

As you can see, Reagans 28% raised no more revenue as a percent of GDP, than when Ike jacked up the top rate to 94%. (IIRC there was a recession caused when Ike went too high) I fail to see any real relation to tax rates and revenue, but I do see a relation to low tax rates and economic oppression (Do you see those 2 yellow lines?).

Not too long ago Thom Hartmann wrote:

   "Progressive taxation has a long history: As Jefferson said in a 1785 letter to James Madison, "Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise." Hartman concludes, "Progressive taxation has helped create every middle class in the First World, and without it the middle class will vanish."

As a percent of GDP, revenues are incredibly consistent, Something I think Bill Clinton clearly understood when he raised the top rate a little and concentrated on getting the economy really ramped up, as GDP increased so did revenue, and over time Clinton was able to balance the budget. And do note that the economic stimulus happens first, and balancing the budget occurs later. FDR wanted to balance the budget in 1937, after all GDP in 1936 was a touch higher than inn 1929, 1936 was a good year, nearly 14% GDP growth, hours worked were down, wages were up But FDR made the mistake of cutting back about 2/3rds the WPA and CCC money in 1937, causing a recession. FDR learned his lesson and brought back the stim packages he had cut, plus he added a 200 ship navy building program. BTW it was this depression era fleet that beat Japan in the Pacific.

If all you want to do is balance the budget, then just get the economy cranked up. If you want the idea, called democracy to work, where folks get involved in participatory government, then you must stop economic oppression in the form of a tax system that taxes the majority of us out of the economy, and leaves running for office an entitlement for inherited money.

So at this point I am renewing my call for an increase of the Individual top tax rate to at least 60%, and using a minimum of 10 tax brackets to get the proper progressivity amongst the top income earners. And as clammyc said in  a recent dairywe're only talking about the top half of one percent of income earners. In simple terms if you have individual income, not family income, of 90k, you'll see a tax break.

I'm not just talking about letting the Bush tax cuts sunset, I'm talking about sunsetting Reagans 60% tax cut for the richest amongst us. Its time they pay their fair share. They're called Fat Cats for a reason, well its time a for a diet kitty kat.

Originally posted to Roger Fox on Tue Jan 05, 2010 at 06:05 PM PST.

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Comment Preferences

  •  Tip Jar (10+ / 0-)

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Tue Jan 05, 2010 at 06:06:00 PM PST

  •  $35,000/year in state tuition at UCLA law (1+ / 0-)
    Recommended by:
    Roger Fox

    Education at all college levels is becoming unaffordable to all but the professional and upper classes.

    look for my DK Greenroots diary series Wednesday evening. "It's the planet, stupid."

    by FishOutofWater on Tue Jan 05, 2010 at 06:17:54 PM PST

    •  Thomas Jefferson understood the effect this has (0+ / 0-)

      He started the University of Virgina as a free college so that the yeomanry would have the basic skill set to be the citizen legislators.

      So of course if you dont want people to parcipatate in the economy and run the government, DO NOT send them to college.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Tue Jan 05, 2010 at 06:21:14 PM PST

      [ Parent ]

  •  Top Rates Aren't For Revenue, But Protection (3+ / 0-)
    Recommended by:
    ogre, Brooke In Seattle, Roger Fox

    They're to prevent the rich from benefitting from the casino economics leading to panics and depressions that we've had whenever the top rates were below 70%. If they can't keep most of their winnings, there's no point disrupting their businesses' long term prospects for quick jackpots.

    The rich have to be kept dependent on their businesses for the medium term and society for the long term.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Tue Jan 05, 2010 at 06:20:19 PM PST

    Recommended by:
    Roger Fox, agito

      This discussion about income tax rates is very good and informative. We should consider that what you tax is even more fundamentally important. You'll see places in the Northeast built when there was housing frontage tax - the houses are quite narrow. In England there was a window tax, and some neighborhoods from that time have houses with no front windows or windows were bricked up.
      Taxing CDO and CDS transactions would make investors think again. Taxing high frequency trading (nano second trades ahead of the rest of us using dinosaur trading calls) would reduce another bit of massive fraud on Wall Street.
     On the other hand, giving tax breaks for employee hiring (with conditions), investment tax credits in targeted areas - e.g., industrial production (Domestic!), increasing tax breaks on machinery depreciation, would have similar effects.
     Of course social engineering should also include arresting Joseph Cassano & the board of AIG from 2007, John Thune, Lloyd Blankfein, et al would also make a good start. Or simply dispossessing them of all of their wealth - that would be a wonderful tax and possibly be worse than jail.

    "America is ruled by the moral philosophy of the dollar."

    by runningdoglackey on Tue Jan 05, 2010 at 06:36:06 PM PST

  •  Top marginal rates are meaningless (4+ / 0-)

    When those very high top marginal rates were in effect, the AGI subject to tax was very very different from the AGI subject to tax under today's rate.  Just two examples.  I'm old enough to remember when things like credit card interest was deductible from AGI.  Also, look up the Tax Reform Act of 1986 -- it so drastically changed what was deductible/exempt/excluded from AGI that, at the time, my CPA Dad ended up paying significantly more after the Act than he did before, even though his top marginal rate went down.  

    When you are talking about how much the rich are taxed (and whether certain tax rates lead to increased economic activity or increased prosperity for the middle class, for example), discussions of top marginal rates are completely meaningless without discussion of what income is, and is not, subject to that tax rate.  In order to have a meaningful discussion, you need to be talking about effective tax rates for people at various income levels.

  •  Uh (2+ / 0-)
    Recommended by:
    ogre, Roger Fox

    Where is the graph of revenues since 1940?  The top graph of GDP-per-capita isn't it and obscures the any data about distribution of income by its being an average.

    The Higher Taxes Don't Raise Revenue chart is also a little misleading because it compares tax revenue to GDP.  When GDP goes up, tax revenue goes up.  When GDP goes down, tax revenue goes down, obscuring the the relationship that the Heritage Foundation is arguing.

    Finally, top marginal rates are not the rate applied to all income.  A top marginal rate of 90% is only applied to income above a certain level, like say  $1 million.  The $999,999 of income below that are taxed at several lower rates, with the first, say $15,000 having a rate of 0%.  How much revenue is produced from the highest marginal rate depends on the number of people with incomes over, say $1 million, and the total across all of those people of their income over $1 million.  And it neglects the effects of lower capital gains tax rates.

    There needs to be a graph of average effective tax rates for folks in each bracket to determine how tax liability affects them.  And an analysis of revenues lost through, deductions, exemptions, and tax credits (and other loopholes).

    What you call oppression, an economist would call the difference between the marginal value of income earned from work versus that marginal value of income earned from work.  The tax rate affects that marginal value in that investors get to keep more of their income than do workers.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Tue Jan 05, 2010 at 06:39:12 PM PST

  •  Here's a very interesting table of (1+ / 0-)
    Recommended by:

    ... revenue by source from 1934 to present, with future estimates.

    Historical Tax Revenues by Source

    Notice the percentage paid by individuals as compared to the percentage paid by corporations; the figures aren't percentages but you can sort of eyeball the trends.

    Now you can compare these to changes in tax law, but tax law changes don't affect only the marginal individual rates.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Tue Jan 05, 2010 at 06:47:06 PM PST

    •  I see downturns in '71-'73 (0+ / 0-)

      1938 and 1990 reflected in total receipts. Nice web site.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Tue Jan 05, 2010 at 07:34:56 PM PST

      [ Parent ]

    •  I've seen that chart before (0+ / 0-)

      I've seen that chart before. And while it seems disappointing that corporate tax revenue is dropping, you have to see that the number of companies that are formed as corporations are also going down. more companies are being formed as s-corps and other "pass-through" revenue entities (where the business income isn't taxed until it becomes personal income of business members).

    •  And this shows some relation to rates (0+ / 0-)

      6% at a high to 1% at a low.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Tue Jan 05, 2010 at 08:12:25 PM PST

      [ Parent ]

    •  As tax law changes it's hard to compare (2+ / 0-)
      Recommended by:
      TarheelDem, Roger Fox

      total corporate taxes Vs total personal income taxes - as a large share of corporate taxes shifted to being reported through their shareholder's individual tax returns and not corporate returns.  

      This drives down what is reported as corporate taxes while driving up what is reported as individual income taxes - even though corporate income is being taxed in both cases. As the tax law changes, companies change their tax reporting to be though their shareholder returns or through the corporation itself.  This makes comparing the fraction of corporate taxes Vs individual taxes over time worthless as a great deal of corporate income is taxed through personal returns.

      What I am talking about has nothing to do with companies paying dividends and shareholders paying taxes on those dividends.

      Some corporate taxation is paid directly by the company - as is generally the case with publicly traded companies.  

      However for most privately owned companies (LLPs, PC, LLCs, partnerships, etc.) company income is not taxed through the corporation's tax return but is due and paid through the shareholders' personal tax returns.  So if you own 10% of one of these companies, you report 10% of the company's income on your personal tax return and pay the tax on this whether or not you received any dividends from the company.

      This website is owned by Kos Media, LLC (Limited Liability Corporation).  So the income of Kos Media, LLC is not taxed through Kos Media, LLC but through the tax returns of the owners of the Kos Media, LLC.  

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

      by nextstep on Tue Jan 05, 2010 at 09:58:15 PM PST

      [ Parent ]

      •  Good point (2+ / 0-)
        Recommended by:
        Roger Fox, nextstep

        That's why it is difficult to find any reliable way of analyzing the effect of the individual-corporate split or the bracket structure on tax revenues.  And more difficult still as a time series.

        50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

        by TarheelDem on Wed Jan 06, 2010 at 04:37:48 AM PST

        [ Parent ]

  •  Tax rates above 50% amount to wealth (3+ / 0-)
    Recommended by:
    VClib, tnproud2b, solar thermal

    confiscation. I don't think that someone should have to fork over .70 and .90 of every dollar that he owns to the government. For whatever reason too many people here just resent rich people or assume that, once a person makes a certain amount of money ($250K or more), it becomes "too much"; and that person should have no problem forking over his money to the government. I don't agree with that.

    •  Thats how we won WW2, (0+ / 0-)

      and got out of the Depression. ANd so you think thats bad, puh lease, quit your whining.

      Maybe you could read the dairy and actually offer some constructive criticism about something I wrote, not something you made up.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Tue Jan 05, 2010 at 07:22:38 PM PST

      [ Parent ]

      •  this community is getting craaazy (1+ / 0-)
        Recommended by:

        your taxation schemes will never take effect. This anti-wealth attitude will never take hold in America.

        It's pointless complaining about it because the rich will always win and all the haters out there in Dkos land will always be whining that other people are making too much money.

        •  preventing economic crisises is not UR concern? (0+ / 0-)

          Ever notice how these things happen way worse only when tax rates are at historical lows?

          On the other hand we won WW2 and got out of the Depression with high tax rates, so I guess it is worth talkinga bout it, 'cause thats where we came from. But I guess that doesnt count for you.

          My parents worked their way out of the depression and my father served in WW2. They and millions more benefited from tax fairness.

          FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

          by Roger Fox on Tue Jan 05, 2010 at 07:51:54 PM PST

          [ Parent ]

          •  Im all for tax fairness (2+ / 0-)
            Recommended by:
            debedb, tnproud2b

            and a progressive tax system, but 70-90% rate is ridiculous.

            Why are we paying so muc taxes? Why do we have to fork over so much money to pay for a bloated military industrial complex?

            We should be the party of lower taxes for all, by cutting military spending.

            •  What are you some billion right winger, WTF (0+ / 0-)

              Warren Buffet says its wrong for him to pay at a lower effective tax rate then his Secretary.

              Do disagree with Buffet?

              FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Tue Jan 05, 2010 at 08:04:59 PM PST

              [ Parent ]

            •  Billionaire, I mean (0+ / 0-)

              FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Tue Jan 05, 2010 at 08:13:07 PM PST

              [ Parent ]

            •  And if we use 15 tax brackets (0+ / 0-)

              the top rate might not even kick in until you've made 5 or 10 million bucks, income below a certain level is exempt from the highest rate.

              And since 80% of Americans make about $90,000 or less we get a tax break. In fact one might get a small tax break making as much as $250,000 - a year.

              Now I'm not saying raise the top rate to 90% or 94%, like it was, just 60%. This is not extreme.

              FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Tue Jan 05, 2010 at 08:19:19 PM PST

              [ Parent ]

      •  Tax Reform Act of 1986 (TRA'86) (0+ / 0-)

        The TRA'86, which lowered the top marginal rate from 70% to 28% TRIPLED my effective federal income tax rate. During the 80's I was a top 1% earner and never paid a federal tax rate as high as 10%. When looking at historical tax rates the published rates are interesting, but it would be useful to know the effective rates. Prior of TRA'86 it was easy to shelter nearly all of your federal tax liability.

        "let's talk about that"

        by VClib on Tue Jan 05, 2010 at 09:55:00 PM PST

        [ Parent ]

    •  The high marginal rates are only on (1+ / 0-)
      Recommended by:
      Roger Fox

      the amounts over, say, 250,000 or even 5 million or whatever...nobody's talking about raising rates on the first dollar of taxable income. Maybe before we get our underwear in a twist about top marginal rates, we should think about having one set of rates for all types of individual income that is taxed, rather than lower rates for capital gains and qualified dividends, which results in people making over $500,000 paying lower rates than those making $50,000.

      "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

      by Alice in Florida on Tue Jan 05, 2010 at 08:40:11 PM PST

      [ Parent ]

      •  I do mention wanting a min 10 brackets (0+ / 0-)

        Which is language some dont understand. Thats for darn sure, OTOH my dairy is real basic.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Tue Jan 05, 2010 at 08:48:13 PM PST

        [ Parent ]

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