
The Missing $1,000,000 Tax Bracket - soundsop
http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html
======
nazgulnarsil
People that don't understand economics always want to talk about this big
nebulous pool of money that apparently sits in vaults somewhere actively
making the rich richer and the poor poorer. This is simple hogwash. the vast
majority of the wealth is tied up in the working capital of the corporations
that these ultra-wealthy run. The people we should be focusing on helping
aren't the 'poor'. Give them money and it disappears. On the other hand, if
you give small business owners (who represent the vast majority of
millionaires, and employ about 75% of the people in the US) you get new jobs
and new products. remember the old adage about giving a man a fish vs teaching
a man to fish? If you HAVE to subsidize something subsidize free fishing
polls, not free fish.

~~~
mattobrien
Supply side economics has a fundamental flaw: it lowers aggregate demand. The
middle class has been able to make up for this over the last 30 years in two
ways - by having women join the workforce, and by taking on more and more
debt. Debt can be piled on for quite a long time, but when the credit bubble
pops, you get what we are going through now. And when consumers find out that
debt is not income, and they retrench in their spending, then there is no
market for the goods all the saintly business owners are making. This is the
worst case scenario.

~~~
nazgulnarsil
_Supply side economics has a fundamental flaw: it lowers aggregate demand._

I can't make heads or tails of this. if oversupply occurs prices decrease.

~~~
mattobrien
Supply side economics does not really increase supply. That's just the
moniker. Supply side economics means tax cuts for the well to do, who will
supposedly then create the jobs that will grow the economy. But this rests on
the middle class stagnating - something that has in fact happened in the last
30 years. The top 1% control 22% of wealth (as of 2006), compared to 8% in
1980. For comparison's sake, the last time this percentage was this high was
1928. If you don't think there's a high correlation between income inequality
and levels of debt, then you are fooling yourself.

There's a point at which the middle class being too poor puts the entire
economy at risk. We are there now. Being an acolyte of supply side economics
today is like being a communist in 1989 - you can keep believing in the true
faith, but it's been refuted in the real world.

~~~
nazgulnarsil
what are you talking about? income inequality doesn't mean anything if
everyone's standard of living is increasing. Would you prefer YOUR standard of
living to go DOWN just so you can have the satisfaction of watching the rich
get poorer? I would much rather have everyone get richer even if that means
the rich get richer. You're comparing percentages but you're neglecting that
on a per capita basis the 78% of 2006 is much much larger than the 92% of
1980. It's not even close.

whose debt are you talking about? household debt or government debt? if the
former it is up to people not to live beyond their means, if the latter the
government is simply stealing from us. Where we are at now has nothing to do
with the middle class and everything to do with government intervention in
1995 and again 2000 and 2001.

what the hell has modern macroeconomics done to our country? all over the
place I see specious analysis such as this comparing numbers that either don't
mean anything, are inaccurately measured, or can't be shown to be an indicator
of other things.

edit: I pulled up some numbers

GDP in 1980: $2.7 trillion

GDP in 2006: $13.2 trillion

Population in 1980: 226.5 Million

Population 2006: 298.4 million

GDP per capita 1980: $11,920

GDP per capita 2006: $44,000

$11,920 in 2006 dollars according to the CPI: $28,824

we're not quite twice as wealthy, but we're far FAR richer now than in 1980.
Income inequality means nothing.

~~~
mattobrien
You are wrong. Everyone's standard of living is not increasing. Quite the
opposite. Adjusted for inflation, median incomes have stagnated or declined in
the last 30 years. Household debt has skyrocketed oftentimes as people have
simply tried to keep up. Yes, some people have lived ostentatiously beyond
their means, but many others are just trying to stay afloat, and deal with the
rising costs of everything as their paychecks stay the same. Conservatives
told people that incomes did not matter because their investments (stocks and
houses) were rising in value. This fallacy has been utterly exposed.

The gains in GDP have more or less gone entirely to the top 10%, and in
particular, the top 1% of the population. This makes everyone else feel like
the pie isn't growing - because it isn't for them. Now that their stocks and
homes are worth substantially less, and their credit is drying up, people have
to spend less. And this fall in aggregate demand has disastrous consequences -
not just here, but abroad as well, for all the countries that depended on
exporting things to US consumers (Germany, Japan, and China).

Income inequality is of course not in itself a bad thing; it is the
consequence of an economy where risk and work are rewarded. The question is
extreme income inequality. Obviously this is a subjective matter. You may not
think we have extreme inequality now, but when it's at the highest level it's
been in 80 years, I'd venture that it is extreme. And extreme inequality often
leads to falling aggregate demand and debt deflation. In short, a depression.
If you think income inequality means nothing, you know nothing.

~~~
nazgulnarsil
your own numbers refute that. look at your original percentages. do basic
math.

the amount the wealthy control has almost tripled, but the amount of overall
wealth has almost quintupled.

imagine that the nation's wealth is represented by a dollar and I control 8%
of it. Over time the wealth of the nation doubles but my percentage control
has grown to 22%.

before I got 8 cents and the rest of the nation got 92 cents to share.

now we have 2 dollars that I get 22% of...44 cents.

the rest of the nation now has $1.56 to share. Discounting the fact that i'll
probably reinvest part of my 44 cents, the nation is still much wealthier than
before.

------
dkokelley
My ideal income tax structure would look like this:

If you make under $25,000, you pay no income tax. Everyone else pays 20%. You
receive tax breaks for disabilities, children, educational spending, and
charitable donations. Corporations would be taxed at 30%, but owners could
take profits without being double taxed. Corporations could also receive up to
50% tax breaks through charitable works and/or donations (provides tax
incentive for community projects, being 'green', or donating to a cause).

It all seems reasonable to me. Maybe I'm missing something. This would also
simplify the complicated and bloated tax code we currently have. It could also
encourage more businesses and workers to move here, which would stimulate
growth.

 _Note: I chose 20% because I saw somewhere else a chart that showed that the
ultimate tax revenue the government took in regardless of tax rate over the
past 50 years or so was 20% of GDP._

~~~
divia
Here's the chart I'm pretty sure you're thinking of:
[http://s.wsj.net/public/resources/images/ED-
AH556B_ranso_200...](http://s.wsj.net/public/resources/images/ED-
AH556B_ranso_20080519194014.gif)

from the 2008 Wall Street Journal article titled "You Can't Soak the Rich":
<http://online.wsj.com/article/SB121124460502305693.html>

The phenomenon is called Hauser's Law:
<http://en.wikipedia.org/wiki/Hauser's_Law>

and intelligent criticism of the chart can be found here:
[http://www.portfolio.com/views/blogs/odd-
numbers/2008/05/20/...](http://www.portfolio.com/views/blogs/odd-
numbers/2008/05/20/lying-with-charts-wsj-edition?rss=true)

~~~
dkokelley
You sir, are a gentleman and a scholar. Thanks for bringing those articles up.
I checked the last link you mentioned, and I wasn't really satisfied with the
criticism. Maybe I just didn't understand the article, but it seemed to me
that all the author said was "A lot of other tax rates balanced out the
highest marginal tax rate shown in the curve." I would have liked to see an
alternate conclusion instead of a simple refutation. But again, thank you very
much for the links.

------
helveticaman
The problem I have with the phrase "Taxes for the rich" is not so much the
"taxes" part as the "the". Who are these rich people? How do you draw the
line? What does it mean for a society to push more and more people into this
category in order to tax them punitively?

~~~
Tangurena
If you're making over $380k, then you're in the top 1% of households in the US
by income.

If you're making over $150k, then you're in the top 5% of households in the US
by income.

If you're making over 100k, then you're in the top 10% of households in the US
by income.

[http://elsa.berkeley.edu/~saez/saez-
UStopincomes-2006prel.pd...](http://elsa.berkeley.edu/~saez/saez-
UStopincomes-2006prel.pdf)

There are some lines. I'd draw it at "top 5% by income."

~~~
comatose_kid
I wouldn't define 'rich' by income alone, because 150k ain't rich in the Bay
Area.

~~~
gjm11
That's like saying "150k ain't rich if you have a 100k/year gambling habit" or
"150k ain't rich if you have an enormous house purchased with a big mortgage".
Living in the Bay Area is a luxury that only the well-off can afford without
great hardship; it has benefits which mean that many people do it even though
after paying to live in the Bay Area they don't have much disposable income.
Just as many people choose to take out large mortgages, or buy fast cars, or
gamble, or whatever, even though they may not then have much disposable income
left.

~~~
diego
The same can be said of living in the US. You could move to a cheaper part of
the world, perhaps even telecommute. You could argue that you grew up in the
US, so staying home is not a luxury. Those who grew up in the Bay Area don't
see living there as a luxury any more than you see living in the US as a
luxury.

~~~
gjm11
Actually, I don't live in the US. But yes, living in the US is a luxury, but
that isn't relevant to the US tax system because everyone taxed by the US
(more or less) lives in the US. (When people say things like "we should tax
the rich more" or "we shouldn't tax the rich more", "rich" is really shorthand
for "among the best-off of the people being taxed".)

------
david927
This is an idea whose time has come. Look at what happened during the last
depression: the top marginal tax rate jumped from around 25% to over 90%. I
think a broadly-graduated marginal property tax on non-agricultural properties
is also a good idea.

A lot of people made off like bandits during this bubble. A 70% tax rate at
income over a million is probably unavoidable. We can't just fleece the
average tax payer for generations and leave the top 1%, many of whom profited
during this time, undisturbed on their St.Barts vacations.

~~~
dkokelley
I have a hard time understanding your logic behind this. The people who make
more money (including those who 'made off like bandits' like you say) were
already taxed for their earnings. Are you saying that these people (who
profited during the bubble) will keep earning money? Or maybe you're saying
that we need higher taxes now so that the next bubble the government will get
in on more of the action?

Also, how is the government fleecing the average taxpayer anymore than it is
fleecing the rich? Aren't the rich not only taxed more (because they earn
more), but taxed at a higher rate?

~~~
david927
That's the reason for the heavily-graduated property tax -- to target
specifically those who might have profited under the bubble, yet who are not
profiting as much now.

I never intimated that "the government is fleecing the average taxpayer more
than it is fleecing the rich." (Although Warren Buffet has said just that.)
And since we own the government, I find "fleece" to be a strange word. Yes,
the rich pay a higher rate on some of their income. And what we're saying here
is that there should be even higher rate for income over a million.

~~~
robotrout
This "bugger your neighbor" attitude that prevails in this country is removing
every freedom that we teach our children make this country great.

Hell yes. Take more money at the point of a gun, why not? They have more money
than you do, the greedy bastards. They don't deserve it. You deserve that
money, or you know somebody that does. Go for it!

~~~
gnaritas
> This "bugger your neighbor" attitude that prevails in this country is
> removing every freedom that we teach our children make this country great.

This "defend the wealthy" attitude that prevailed in this country for the last
30 years has nearly ruined this country and served only to further increase
the economic inequality between the rich and the poor.

If you think that what makes this country great is that the rich are allowed
to walk all over the poor then fuck you. Now give me your wallet you greedy
bastard, you can skip the steak so someone else can get some health care.

~~~
dantheman
It's not a defend the wealthy, it's a defend what you earned, and that you
should not have your wealth stolen from you by jealous people who wish they
had what you had. I'm not wealthy. Income inequality is not by definition bad.

Your self-righteous attitude is disgusting, do you live at a subsistence level
funneling all of your extra income to the needy around the world? If not, then
how can you demand that others skip their steak to provide health care for
someone else.

~~~
gnaritas
You are not an island and what price society decides to set for its services
is not theft, they are not stealing from you and you do not earn anything
outside the platform society provides for you which enables that earning in
the first place. Society has a right to take a share of your earnings; so says
our constitution.

Extreme income inequality is bad because it's bad for society as a whole and
at some point society as a whole becomes more important than the individual.

Your self-centered fuck the rest of the country it's my money attitude is
equally disgusting. We aren't talking about the whole world, we're talking
about our country, because that's what our social contract obligates us to
support with our taxes. I pay my taxes, don't cheat on them, and don't whine
about it and call it stealing like a self centered narcissist who thinks his
right to property matters more than someone else right to life. It doesn't,
not even in the natural world; people would just kill you and take your
property by force to survive.

If, as a collective, society decides to limit the maximum wealth an individual
is allowed to obtain and funnel it back down to limit the amount of poverty,
thus capping both extremes and making life generally better for the vast
majority of people, well... I'm good with that as are the vast majority of
people.

Inequality is not bad, you have to let people reap rewards for their efforts,
up to a point, but not to the point that it damages us all.

~~~
DanielBMarkham
_you do not earn anything outside the platform society provides for you_

What an interesting statement. Sounds to me like you're saying the individual
is there to serve the societal structure, instead of the other way around.

As a simplification, I would certainly hate to live in a place where society
made decisions for me. I'd much rather live in one where I made decisions for
society. In other words the government is made legitimate by the informed
consent of the natural legislature -- the people. The people do not exist to
serve the government. Individuals exist just fine without governments, but not
the other way around.

The entire structure of a democracy is that, at the end of the day, it is the
person that is ultimately sovereign. Democracy isn't some club used by the
majority to tyrannize the minority. If we were talking about Jim Crow laws,
this would be immediately evident -- you can't simply take things from people
because a greater number of voters want to. But somehow because we're talking
about rich people the message doesn't sink in.

Okay. I allowed myself to get sucked into this. Sorry. I know better. It just
seems like you guys are so close, yet I know in my heart you're not going to
come to any kind of understanding.

~~~
gnaritas
> What an interesting statement. Sounds to me like you're saying the
> individual is there to serve the societal structure, instead of the other
> way around.

No, I think one can't exist without the other, but what I'm saying is things
like trade and property don't exist outside the social structure setup by
society in today's world.

> Individuals exist just fine without governments, but not the other way
> around.

Actually, no, they don't, because there are no individuals, there are just
lot's and lot's of people and we can't get along without some form of
government. With no explicit government in place, crime rules. We can all
agree that criminal rule is not "getting along fine", and in fact we have,
it's why we create governments to begin with.

No man is an island, we are tribal creatures, and always have been even before
we were man.

> Democracy isn't some club used by the majority to tyrannize the minority.

Actually, it is exactly that. We've put protections into place in many
circumstances to force a super majority to be required, but it very much is
tyranny of the majority. Look at the laws around us we're all forced to obey
and tell me it isn't?

America is NOT a society based on individual liberty and freedom, it IS a
society based on the moral whims of the majority. If this were not the case,
there would be no victimless crimes and the default position of everything
would be legal and getting something made illegal would be a huge battle. This
is the exact opposite of what were are now.

Interesting and enjoyable comments from you though, thanks.

~~~
DanielBMarkham
You realize that the United States had _no_ federal government for 12 years,
from 1775 to 1787, right? And that for a large part of its history, people
were responsible for their own crime control?

I could go on -- at length -- about various places where people did just fine
without government structure. In the old west, for instance, marshals might
not make it through town but once every couple of months. Didn't seem to slow
down westward expansion that much. European traders worked all over the world
just on a handshake and a promise for centuries.

Anthropologists studying tribes tell us that there are a few things that
distinguish true tribes from modern cultures. One of those is the idea of
private property: what is mine is mine and you can't take it from me unless
under very unusual circumstances. In very primitive societies, the chief or
the tribal elders can come around and just take what they want. It's only
after we had the concept of private property and contract law that we saw
significant economic and cultural growth. It was observing this state of
nature that eventually created the political theory that is the bedrock of the
country.

In communist China, just after the revolution, they would have "people's
courts". These courts basically consisted of a mob of people who would bring
in rich people, describe at length how they "exploited" the workers, and then
strip them of all their goods. Sometimes for good measure they'd send them to
jail or kill them. It was great political theater -- the crowds loved it --
but what were the results?

This was not a time of record growth, or even a time when the lives of the
average citizen got that much better. All they really ended up doing was just
replacing the folks who got rich signing contracts and respecting property
rights with the folks who got rich being politically connected and doing
whatever they liked.

Just some things for you to consider. I know I don't want to see any version
of people's courts here in my lifetime.

~~~
gnaritas
No federal government does not mean _no government_. Everywhere you find
people you _will_ find some form of government they have setup to resolve
disputes even if that government is no more than what they consider a fair
arbitrator. If we all agreed on everything we wouldn't need a government but
that just isn't going to happen, ever.

Yes, for short periods of time small groups of people can get along without a
government. That is not relevant, we're talking about a country here and you
aren't really suggesting that we could get by just fine without a government
are you? Government means any ruling body, not just the feds.

I don't want to see those kinds of kangaroo courts in place either, but the
privilege of property, and it is a privilege, is not absolute and never has
been. When necessary, we've always had some means of seizing it for the good
of the many over the whims of the individual. This is as it should be. We
should respect property rights as much as possible up to the point that they
start hurting the many too much.

~~~
DanielBMarkham
Yes, you are making my point. What happens in these cases? What happens, say,
when a merchant from Venice seeks to work with an Arab trader in the 14th
century?

Each voluntarily gives up some sovereignty to create a minimal set of rules so
that a transaction can take place.

Government (at whatever level) consists of each of us voluntarily giving up
some of our sovereignty so that we can have private property and contract law.
The protection of our property -- our lives, our housing, our money, etc -- is
the goal here. Without that protection, and without our voluntary surrender of
power, government becomes something you _do_ to somebody else. It becomes a
tool of control. Jefferson was against the U.S. Constitution, for instance,
for just that fear -- that by removing politicians from the people at some
point you lose the heart of a democracy.

Now of course we have to have a national defense, and therefore we're going to
have taxes. I don't think anybody wants zero government. In fact, government
can do lots of cool things, like a space program or promote clean energy. But
the key question remains: are people voluntarily giving up sovereignty for
freedom to transact? Or are they stuck with no choices? Is government
something for maximizing freedoms, or something for equalizing property? Are
we still getting equal representation for our taxation? Is government
something we create, or something that we're stuck with?

If property is a privilege to be taken at the whims of the majority, then
we're back to the caves again.

~~~
gnaritas
It's a different world now. I can't just grab my shit and move west a few
hundred miles to get away from this government, or go find a new continent and
establish a new country with the rules I like. The world isn't that big
anymore. Consent to being governed is no longer an option. We will be governed
whether we like it or not.

You can only look back in history so far before you see the world was so
vastly different that comparisons aren't valid anymore. Government is already
something past generations has done to us and there's no going back, it's
already a tool of control, Jefferson already lost.

> But the key question remains: are people voluntarily giving up sovereignty
> for freedom to transact? Or are they stuck with no choices?

The question does not remain, we've been stuck with no choices for decades if
not generations. No natural born citizen alive today _joined_ the U.S.
voluntarily, we were all born stuck with it.

It's not _if_ property is a privilege, property is a privilege, period. The
government can seize it, destroy it through inflation, or whatever else we let
them do and they've been doing it for a long long time.

Your arguments are all so _academic_ and _what if'y_ , man I'm talking about
reality here. The government can seize your property for suspicion of drugs,
lose the case, and keep your property. They can seize the ultimate personal
property, your own body, and imprison you because of what you chose to put
into your own body. That's life in this country.

This idea that government is some voluntary agreement between the government
and the governed just isn't the real world anymore, the days of overthrowing
the government are long gone. You're talking about what government should be,
I'm talking about what it is, so what's your point again?

~~~
DanielBMarkham
Dude, you keep moving the goalposts here. I explain one part to you and you
change the subject to be something else.

I'm talking about the theory of governance, which doesn't go anywhere. Some
things work and some things don't. There is a reason why the United States
became such an economic powerhouse. Those first principles don't ever
disappear.

So when you say something like _you do not earn anything outside the platform
society provides for you_ : it's demonstrably false both in historical and
current terms, it reverses the role of the individual and society, and it
adopts a wealth redistribution principle that has failed over and over again.

Other than that, it's a great idea. I'll leave you to it.

~~~
gnaritas
Dude, sorry, don't mean to move the goal post, but I have an excuse. I'm doing
all this laying at home with pneumonia doped up on codeine. I really was just
trying to understand your point.

If that is demonstrably false, then please do demonstrate, because I don't
believe that for a second if we're talking about the real world and not some
abstract ideal government.

Governments have a monopoly on the markets I'm allowed to trade in and will
jail me if I try to trade outside of their markets, so they clearly provide
the platform and law and rules upon which all trade is based.

This is to my benefit, without those laws and rules someone could just take my
property by virtue of being bigger and badder. The government is at least the
big bad that I have some say in how it's structured rather than some random
company which I have no control over.

Conservatives like to point out how redistribution of wealth has failed over
and over again, but look around man, the entire civilized world is liberal,
heavily liberal in American terms, so it certainly has not failed as far as I
can see.

This idea that America has somehow succeeded where others have totally failed
is something I just find absolutely absurd. Not being number 1 is not failing.
Every other government in the world is not a failure.

As far as I'm concerned the measure of the success of a country is how happy
it's people are, not how much money it cranks out. Happiness is not measured
in dollars.

~~~
david927
Fantastic thread, you guys. Gnaritas, in my opinion you've got it absolutely
right. There are some strange memes in America, such as that it's the richest
country on earth, socialism is bad and anything government touches turns
rotten. The problem is that the truth is rarely found in extreme locations.

America is certainly not even a contender for richest country, and as you
state, many countries, especially in Europe, are showing that socialism works
quite well. It's the reason we're moving to that model with healthcare.

> the measure of the success of a country is how happy it's people are, not
> how much money it cranks out

Exactly. And countries with more smaller gaps between the rich and poor are
almost exclusively much happier. I've been to two countries which are very
similar (I won't state which to avoid offending anyone here), but Country A
was depressing and sad, old women drunk in the streets -- I couldn't leave
fast enough. I went to Country B and, although it was poorer, the people
seemed much happier. It was much more alive and upbeat. I found out later that
Country A has a huge disparity in wealth, Country B very little. I credit this
with being the single strongest contributing factor to the quality of life in
these countries, and a huge factor generally in the quality of life in any
country.

------
dantheman
The problem is that the notion of an income tax is considered a legitimate way
of funding the government. In reality the government should be funded by
property, sales, and tarrif taxes (not protective tarrifs, just a fee to
offset the cost of government).

The current income tax we have now is worse than the serfs had, @least they
only had to work 1 or 2 days on the fields for no pay. We have to do that on
our income, let alone all the other taxes and fees we need to pay.

~~~
ivankirigin
If I were to start a country, I would cap spending, and pay for things with a
fiat currency. Inflation would be an unavoidable, flat, and implicit tax. The
trick would be to control spending.

------
wlievens
In Belgium, the 50% tax bracket starts at some 30,000 EUR/year. And that's
exclusive of the 13% social security tax.

There must be some kind of sensible middle road...

------
gfunk911
I was bored, so I made this table of effective tax rates for various
incomes/years, indexed to 2007 dollars.

<http://mharrisdev.com/income_tax.html>

------
ars
I would like to see the charts compared with GDP per capita. Just curious if
there is any correlation.

~~~
colins_pride
Just make sure you get the direction of causation right ..

