Restoring the 91 percent tax rate wouldn't solve our budget problems
E. Thomas McClanahanPresident Obama says ending the Bush tax cuts would put the top marginal rate back at 39.6 percent, where it was in the booming years of the late ‘90s — so what’s the big deal?
Well, the top rate will actually be higher than that after a raft of Obamacare taxes go into effect next month, including a 3.8 percent levy on investment income for affluent taxpayers.
But the larger point is that you can’t raise the income tax rates high enough to finance the ever-widening hole created by entitlements.
Michael Barone shows why. He looked at a table in the Economic Report of the President listing federal revenues going back from 2011 to 1939. Guess what? Revenues have never gone above 20.9 percent of GDP — even though the top tax rate has jumped all over the place. Even when the top rate was 91 percent in the 1950s, revenues didn’t crack that 20.9 percent ceiling.
The problem is that as the top rate rises, loopholes proliferate and people have a greater incentive to hide income, move it into different periods or seek tax shelters.
The policy goal is what it’s always been: Make the economy grow faster. I’m not saying the world would end if the top rate went up a few points, but there’s a real risk it would make a weak economy even weaker — taking us farther from the goal of fiscal stability.
For those inclined to scream “trickle down,” if there are severe consquences from a tax increase, they won’t be felt by the rich. They’ll hit average people, especially those already on the margin.
If your goal is alleviating our fiscal problems, the two imperatives are: faster growth and entitlement reform.
As Daniel Thornton of the St. Louis Fed wrote in a recent paper, the era of chronic budget deficits goes back 40 years and the main reason isn’t tax rates. It’s spending.
Thornton finds that spending for Social Security, Medicare and Medicaid — along with “other payments to individuals” (i.e., check writing by government) — accounts “for essentially all of the increase in government spending that has given rise to the deficit/debt problem.”
Further: “…most of the increase in spending that generated the persistent deficit over the 38 years before the financial crisis was spending for Medicare and Medicaid, particularly Medicare.”
So naturally, Washington has tied into a knot over tax rates for the rich, something that almost seems beside the point.
Mark Hastert
5 months, 1 week agoI’d be completely happy to leave the rate where is is if we could follow the lead of “The Great Ronald Reagan” and tax capital gains as regular income.
Phil Cardarella
5 months, 1 week agoI vote we do both — at least for incomes over $250K. Let us rebuild the middle class and the nation’s infrastructure.
Frankly, much of the 1% is lucky that they have not been tarred and feathered after the meltdown of the economy — from which they still seem to have profited.
Too much accumulated wealth is inherently dangerous to a Republic. Remember how — in Amimal Farm — all animals were equal, but some were more equal than others? Well, for every Buffett or Gates, there are a bunch of Kochs.
A guy with a nutty idea pushing a misappropriated shopping cart is harmless. The same guy with the same nutty idea — with a billion dollars to spend and an army of sycophants paid to tell him it is not nutty — is a threat to the Republic.
On this Huey Long was right: It is OK to have all of the money you and your children and grandchildren can possibly spend. But, it is not OK for you to have ALL of the money.
JR Beillenhouser
5 months, 1 week agoPhil - You are real good with the numbers aren’t you? You can’t tax enough to catch up with the current spending, how do you really propose that we spend more on rebuilding the middle class (just what does that mean in real world speak anyway) or the nation’s infrastructure. For God’s sake, look at a report on the revenue vs the spending of the Federal Govt.
And you know your literature also. Animal Farm was about the dangers of collectivism and totalitarianism. Any high school junior can tell you that. The animals that were more equal than the others were the Pigs and who claimed to run the farm, ala the Administration. Orwell was talking about the government in societies like the Soviet Union, or soon to be, our government.
I am not rich, rather very middle class. But this class warfare has to stop. The only danger to our Republic at this point is all of the money the government is just flushing away. That will be it’s great undoing, and raising several billion dollars is going to do nothing to change this reality.
Mark Hastert
5 months, 1 week ago“But this class warfare has to stop.”
…funny, it’s never class warfare when they do it. Worker productivity keeps increasing yet earnings decline. Adjusted family incomes keep falling, poverty increases yet the rich get richer and control an increasing share of America’s wealth. There is class warfare alright, and the rich are winning. Money buy’s favor, tax code, and incentives we ordinary folks don’t enjoy.
Maybe you’re content to be a sharecropper JR, but I’m not. If I help to create wealth I expect to get fair compensation. If you’re concerned about collectivism and communism maybe you should stop cashing those checks and filling those prescriptions and start living you principles. Or are you a Napoleon?
As for myself I made a deal when I took my first job at 14 sacking groceries. I’ve fulfilled my obligation to you and GH and, I expect my children and grandchildren to fulfill theirs to me.
George Hunsucker
Northland
5 months, 1 week agothe class warfare libs will not admit there is a spending problem ET. I appreciate your attempts at educating them, I am afraid it is fruitless…
Let’s just let them do what the hell ever they want and then see what happens. It will be great for gold as this group destroys America….
George Hunsucker
Northland
5 months, 1 week agoWhat the wealthy will do…. but libs refuse to accept this
http://www.myfoxny.com/story/20307940/french-star-depardieu-moves-to-lower-tax-belgium
JR Beillenhouser
5 months, 1 week agoMark - you are going after the wrong people. No, I’m not rich, but I would like the opportunity to be, and I want my kids to have the same opportunity. You worked hard, so did I, big deal. Your fallacy is that you expect those behind you to take care of you, yet you have no problem burdening them with massive debt. Blame the rich, but they are not the problem, Washington is the problem.
“If you’re concerned about collectivism and communism maybe you should stop cashing those checks and filling those prescriptions and start living you principles.” Not sure what you are saying here, doesn’t make sense.
Oh the repayment to you is not going to happen, SS and Medicare will not exist in a few years,. You will get nothing, and you can take comfort that people with the same ideas as you allowed the system to go broke. A job well done.
Mark Hastert
5 months, 1 week ago“I’m not rich, but I would like the opportunity to be, and I want my kids to have the same opportunity.”
On that we can agree the problem being that for the last three decades it’s become increasingly hard to move up or even tread water for middle and working class Americans not to mention the poor. There have been a number of recent studies published that concluded just that.
I’m all for hard work and opportunity but when the fruits of my labor are accruing to just a handful of folks at the top of the pyramid it’s time for a change. America thrived, there was opportunity, and a shot at prosperity for more Americans before we let ourselves be conned into thinking that the rich are somehow more special than the rest of us, that we (and ours) are children of some lesser god. It’s the 2% who are entitled in this country. Let’s reform that entitlement program first. If more of us could become and remain middle class and better many of our other issues about SS, Medicare, etc. would go away.
George Hunsucker
Northland
5 months, 1 week agoyep libs, the rich will just stay and let you confiscate their wealth…
http://www.france24.com/en/20121210-critics-savage-depardieus-new-role-tax-exile
George Hunsucker
Northland
5 months, 1 week agoMaybe you smart libs can answer these quesitons—
The six contradictions of socialism in the United States of America • America is capitalist and greedy - yet half of the population is subsidized. • Half of the population is subsidized - yet they think they are victims. • They think they are victims - yet their representatives run the government. • Their representatives run the government - yet the poor keep getting poorer. • The poor keep getting poorer - yet they have things that people in other countries only dream about. • They have things that people in other countries only dream about - yet they want America to be more like those other countries.
This is why we conservatives shake our heads as you libs as you destroy America…..
Phil Cardarella
5 months, 1 week agoAre you including those who get special tax breaks — like paying 15% (or 10%) — among those subsidized? Or Exxon & BP? Or shipping money and jobs overseas, but still getting tax breaks?
Yes, I know that Animal Farm was originally about the dangers of collectivism. But the lessons transfer well to the way we have “socialized” capitalism to protect the wealthy. If Orwell were writing today, he would still fear the power of the State — but one of the things scariest would be the way that it has established a Guilded Age II corporate aristocricy. The middle class pays for the cost of making and safeguarding wealth — in both taxes and productivity — while the super-rich and corporate-rich get a relative free ride.
We have neither socialism nor class warfare — but could use a healthy dose of both.
Mark Hastert
5 months, 1 week ago“The six contradictions of socialism”
You have a vivid imagination GH and a illogical undecipherable sort of logic, for instance;
“The poor keep getting poorer - yet they have things that people in other countries only dream about. • They have things that people in other countries only dream about - yet they want America to be more like those other countries.”
Your not talking about the same countries are you? The same circumstance?
When you write of “their” representatives” are you suggesting that they are able to pass all the laws they want? er….filibuster? super majority?
As one of the subsidized are you claiming to be a victim? Are you volunteering to give up your subsidy? It’s hard to figure out what you’re saying.
We’ve had three decades now of the pendulum swinging in favor of the few rich and powerful. It’s beginning to swing back toward equilibrium. People are fed up.
Rush is right. You America doesn’t exist anymore.