Tax the Rich? Not so fast.

[volinbham]

Here's an interesting finding from an economist.


His work shows that tax revenues have been relatively stable at about 19.5% of GDP regardless of the highest marginal tax rate.

Tax revenues are highly correlated with GDP but independent of marginal rates since tax increases are negatively related to GDP.

Lesson? If you want to increase tax revenues, grow the economy.

 

[BigPapaVol]

Here's an interesting finding from an economist.


His work shows that tax revenues have been relatively stable at about 19.5% of GDP regardless of the highest marginal tax rate.

Tax revenues are highly correlated with GDP but independent of marginal rates since tax increases are negatively related to GDP.

Lesson? If you want to increase tax revenues, grow the economy.

what's missing from the graph is the growth in GDP associated with those marginal tax decreases. Your message gets to it with the negative correlation between tax increases and GDP. More interesting would be to show the actual government receipts, broken down by remitter income level, while marginal rates are down. Such graph would very likely show the wealthy still paying an enormous percentage of total taxes, but the total receipts would be up massively.

Lesson, you want to increase tax revenues, grow the economy by lowering marginal rates.

 

[TennNC]

Here's an interesting finding from an economist.


His work shows that tax revenues have been relatively stable at about 19.5% of GDP regardless of the highest marginal tax rate.

Tax revenues are highly correlated with GDP but independent of marginal rates since tax increases are negatively related to GDP.

Lesson? If you want to increase tax revenues, grow the economy.

So, from 1950 until around 1963 or so, the top income earners only kept 10% of their income? Am I reading that correctly?

 

[OrangeEmpire]

That is fair.... government should take 90% of our earnings.

 

[BigPapaVol]

So, from 1950 until around 1963 or so, the top income earners only kept 10% of their income? Am I reading that correctly?

yes, the top marginal brackets were at one time little more than pure robbery.

 

[TennNC]

yes, the top marginal brackets were at one time little more than pure robbery.

I didn't know that.

 

[OrangeEmpire]

I didn't know that.

Wow TennNC, that is your liberal utopia!

Imagine all the money that would be available for the collective good!

 

[BigPapaVol]

I didn't know that.

it's exactly what spawned the tax accountant and tax attorney businesses.

 

[WA_Vol]

Warren Buffett addressed this better then anyone, I've read:

Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

Buffett said that was despite the fact that he was not trying to avoid paying higher taxes. "I don't have a tax shelter," he said. And he challenged Congress and his audience to see what the people who "clean our offices" are taxed, to loud applause.

Buffett Slams Tax System Disparities - washingtonpost.com

 

[WA_Vol]

Buffett asked the employees in his office to calculate the percentage of their income that they pay in income and payroll taxes. Buffett, who said that he does his taxes without an accountant and does not use tax shelters, revealed that he paid 17.7 percent of his income in taxes, while the average for his office staff was 32.9%. None of Buffett's employees paid as low a rate as he did.
Buffett then issued his CEO challenge: Buffett will donate a million dollars to the favorite charity of any member of the Forbes 400 list of wealthiest Americans who can successfully challenge Buffett's claim that the average tax rate paid by the Forbes 400 billionaires is lower than the average tax rate of their receptionists.

Warren Buffett's CEO Challenge — Rockridge Nation

 

[MG1968]

if Buffet doesn't think he's paying enough taxes, he should go ahead and cut a check to the Federal Treasury. And if he feels guilt toward his receptionists tax rate, I'm sure he can find a way to overcome that as well.

Marx had a name for people like Buffet, "bourgeoisie socialists".

 

[volsforever27]

Buffet is a prime candidate for the bill which would allow you to pay more if you wanted... somehow I don't think he would.

 

[BigPapaVol]

and no pronouncement from buffet to the congress can any longer be taken at face value. His 17.7% bill is absolute garbage. If he didn't have some carry forwards or anything else, he would have 35%. If he wants to pay his share, he can fill out a 1040EZ with only 46 MM as his AGI. That would be unsheltered.

Bottom line is that he now has a political axe to grind so he's engaging in sensationalism. He's just doing what loads of the uber-rich do once they've made it and no longer need income. He's building a legacy by advocating for the less fortunate and ridding himself of the evil rich guy image.

 

[KB5252]

yes, the top marginal brackets were at one time little more than pure robbery.

That is where Reagan got his philosophy from as far as taxes go. He would make so much per year making movies but when he reached a certain cap he knew he would be taxed out the :shaking2: so he quit making movies until the next year. He saw the strain this put on the people whose jobs depended on the industry and came up with "trickle down economics".

 

[TennTradition]

Would revenue per capita as a percentage of GDP per capita not be a better metric for this sort of comparison? I doubt the numbers would be all that different and our population probably hasn't changed all that much ... but something like that along with everything listed in 1950 dollars would seem to be the most appropriate comparison (but then again, although I play one sometimes on the internet, I am indeed no economist ).

 

[KB5252]

Would revenue per capita as a percentage of GDP per capita not be a better metric for this sort of comparison? I doubt the numbers would be all that different and our population probably hasn't changed all that much ... but something like that along with everything listed in 1950 dollars would seem to be the most appropriate comparison (but then again, although I play one sometimes on the internet, I am indeed no economist ).

Did you stay at a Holiday Inn Express last night?

 

[TennTradition]

Did you stay at a Holiday Inn Express last night?

No...that's the problem. If I had then I would have already known whether I was right or wrong.

 

[KB5252]

No...that's the problem. If I had then I would have already known whether I was right or wrong.

Good Point!

 

[BigPapaVol]

Would revenue per capita as a percentage of GDP per capita not be a better metric for this sort of comparison? I doubt the numbers would be all that different and our population probably hasn't changed all that much ... but something like that along with everything listed in 1950 dollars would seem to be the most appropriate comparison (but then again, although I play one sometimes on the internet, I am indeed no economist ).

that would be exactly the same as revenue as a % of GDP, unless my math is off.

 

[TennTradition]

that would be exactly the same as revenue as a % of GDP, unless my math is off.

I thought about that...but then I thought that would only be true for a given slice of time or if population were constant....but maybe I'm thinking about it backwards.

Edit: On third thought, I think that I am wrong. Revenue as a % of GDP would always be Revenue/GDP * 100. So, if you were to divide out population for both, you would get the same percentage. Wow...you would think that I would actually put it down and think about it before typing such crap . So...as I suspected...I was wrong about the first one. How about the 1950 dollars...do you think that it is already in constant dollars?

 

[BigPapaVol]

How about the 1950 dollars...do you think that it is already in constant dollars?

I think it's immaterial since we're talking in % terms. If not, the numbers have to be normalized somewhere, whether in 50, 80 or current.

 

[WA_Vol]

Lesson, you want to increase tax revenues, grow the economy by lowering marginal rates.

If that's true, then why in 2000 was 1.004 trillion collected under President Bill Clinton and only 794 Billion collected in 2003 after Bush's tax cuts? It wasn't until 2006 that the govt collected over a trillion in taxes again. Read this article by Ben Stein:

In fact, the federal government collected roughly $1.004 trillion in income taxes from individuals in fiscal 2000, the last full year of President Bill Clinton’s merry rule. It fell to a low of $794 billion in 2003 after Mr. Bush’s tax cuts (but not, you understand, because of them, his supporters like to say). Only by the end of fiscal 2006 did income tax revenue surpass the $1 trillion level again.
By this time, we Republicans had added a mere $2.7 trillion to the national debt. So much for tax cuts adding to revenue.

In Class Warfare, Guess Which Class Is Winning - New York Times

 

[MG1968]

If that's true, then why in 2000 was 1.004 trillion collected under President Bill Clinton and only 794 Billion collected in 2003 after Bush's tax cuts? It wasn't until 2006 that the govt collected over a trillion in taxes again. Read this article by Ben Stein:



In Class Warfare, Guess Which Class Is Winning - New York Times

revenue from income taxes fell, but what about tax revenue from the economy?

 

[WA_Vol]

More:

• • The Bush tax cuts have contributed to revenues dropping in 2004 to the lowest level as a share of the economy since 1950, and have been a major contributor to the dramatic shift from large projected budget surpluses to projected deficits as far as the eye can see.

Tax Returns: A Comprehensive Assessment of the Bush Administration’s Record on Cutting Taxes, Revised 4/23/04

 

[BigPapaVol]

If that's true, then why in 2000 was 1.004 trillion collected under President Bill Clinton and only 794 Billion collected in 2003 after Bush's tax cuts? It wasn't until 2006 that the govt collected over a trillion in taxes again. Read this article by Ben Stein:



In Class Warfare, Guess Which Class Is Winning - New York Times

Because when you cut corporate taxes to nil via recession, eliminate all the enormous capital gains (which would have been in the 2000 receipts) from the Wall St bust, factor in all of the portfolio loss protection for the big earners' income and you have a recipe for decreased gov't receipts. It's just not a real tough scenario to decipher, but I'm certain the NYT painted it as tax cuts gone awry.

The negative correlation between marginal tax rates at the high end of the range and gross government tax receipts is reality.

Finally, you might as well reach behind yourself and crap in your hand, scan said excrement, then paste it on this site because I would find that as reliable as anything the NYT has to say on economics, politics or both.