Bad Arguments Against Tax “Increases”

By James Kwak

Last week, a professor making more than $250,000 per year (with his wife’s income) put up a blog post (since taken down) criticizing President Obama for wanting to “raise” his taxes.* The post basically said, after all of their basic expenses, “we are just getting by despite seeming to be rich.” If his taxes go up, he says he will have to cut back on spending, which will depress the economy, or perhaps even sell his house or cars, which will depress those asset markets. The problem, he argues, is that the tax “increases” won’t affect the true super-rich, because they use tax dodges to avoid paying taxes; instead, they will just hurt the economy.

This post has been the target of some howitzers on the Internet, mainly focused on the professor’s income and expenses, but I wanted to raise a few more general policy points.

First, it’s just not true that the rich will reduce their spending dollar-for-dollar as their taxes go up. The reason that tax cuts are a lousy form of stimulus applies in reverse: just as extra cash leads to more saving, less cash leads to less saving. And this is especially true for the rich, who have more slack in their budgets. There might be individual rich households that will reduce their spending dollar-for-dollar, but in aggregate it just won’t happen.

Second, there certainly are hard-working, young, dual-income, multiple-child, productive families who have high expenses. It is true that there is no single thing as “the rich.” Different people making $250,000 consume different amounts, and it’s not just a function of personal virtue; it’s also a function of where you live (some of those high salaries come in places with high costs of living) and where you are in your career lifecycle. But the obvious implication of that banal observation is that we should tax wealth, not income, or wealth in addition to income. If the people arguing against “raising” taxes on the rich were arguing for a wealth tax, or at least for a meaningful estate tax, then I would have more sympathy for them. (Or, say, a consumption tax with an exclusion for the first $40,000 of consumption.)**

Third, the “Cayman Islands” argument (that the really rich don’t pay taxes) is mainly false and, to the extent it is true, again yields a different policy conclusion. Warren Buffett, for example, pays an average tax rate of 18%, so the claim that “the super rich don’t pay taxes” is just not true. Now, that is a lower tax rate than many middle-class households, but the reasons for that are well known. Again, we tax income, not wealth; we tax capital gains and dividends at much lower rates than salary (again, thanks to George W. Bush), and the rich get a larger proportion of their income from investments; and the taxes that affect most working people are actually regressive, because of the cap on the payroll tax. So I would have more sympathy for the Cayman Islands argument if its author were also arguing for lifting the cap on the payroll tax and eliminating the tax breaks for capital gains and dividends.

Fourth, if it is true that the rich are feeling squeezed, this actually undermines the main argument against tax “increases”–that higher marginal rates will cause people to work less hard. If households making over $250,000 per year really have no fat in their budgets, then “raising” marginal tax rates will not affect their propensity to work, which is what you want from an economic standpoint.

Fifth, the professor makes the tired old argument that his spending (which goes to local “entrepreneurs”) is better than government spending (“handouts”). In general, I agree that it is better to make our production decisions based on consumers’ preferences rather than congressional votes. But the entrepreneurs-vs.-handouts is a red herring. In the long term, the choice is between consumption by the rich and health care for the elderly (Medicare). You can call this redistribution.*** But given that old people generally need more health care than young people, given that old people generally make less money than young people, and given that health care costs continue to grow faster than inflation, the question is whether we’re willing to let people suffer in their old age simply because they couldn’t save enough money in their lifetimes to pay for their medical emergencies in retirement. (And there will also be people who make lots of money, save lots of it, and still go broke in old age because they lose the medical lottery.) There are people who are willing to come out and say that. But most people opposing tax “increases” are not. Instead, they prefer to malign government spending in general.

In the long term, we have a big fiscal problem. Yes, “raising” taxes will have some impact on the economy. But we have to do something. Since partisan gridlock rules out any significant reform of the tax system (and even rules out sensible compromises like delaying the tax “increases” until the economy recovers), the only available lever to increase government revenue is letting Bush tax cuts expire. It’s a blunt tool, but in the current political climate it’s the only one we’ve got.

* Of course, as we all know, it’s President Bush who is raising his taxes; what’s happening is the Bush tax cuts had sunset provisions so that they could make the true fiscal costs of the tax cuts seem artificially small, and those sunset provisions are about to kick in.

** The other implication is that if you’re young and have a high salary but high expenses, you should just borrow more money; you’re really just borrowing from your future self, because someday the house will be paid off, the kids will be done with college, and you’ll be making even more money since you’ll have more seniority and experience.

*** Most people think that a progressive tax system is redistributive. I’m not sure. The issue is who you think benefits more from government spending–the rich or the poor. The conventional answer is that the poor do, because they get “handouts.” But imagine a world without government. Who would lose more? Assuredly the rich, who would no longer have the armed forces, the police, and the courts (and the FDIC) to protect their property. I guess you could have a private security market, but how could you maintain, say, a financial system where most of your wealth is bits on a computer somewhere without a government to back it up?

157 thoughts on “Bad Arguments Against Tax “Increases”

  1. I believe taxes should be raised on those making over $250K, let me state that to begin with. But I also see where some of these people are coming from, especially those right at the edge of that tax bracket.

    First of all, there is simple ignorance. There are people out there who make $250,000 – 300,000 a year in income and assume their taxes will go up. What they don’t understand is the tax system that allows for certain deductions – even for those in brackets that hight – and deductions for retirement plan contributions etc. so most people who look at their “salary” and assume they are in that bracket will actually be in a lower bracket of taxable income and not be affected at all.

    However, there are people like me. I’m not complaining – my family doesn’t really suffer, however a few years ago I was making about 20% more money. My lifestyle reflected my income, I wasn’t living hand to mouth but I wasn’t stowing away that full 20% either, only about 7% (I have children, they are expensive). So while I’m not suffering and I don’t want sympathy, things are harder than they used to be. We are not going on a vacation this year, we have much more “intense” discussions about what we are or are not going to spend money on since there is very little flexibility in our fixed expenses because we couldn’t possibly sell out house and downsize since it’s underwater (even though we put down more than 20% when we purchased it with a regular conventional 30 year mortgage.) In fact we can’t even refi and lower expenses because of the equity erosion. In the meantime, my health insurance costs have increased about 50% over the last three years so there’s another $7,000 less take home pay.

    Once again, I’m not asking for sympathy nor should these others get it – but people don’t like to cut back on anything. So those that are making $250K a year in sales, or what have you, that were making $300K a year three years ago have had to cut back on their lifestyles and they don’t feel rich because they are actually poorer than they used to be. Combine this with just outright lying from Fox News and other outlits plus once again that ignorance about how the tax system works and you see where the misplaced anger comes from.

  2. “But imagine a world without government. Who would lose more? Assuredly the rich, who would no longer have the armed forces, the police, and the courts (and the FDIC) to protect their property.”

    Tell it to the Koch brothers.

    In the meantime, James, you could help to spread the word that Americans actually support economic equity and fairness, as demonstrated by the study covered here:

  3. People are also vastly overestimating their tax increases. The proposal is about letting the 33/35% rates go up to 36/40%. The top rate kicks in at $373k for married-filing-joint. If you’re making $300k, you’ll see an additional 3% tax on $50k – $1500. This amounts to a total tax rate change of 0.5%.

  4. Wages and investment income (a.k.a “unearned” income) should not be taxed at the same rate. My wages are risk free and, especially as a government employee, come from the backs (actually minds) of those who CREATE wealth for our nation. Wealth is not something that exists and is hanging up in the sky that the wealthy somehow have more access to. Wealth has to be created continuously. Those who create it do so by taking risks. Those who know how to take risks, and win, create wealth. Those who invest in risk takers who win deserve their rewards. In 1993 I invested my money in Lucent and lost it. Those who invested in Apple got rich (a.k.a “unearned” income). How many late hours did those investors stay up while determining which stock to buy? Should we tax their gain to keep hiring more federal government employees like me? Or spreed the wealth as if somehow others are “entitled”to it. If we do, pretty soon the risk reward equation will change to where the risk is not justified as most of the rewards go to those the politicians tell us are entitled. Companies like Apple in 1993 (which was no sure bet) will be starved for money and the next IPod will not get created.

  5. Why we shouldn’t raise taxes.
    Our elected representatives have proven time & time again that they will spend the tax revenue + some per centage over that. There is no evidence in the last 60 years that they will show any fiscal restraint. I have heard no one argue that their behavior will change & in fact they have just been on a huge spending binge.

    The only restraint on spending that has been proven is the increase in interest rates by the market when the amount spent gets out of hand.

    Why raise the bar for that restraint to kick in? Why provide a larger revenue base, when it will slow down the restraining behavior of the market.

    We (the tax payers in the private economy) are getting going to foot the bill no matter what. Why shouldn’t we do it in a way that kicks in a restraining influence as soon as possible, and at a level decided by the markets rather than the electorate?

  6. First of all here is the distribution of income for the top third (this is from 2007, the latest IRS data). It shows the cutoff income for different groups.

    Look at the rightmost bar in the graph, the top 0.1%.

    Just to the left of it is the group Obama proposes to screw.

    Give me a reason that somehow that group should suffer the most.

    I am not arguing against a tax increase. I’m arguing against a tax increase that disproportionately falls on that group.

  7. Technically you are both right. What’s really at issue here is frankly progressive taxation really doesn’t work.

    Hear me out for a moment

    1) when products go up or down not that many companies announce it. No oil company will say it’s gas stations will increase prices say 10%…it doesn’t work that way as prices fluxuate. Sometimes proctor and gamble might say prices are going up but that’s rare

    2) If taxes go up then we know this AHEAD of time. Therefore anyone thinking they can lower their spending can simply hedge against it…how? Well let’s say the tax is on people making 250K and up..someone makes 253K..chances are they’ll give $3,001 to charity and therefore be in the lower tax bracket :)

    3) It is often said that the rich don’t pay their fair share of taxation..well that’s because if someone is rich they do NOT have to work! Bill Gates doesn’t punch a clock. Most of his money is in stocks. He pays capital gains taxes and probably not income taxes.

    There really is no direct taxation on wealth..only the means to become wealthy.

    No one realistically needs billions or even millions of dollars in order to live. Therefore if there’s no reason to work they can quit.

    In reality the only method of constant income for the government is georgism. Basically you don’t tax labor (as income tax revenue goes down during high unemployment), you don’t tax sales since there’s an underground economy…you tax ownership of land and big ticket items…it taxes cap and trade and tv spectrum etc. The original idea of rich in the USA were land owners not people that simply had money.

    Of course the biggest issue in today’s economy is we are using tens of millions of people on a “test”. No one generation has ever retired based on the idea of a liquidation of stocks,bonds, mutual funds and houses. Retirement was a artificial concept based on the words of Otto Von Bismark about 130 years ago!

  8. Wait what? Your “argument” doesn’t prove why we shouldn’t raise taxes, and in fact is an argument for raising taxes.

    If we’re going to have a set amount of spending ANYWAYS, then maybe we ought to have a tax receipt level that matches that, so we’re not simply dumping massive debt that shackles our country for the next 100 years. The idea that reducing taxes would force spending cuts is decidedly nonsensical, as we’ve seen since 1981. In fact, “conservatives” are arguably more inclined towards huge spending than liberals, since their relatively minor cuts in domestic spending have been hugely outweighed by the massive increases in military spending over the same period.

    The problem this country has is that we are arguing a debate on false pretenses. Most Americans believe that we have this huge amount of fat in domestic spending, when in fact any budget expert will tell you that we’re at the bare minimum (or less) of what it takes to operate programs. Our infrastructure is crumbling as a result. The huge components of our budget: Social Security (which is ostensibly paid for by regressive taxes on workers), defense spending, Medicare, interest on the national debt.

    At the same time, the supply side tax cuts have not only NOT EVER resulted in the promised GDP growth (the laughable Laffer curve), but in fact GDP growth since 1981 has been far less than GDP growth during our high tax period of 1949 to the 1970s. Moreover, in the 5 year periods following major supply side tax cuts (tax cuts for corporations, investors and the wealthy), GDP growth has generally been far lower than in other periods.

    We’ve stopped investing in our future, under the mistaken assumption that if we stopped having the government do this investment, and instead gave money to investors, the invisible hand of the market would invest in our future instead. That supply side theory is as idiotic as Communism and ultimately has hollowed out our country.

  9. Between 1946 and the mid-1980’s, arguably the greatest period of wealth creation by a nation in the history of the world, or at very least over such a short time span, the top tax rate never dropped below 50% and dividends and capital gains were taxed at the same rate as ordinary income. Why do we think raising taxes 3-4% will somehow destroy the economy and the incentive to save and invest? I suppose if his taxes are raised 4.6% Steve Jobs will just sit at home and refuse to innovate Apple products? If he has to pay taxes at ordinary income rates rather than 15% Warren Buffett will just sell everything and live in a cabin in the woods? Both those guys built their companies in an America with higher rates on investment and risktaking. Where do the rich invest anyway – U.S. and Muni bonds, wouldn’t a sovereign default affect their wealth far more than an extra 4% in taxes?

  10. Please say you’re kidding re #1? THEY’RE MARGINAL RATES. The extra $3k in income does NOTHING to the taxes you pay on the first $250k you earned. That person’s hypothetical tax bill would increase $90. Really…donate $3k to save $90. Someone does not deserve to be in that bracket if that’s how they think.

  11. James,

    Great post. I love your *** point, a point that is rarely brought up. Thank you for expressing it.

  12. Right, because the police officer, factory worker, etc. does not take any risks in earning his wage. Whatever.

  13. WRT to the increasing health care costs, we should focus our attention on creating an environment where doctors consider the bottom line.

  14. First, of all, lets agree on the facts. After Obama’s tax hike, one particular group, those earning 250K-400K will get squeezed. Here is the tax data. Currently, they pay the most in Fed taxes. (if you include payroll, they pay even more).

    Data is from

    In 2001 (See Line 47, Line 139)
    top 1% paid 27.5% on 292K income (9,969 SS cap on double income, + medicare ) + 4% FICA = 31.5%
    top 0.1% paid 28.2%, on 1.3 mil income (9,969 SS cap on double income ) +0.07% FICA = 28.3%

    In 2007 (See Line 53, line 145
    top 1% paid 22.45%, on 410K income (12090 SS cap on double income + medicare) + 4% FICA = 26.5%
    top 0.1% paid 21.46% on 2.1 mil income (12090 SS cap on double income + medicare) + 0.03% FICA = 21.5%

    >>If the people arguing against “raising” taxes on the rich were arguing for a wealth tax, or at least for a meaningful estate tax, ….
    So taxes should be based on what one buffon said or not said?

    >>Third, the “Cayman Islands” argument (that the really rich don’t pay taxes) is mainly false,..

    No it,s not. The top 400 pays only 16% in taxes. The top 1% pays double that. “don’t pay taxes” does not mean zero taxes. It means they

    >>Warren Buffett, for example, pays an average tax rate of 18%, so the claim that “the super rich don’t pay taxes” is just not true. Now, that is a lower tax rate than many middle-class households, but the reasons for that are well known.

    That’s a ridiculous aruemnt. When Buffet pays 18% and someone earning 410K on average pays 26.5% taxes, Buffet is not paying taxes. That’s how common folks understand that.

    >>Again, we tax income, not wealth; we tax capital gains and dividends at much lower rates than salary (again, thanks to George W. Bush), and the rich get a larger proportion of their income from investments; and the taxes that affect most working people are actually regressive, because of the cap on the payroll tax. So I would have more sympathy for the Cayman Islands argument if its author were also arguing for lifting the cap on the payroll tax and eliminating the tax breaks for capital gains and dividends.

    So do it. Here is the opportunity for Obama. Restore capital gains tax completely, eliminate the carried interest tax, keep the tax cuts on wages. Raise taxes much more on the plutocrats.

    Instead of that, here you are, claiming some idiot made a poor argument against the Obama proposal, so we should screw labor income more.

    Before I end, 2 more things.
    -Obama is not even promising to restore completely the pre-Bush cap gains tax. He is promising to restore completely the pre-Bush taxes on wages.

    -Raising the FICA cap is again another racket against labor. FICA taxes wages, not investment or cap gains income.

  15. I agree with much of what you’re saying.

    I’d be in favor of keeping the current rate/bracket structure untouched, IF we do the following:

    – Add two more tax brackets on top of the current structure. A 40% bracket starting at $750k and a 50% bracket starting at $2 million. It’s absurd that a person with $380k in income faces the same marginal rate as someone with $$380 million in income.

    – Tax all dividends and capital gains at the same rate as ordinary income. Index the capital gains basis to inflation. Eliminate the exemption for home sales.

    – Reinstate the estate tax as it existed in 2009.

  16. It’s interesting, Scoobyvegan, that you should mention Apple in your post. In order to understand the origins of Apple’s profits, you need to consider the history of the computer industry. The first programmable, digital computers, such as ENIAC, were built at the end of World War 2. They were built of vacuum tubes and relays. Their components filled several refrigerator-sized cabinets and their computing power was less then the Blackberry that I have on my belt.

    The industry was able to progress because the federal government spent massive amounts on research and development. Many Americans are aware that the development of the Internet was funded by the government back in 1969. What is less well known is that the government also funded research in many other areas related to the computer industry – semiconductors, relational databases, programming languages, operating systems, etc.

    So the story of this industry is that it was the taxpayer that took the risk in investing in this R & D. The fruits of that R & D were then made available to industry free of charge. (You could call this “redistribution”.) As a result, the investors and executives at IBM, Microsoft, Apple, etc. were able to build their huge fortunes.

  17. “Between 1946 and the mid-1980′s, arguably the greatest period of wealth creation by a nation in the history of the world, or at very least over such a short time span, the top tax rate never dropped below 50% and dividends and capital gains were taxed at the same rate as ordinary income.”

    Top Marginal Income Tax Rate (married couples filing jointly):

    1948 was 86.45% for income over $200,000.00
    1980 was 70% for income over $215,400.

    A drop of 16.5% with only a $15,400 increase in top bracket.


    Where did you get your number?

  18. Professor Brad DeLong, I think most economics lovers know is a professor over at Berkeley California with a terrific blog. He was industrious enough to search for the post I think James Kwak is referring to. Professor DeLong dug it out of the Google cache, because it appears Henderson took it down (embarrassed??) and you can read it here:

    Professor DeLong also posted a very good response to a man purportedly claiming to be another professor at another University, who was whining like a child about the possibility of discontinuing “W” Bush’s tax cuts for the rich. You can read that here:

    Professsor DeLong was kind enough and gracious enough to give me permission to reprint that because I thought is was so well written, and I will post it in its entirety with proper attribution later today if anyone wants to read it there.

  19. There are various types of risk. My government job has the risk of injury (flight test) like “police officer, factory worker, etc. What I was obliviously taking about was FINANCIAL risk. This was a discussion of wealth, was it not?

  20. Agreed.

    Generally, this is not about ‘small government’ or any other Koch-brother trope. It’s about distributing the burden as unfairly as possible to the bottom end of the income scale.

    On days my fatalism is bad, I wish the the Kochs and the Walton heirs get what their political proxies claim that they want: really, truly limited government. Which is to say, Somalia.

  21. Is there any logic for the $200K limit for single earners and $250K for joint filers? This has always bothered me as it seems to result in more of a “marriage tax” then we have seen in a while. Why not $200K and $400K?

  22. Trouble with that is, the Kochs and the Waltons live in the palace with their armed guards, and we get to be the average starving Somalians.

  23. I worked 18 year in flight test (military acquisition) and 6 in flight research at NASA as an engineer. I don’t deny that the government has its place in taking financial risk (with taxpayer dollars) to explore new technologies that business just can’t afford or would not do. Going to the moon had some financial “payoffs” in new technology that rolled down to business. However, just remember that the wealth that was taxed to fund the moon shots had to be created by private industry first. Don’t put the cart before the horse.

    Take a group of government bureaucrats and put them on an island to see how they survive. Then go back in about a month, retrieve the dead and replace with farmers, carpenters, cattlemen, machine-shop owners, doctors, and other small business men. In a few years, go back to visit the resort

    Most of our taxpayer dollars are wasted. $800,000 to UCLA to study how to teach uncircumcised men to wash there genitals! This is not a mere antidote. Trillions to bail out wall street. Millions to pay for custom ARRA signs. The wealth has to first be created for the government to waste the bulk of it.

    NASA get’s around $18 billion from the Trillion dollar budget. Most of it printed out of thin air and the rest pulled for the pockets of people that actually create wealth. It pay’s my salary so and that’s great for me. However, as I drive to work, I always try to remember that it’s the owners of the small sandwich shop, machine shops, and farms, medical offices, etc., that are toiling harder then I ever work, that pay my salary. Lets give them a brake by cutting spending before we raise taxes. If that means my job, so be it.

    Also, remember you can tax Warren Buffet’s $50 billion at 90%. The money you get wouldn’t run the government for one hour. It’s call the normal distribution. The real money is in the middle not out on the far right end of it. Wealthy is defined by the Federal Government as any family making over $250K. In California anyone making over $45K. The guy who owns three sandwich shops or a medium size machine shop pays my government salary. Not the Warren Buffets. Again, cut the waste in government spending before you raise taxes on these guy. Because one day, they are just going to say F-you, and I will be out of a job for sure.


  24. Scooby,

    I said “Between 1946 and the Mid-1980s….the top tax rate never dropped below 50%” Well 86.45 and 70 are both higher than 50% – I don’t know what you are talking about. I didn’t mean the rates “dropped by 50%” I meant they didn’t drop “below” 50%. I thought it was pretty clear.

    Secondly, you make my point. The top rate was lower in 1970 than 1948 (although those rates bounced around until the 50% cap was broken in the mid-80s and has stayed lower since) but the bracket also only went up 7.7%, while I’m sure inflation was higher than that over a 22 year period. So even though the rate may have gone down – which I’m sure Joe Kennedy and Henry Ford, Jr. appreciated – many more people fit into that top rate. At the same time Congress kept adding more and more deductions and loopholes into the code which triggered the AMT in 1969.

    That said, I still don’t understand your point. Surely nobody is saying that innovation and risk taking doesn’t lead to new businesses, which lead to growth and greater employment – that’s the history of the country’s success. What is dumbfounding is how an extremely small hike in tax rates is going to somehow stop that process especially when that process has been slower under the current rates than it was when rates were higher – but the country was in better financial shape overall.

  25. I also have no problem with this. I guess it’s back to the “Republican’s may have no brains but Democrats have no balls” scenario. What Congress should do is hold a vote on extending all the tax cuts, then hold a vote on introducing a new rate of 45% on all income above $1 or 2 Million a year. Make the Republicans vote against raising taxes on multi-millionaires.

    I do understand this bracket problem, I don’t sympathize tihs those who make $400,000 a year, but it is stupid that many of them pay more in actual revenues to Washington that those who make $4 Million.

  26. It’s still on “taxable income” not earnings. Married people have more deductions and the deductions phase out at higher limits, so it’s not really a 1-2 ratio. However, it should be more like $200K and $325K or so.

  27. “Again, we tax income, not wealth”

    I’ll remember that when I pay my property taxes on the house I hand-built myself on raw land. Why, someone has to pay the LA County bureaucrat who earns six figures to sign off that my house would be aesthetically pleasing; in her opinion. Couldn’t leave that to me, now could we.

    I will remember that when the government takes “their fair share” of my inheritance (wealth) generated by parents who worked very-very hard blue collar jobs to accumulate that wealth over 80 years. The government will then give that WEALTH in the form of hand outs and “entitlements” to those who think it came from “Obama’s personal stash!”

  28. Dude even your presumed “ridiculous” examples are actually ridiculable.

    I am uncircumcised and I was never taught to wash down there properly until I developed a urinary tract infection and a urologist told me that I actually had to … (well it gets gross but its not trivial). This infection cost the economy ~$5000 once all is said and done because, since I am young, they were worried it was something more serious and they had me do a thoracic CT etc. I am guessing this happens to far more than 160 people a year, so probably you save a LOT if you teach this simple thing to people – more in a single year than that study cost.

    And what on earth are you talking about “people who create wealth” ??? Why on earth should the person running the construction crew get paid 5x more than the construction worker, and why, in turn, should the CEO of the construction company get paid 500x more than the construction worker? The reason is that he (and it almost always is a he) sits on the boards of the corporations that his buddies run, who in turn sit on his board. ZERO incentive to keep salaries in check.

    Historically, wealth accumulation always happens because of severe distortions of social systems — from the control of military resources, which was the traditional source of wealth for long periods of time (read: wealth accumulated through violence — Egypt, Rome, etc.), to the modern day CEO scenario above.

    IF you take seriously the idea that money = labor, then unequal allocation of wealth is one of the most anti-democratic forces out there.

    That said, there are reasons why we should want wealth accumulation: you need entities that can efficiently allocate large chunks of capital. Efficient allocation of large chunks of capital, however, does not require wealthy *people* – it requires wealthy *entities* such as corporations or governments, both of which can make large scale decisions and both of which have their own particular failure modes in the context of such decisions.

    And wealthy *people* actually severely skew the economy because they result in allocation of labor to things such as luxury good production etc., which is completely wasteful. And an even more sinister consequence of excess wealth concentration is that the wealthy become speculators, fueling gross inefficiencies in economic activity (see: 1929, 1998, 2008).

    So yea, you can go on living in your fictitious little universe, where the wealthy “deserve” what they have. I just wish that we could model your world versus a world where capitalism still reigned supreme, but wealth concentration would be curtailed. I suspect such a system would work very well.

    Oh wait, it already did: USA 1940s-1970s.

  29. Hat tip to James K. for his technology posts and to Baseline Scenario. Baseline Fables was my first venture into blogging. From there I’ve graduated to my first website. Here is an insight into the nature of capitalism:

    “In the 18th century, Saint-Domingue (now Haiti) was a brutal slave colony with an estimated 500,000 slaves and 32,000 colonists. It was the most lucrative possession in the French overseas empire; producing sugar, cotton, coffee, tobacco, cocoa and indigo. Much of the wealth and glory of 18th century France came from the slave plantations of “la perle des Antilles” Saint-Domingue.

    The island the Spanish called Hispaniola was a tropical paradise. One-third of the African slaves “imported” to Haiti died within three years. Today, Haiti is utterly impoverished and the ecology nearly destroyed by deforestation. Sorry folks to put it this way but: First the flora and fauna were decimated, then the aboriginals were decimated, and who is next on the list?

  30. why not? they got the biggest cut in taxes compared to any one else. though i could see adding a few more rate and income/wealth levels. seems foolish to have no but to tax those who are struggling on there token 2 millions dollar in income the same as their better off 10 million dollar in income neighbors

  31. Glad to hear your parents estate will be over $3.5 million. That’s the amount that was excluded from the estate tax in 2009 and is very likely to be the exclusion if the estate tax is renewed. A proposal along those lines was introduced in the senate recently. I don’t feel too bad that you might have to pay some tax on the amount of your inheritance above $3.5 million. I’d like to see a specific exclusion for the land value of working farms though.

    I’m sorry that you feel it’s a burden to pay property taxes on your home to provide things like firefighting and police services. Perhaps you would like it better if these services were privatized.

    The design and aesthetics of your house effect the values of your neighbors’ houses. California home values being what they are, there’s a lot of money at stake and people can be uptight about that sort of thing.

  32. All this jabber about taxes or no taxes, and biggovernment as opposed to small or, for extreme wingnuts no government is fruitless and absurd. First we already have a great big giant monstrous government trillions of dollars in debt, hopelessly corrupt, and owned and controlled by the predatorclass, 1% of the population. Whatever law is passed or tax rate is set is irrelevant, because the predatorclass den of vipers and thieves that own and control the government will simply conjure a wide array of ways to dodge the systemically corrupt and toxic system and continue funneling trillions of taxpayer dollars into select offshore accounts.

    Imagining tweaks to the monstrosity that is the current global financial system, or the US tax code is an exercise in futility, because the spaniels in the socalled governments are unwilling to enforce existing, future, or any laws curbing, or prohibiting their masters in the predatorclass. Effectively – the predatorclass is bound by no laws and will continue the unabated and unrestrained robbing and pillaging of poor and middleclass Americans to feed the superrich, the predatorclass alone and exclusively.

    The entire system must be torn apart. All the current managements must be forcefully removed and banned forever from any conduct in the mechanics or processes of any future government or financial system, and new more equitable, more legal, and more moral government and financial system must be erected in place of the FAILED systems, FAILED managements,FAILED products, FAILED governments, and the hopelessly corrupt, toxic, and criminal enterprises and systems we currently hazard and endure.

    If not, all this chari vari about taxes, and the size or efficiency of the markets or governments is worthless, substantless, meaningless hot air. Nothing more than words.

    In a world where there are no laws – there are no laws for anyone predatorclass biiiiaaaatches.

  33. I would like to be one more voice to add the following: if you’re in that $250k+ range, PAY FOR AN ACCOUNTANT. They will, in all likelihood, save you FAR more than they cost for their expertise. You will very likely come out ahead (unless you are an accountant yourself) of where you would have been without them.

  34. Ronald Reagan is why from the time I was old enough to understand what “national debt” and “fiscal conservative” meant, I didn’t understand why Republicans claimed they were fiscal conservatives that didn’t believe in growing the national debt. Every person that pines away for the good old days Ronnie as our “last good president” leaves me rolling my eyes and reaching for a ball gag to stuff in their ignorant mouth.

  35. The peoples only hope for implementing the changes necessary to form a more perfect union is best described here:

    (“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, {it is the right of the people to alter or to abolish it,} and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.”)

  36. While we focus just on the tax rates, etc. I think we miss a very important part. Comments about the risks people take, wealth “creation,” etc. are not what is underlying the anxiety, either of the couple who are deemed “rich,” or the Polish woman who cleans their house.

    A reality for most people who have not accumulated significant capital on which to live — that’s most Americans — have saved very little and even the couple that created the firestorm have set their expenses, by choice, very close to their incomes. If he loses his job, they’ll have to give up a lot more than the cleaning woman and the gardener. Unfortunately for those “entrepreneurs” who he may lay off if his taxes go up (I can see him pulling the weeds now), they have far less flexibility in their budgets.

    I am old enough, and lucky enough, to have my kids finished with college (for which I paid), my home virtually paid off (because I didn’t use it as my ATM), and a good income to boot. I will have to pay more, and given the opportunities I’ve had in this country, I don’t mind. I know people who make $50k/yr and save money, and some who make $500k and spend more than they make. Ever read The Millionaire Next Door? The lawyer with the loan on the $100k BMW may not feel rich because he spends it all, but that doesn’t mean we should worry if he needs to pay another 4% on the EXCESS over $250k taxable. They need to get a grip.

  37. Why should financial risk be valued more highly than the risk to life and limb faced by many working people?

  38. Almost every argument relating to tax “rates” is nearly completely and utterly bogus. As most of us are aware, tax rates in and of themselves actually have only a marginal effect economically, with the exception that lower top rates tend to increase the percentage of wealth concentrated among the wealthiest.

    There are lots of taxation reforms that need to be done. First, before leaving the issue of rates, how dare the wealthy complain about raising the top marginal rate from 35% to 39.6%. It is an absurd argument when we know that historically these same earners were taxes for many years at more than twice the proposed highest current rate. Edn of argument, since the economy did just fine, thank you, during that era, and, in fact transictioned from a WWII military fueled economy to a solid peace time economy for much of that higher rate time.

    What truly needs to be done is to completely trash the current tax law a regulations, and go to a flat tax with a substantial personal exemption and no mortage deduction, and peg the capital gains rate slightly below the income tax rate, and the corporate tax rate at exactly the same level as paid by individuals. Guess what, lots of collections and virtually no arbitrage (like the present “Sub-S” scandal. I won’t say what the flat tax rate should be, but probably below 20%, and could lead to the elimination of much other fiscal medling that has such a corrosive effect on economic activity.

    Please argue against this idea, please, someone!!!

  39. I hope that felt good, because you were preaching to my choir. I am a doomsday guy. If the Mayans are right that will save our fellow Americans much pain, because that’s all that is coming. So long as we are willing to watch America Can Dance (or any of the plethora of similar entertainment drivel intended to numb our minds by the wealthiest media owners), and not pay attention, and continue to let the single party with the Republican and Democrat branches (all party of the American Plutocrat party) make our laws and decide what they collect, who they pay, and who gets special treatment, we will continue to get what we have, and will soon become what the wealthiest want: either dead or their slaves. We’re close now, but a far more dismal future awaits us unless we are willing to stand up and be counted.

  40. True that Bayard Waterbury!!! If you believe in the political system – a flat tax is the most equitable way to right our horrible tax inequities. If like me, you have no faith in the political system, – then get stocked, cocked, locked, and ready to rock Americans – because the only hope for securing our children’s future is exercising our rights and obligation to “alter or abolish” the predatorclass owned and controlled monstrosity that is our current government and financial system. The entire structure must be destroyed, all the current operators must be removed and prohibited from any access to either the government or the financial system, and some new, more equitable, more legal, and more moral government and financial system must be constructed out of the ruin and toxicity of the existing systemically corrupt, toxic, and FAILED government and financial system.

  41. The only second language I know tippy is a little Chinese, I’m afraid you’re gonna have to talk down to me and say it in English.

  42. Nicely said A Lewis, but having spent the last 30 minutes reading many of the comments, I would also add; “Great comments by so many. Thanks for taking the time to write them!”

    As a Brit on the verge of gaining the right, as in visa (fingers very tightly crossed!), to marry a UK born American and live in Arizona, the articles and commentators on this Blog have been a wonderful way to get to ‘know’ my new country. And, but I shouldn’t really say this so I’ll lower my voice ;-) if you want to see a country in a desperately complicated mess try Britain!

    There’s a lot wrong with America (and practically every other significant country) but to my mind, taken across a broad measure, it’s still one of the best countries in the world.

  43. “My wages are risk free and, especially as a government employee, come from the backs (actually minds) of those who CREATE wealth for our nation…How many late hours did those investors stay up while determining which stock to buy?”

    Heroes! Heroes!

  44. BTW, I’m a wage laborer. Each day I work my tail off doing my bit to organize the world around me. The billionaire investor “earns”, or takes home, thousands of times what I do each day. He does not work thousands of times as hard as I do. Nor does he take thousands of times the risk. Yet without the tax structure that you consider to be confiscatory, unfair, and dispiriting to him, the enormous advantage of scale that he possesses over me will allow him to gather to himself basically all our national wealth to himself leaving me basically his slave.

    This seems to be the norm in the history of civilizations. An aristocracy controls nearly all the wealth. They are referred to in reverent terms such as “betters”, as in better than the common folk, and get to obey different rules. Quite naturally, they manage to make their better position hereditary, creating a separate and permanent class, almost a different and superior species.

    Is this what you want?! It’s what your words suggest.

  45. Pardon my ignorance. Can someone explain the reasoning for a capital gains tax rate that is lower than the wage income tax rate? I know that there’s an argument. It’s been used, evidently, to make capital gains rates quite a bit lower than income tax rates. There doesn’t seem to be a whole lot of energy in counterarguing that, so it must be a fairly effective argument. I just don’t know what it is. Thanks.

  46. There you go again, trying to rearrange the deck chairs on the Titanic, James. The present tax “system” is so riddled with special rules, exemptions and priveleges, that only the moguls like Buffet and Gates have the money to hire the lawyers and CPAs to help them construct “shelters” and otherwise avoid paying taxes and/or to hire the lobbyists to change the rules in favor of them and their friends. While the unions succeed in preventing employer health care contributions from being considered taxable income.

  47. Why, for that matter, should financial risk-taking be valued more highly than the work that working people do?

  48. Of course most everyone would prefer to pay less in taxes. But when Canadians witness the mind-numbing distortions and lying in the American debate over health reform … we are more aware and appreciative of our universal healthcare system which is funded by taxes.

  49. I agree there is waste. It is in government, in business, and in our individual lives. It needs to be addressed. One problem that is periodically mentioned is how money is spent near the end of a budget year. Often managers will spend “the rest of the money” before the end of the year, often wastefully. Why?

    Well, if they had a bunch of money left unspent, they’d be told that they had overestimated their needs for the year, so the next year’s budget allocation would be cut because, obviously they didn’t need that much. If they ran out early, the manager would accuse them of mismanagement and inefficiency. It’s a system designed to be abused.

    But on your point of who is paying your NASA wages, it is unlikely to be the little sandwich shop, or my little Vietnamese dry cleaner who works 70 hour weeks. They like have a minimal profit left and pay little or no income tax. My conservative friends complain about the 50% who pay “no taxes,” but those are the working poor making $10/hour and washing their dishes after their $100 meal! Oh, and that little sandwich shop owner that nets $40,000 from his shop, after taking risks paying rent, etc., pays 15.2% in self-employment tax, even if he pays no income tax after personal deductions. That is MORE than someone like Bill Gates pays on his $300M-plus in dividends.

    Entrepreneurs take risks, and when they hire people they do so to produce more (when there is DEMAND) and make a profit on the labor of every person they hire. If they can’t price their product high enough to make a good profit, they don’t settle for less profit — they move production overseas. Manufacturing jobs will come back to the US when workers are willing to work for $1/hr like the Chinese.

  50. I love this counter argument I’ve been hearing lately, must be from TNR or TownHall or Pajamas or somewhere like that because I’ve seen lots of conservatives make it lately. The argument that even if you tax x rich person at a huge rate it only runs the government for some tiny amount of time.

    Well which is it? So that extra tax does bring in more revenue then right? Or does it stiffle the economy and kill the revenue it would have brought in? Nobody is arguing that just raising revenues will fix the economic hole, it’s a component. Tax increases increase revenue immediately whereas the cutting that needs to be done, in Medicare, Social Security and Defense – the only really parts of the budget that can be cut and make an impact – cannot be done for the 2012 fiscal year. You can’t cut the benefits of those already getting them, just like in ’86 you have to structure the cuts so they phase in so those who are say 55 and under can adjust their retirement strategies accordingly. That’s why tax increases are the ONLY thing that will impact the deficit short-term. If the revenue impacts are “so small” that they don’t matter and shouldn’t be done then all the cuts Republicans are willing to actually make – foreign aid and a small reduction of the Federal workforce (which is anti-stimulative in a bad economy and just increases unemployment payouts) make even less impact.

  51. Don’t forget that with very simple Estate Planning – probably less than $5K in attorney fees – you can easily double that exemption. So if your parents accumulated $7 Million in wealth on blue collar salaries then I toast them with the beer currently in my hand.

    By the way, what did you do to earn that money other than win the sperm lottery? I thought we were a country of “rugged individualists.”

  52. The other problem with envoking Reagan is the actual economic situation the country was in in the late 70s is vastly different from the one we’re in today. Tax rates were too high when Reagan took office. Not balancing the budget during those years was an outlay problem.

    It’s like a 5’9″ guy weighing 250 pounds. He needs to lose weight. So he diets and gets to 175 pounds. The solution to a future health problem is probably not him starving himself down to 130 pounds – it’s a different problem requiring different solutions.

  53. Tony,

    Unfortunately what you say is what I often believe in my heart of hearts, but as a guy with young kids I try to push aside and whistle pass the graveyard for their sake. I really, really hope you’re wrong – but I would have a hard time not agreeing with you. Tequila is great succor.

  54. And your property taxes in California are kept low by Proposition 13, so that instead of financing services through taxes on land value — the fairest and most efficient tax yet devised — you get to pay and bear sales taxes and wage taxes, and parcel taxes which burden the single-family property owner just like the owner of the apartment complex!

    How much of your parents’ estate is land value? Low taxes on land value lead to high selling prices on land, and enrich land speculators and impoverish young people who have to buy them out.

    The community creates the land value. If the local or state community is too dumb to collect a decent share of that value, month in and month out, the federal and state governments are right to collect it once a generation — and they should be collecting far more of it!

    Land value taxation is Natural Public Revenue, and we fail to treat it as such.

  55. Or how about scrapping income tax all together and substituting a VAT with rebates for the lowest wage earners. On top of generating dependable, non-loophole ridden income, it also takes away the “Income tax is illegal” argument from all those crazies. A VAT is an excise tax, in the original unamended Constitution.

  56. Well Ted K, you may not be a Frenchy but you may enjoy a glass of red wine (or two). As for the French language, from what I gather there is quite a bit of onomatopoeia. For instance, in New France the word for passenger pigeon was tourtre. (If you cannot roll the French “r” it might work with a Spanish “r”.) In any case, a very lovely sound tourtre indicative of its source.

    Here’s a bit more info:

    There were an estimated three to five billion Passenger Pigeons in America when Europeans arrived. They were called tourtre in New France. A traditional French-Canadian meat pie is tourtière indicating its culinary origin.

  57. _______________________________

    Our economy is slowly dying, your job, lifestyle are dominated by anxiety.

    No one is proposing a solution because no one has the slightest idea of why it is happening and many have vested interest in the present system.

    However an objective observation of the phenomenon can help us understand it and provide us with an innovative solution.

    Of course we can’t solve the problem with the tools that brought us there in the first place and we need a new ideology.

    – Do you feel that your ideology pushed you to make decisions that you wish you had not made?

    – Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

    – You found a flaw in the reality…(!!!???)

    – Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

    – In other words, you found that your view of the world, your ideology, was not right, it was not working?


    In order to alleviate those economic woes wee need to create, as fast as possible, a new credit free currency that will solve the credit crunch and bring incremental jobs, consumption and investments to the present system.

    An Innovative Credit Free, Free Market, Post Crash Economy

    A Tract on Monetary Reform

    It is urgent if we want to limit social, political and military chaos.


    Is the fulfilment of these ideas a visionary hope? Have they insufficient roots in the motives which govern the evolution of political society? Are the interests which they will thwart stronger and more obvious than those which they will serve?

    I do not attempt an answer in this place. It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed. But if the ideas are correct — an hypothesis on which the author himself must necessarily base what he writes — it would be a mistake, I predict, to dispute their potency over a period of time. At the present moment people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible.

    But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.

    Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

    Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.


    Credit Free Economy
    More Jobs, No Debt, No Fear.
    Prosperous, Fair and Stable.

  58. Tax cuts and easy money are the leeches of voodo economics; they bleed governments and the middle class while temporarily making us feel better.
    Economists who have suggested them as a means to “fix” the economy are like the doctors who bled George Washinton to death trying to save his life. The fundamental problem is twofold: economics is not yet on a scientific footing, it is where medicine was in George Washington’s time. (That can be remedied.) Consequently we are whipsawed by opinions from empty reputations. Secondly, the public is ignorant and wants to believe in Santa Claus: something for nothing. Demagogues are ready to support such wishful thinking in return for power; and have been successful since Ronald Reagan’s day.
    I posted an essay “Tax Cuts are the leeches of voodo economics” yesterday on my blog. The essay includes the first two steps to getting us out of this mess.

  59. Self immolation of our nation for pie in the sky objectives won’t help.

    Inter regnums are universally destructive periods that can last for decades to centuries. One problem with your approach is that the 7 billion plus people on this planet depend on a functioning economic system, including ours. Destroying the system will produce a population implosion… probably to under 1.5 billion in a matter of one or two decades. It’s worth making every effort at a constructive alternative; even if we fail.

  60. It’s interesting that you claim it was an “outlay problem” when Reagan took office, because if you had even bothered to look at the graph, you would notice Reagan increased spending dramatically. In fact Reagan increased spending an exponential amount. Reagan was cutting taxes (otherwise known as government revenue) at the same time he was increasing federal government spending. In other words—Reagan was the biggest Keynesian this country has ever seen in action.

    By the way, that’s something else the cigarette smoker with federal health insurance–Republican Congressman John Boehner, and Republican Senator Chuck Grassley, the Republican who thinks it’s incredibly efficient for himself to have federal health insurance, but wasteful for you to have federal health insurance, would rather you illiterate Teabaggers out there never comprehend. So far so good…..

  61. Are Vikram Pandit and Citigroup now in full control of internet censorship?? Read about it.
    Here at Left Business Observer
    Here at Salon
    Here at Brad DeLong’s blog
    I am wondering if/when will Vikram Pandit/Citigroup take down this post at Economics of Contempt blog, which seems to indicate Vikram Pandit didn’t know what Section 23A was. You can read that here:

  62. How’d that song go? –
    “everybody wants to rule the world”

    So that’s the collective GOAL.

    The question is WHY is that collective GOAL the wet dream of a “predatorclass”?

    A world wide parade of PSYCHOS taking the levers of civilization in their filthy paws is littering mankind’s history since the Industrial Revolution.

    You rail at them, but secretly you still wish you could have their power.

    The SILENCE is deafening on this site and across the VICIOUSLY CENSORED internet “conversation” venues

    when proven methods for GETTING RID OF THE PSYCHOS are brought forth in an organized and peaceful way!

    1. Just War Doctrine – “we the people” follow it unlike the “predators” – not that predators deserve such consideration and respect – no “army” has ever lost a war that started and ended with clear goals.

    2. The principles attacked, ignored, or un-used by modern, nose-picking IT PSYCHOS do STILL EXIST as the organization of “government” that began with the Declaration of Independence 1776 and they are the principles that are the checks and balances to “predators”. Dads need to teach their kids how “brotherhoods” come together around SANE, tried and true, common sense methods of providing peace, prosperity and security.

    3. The very fact that PSYCHOS can keeping using PAPER to rule the world is an embarrassing 8 year old MIND GAME that no ADULT should be playing anymore. Paper money, paper laws saying everything we do is okay for us, but not for you. Symbolically – Amendment 28 followed by the burning of the Patriot Act will work to illuminate “us” and “them”.

    It’s all about GAME-changing who takes the first shot – isn’t it? Kennedy got slaughter, Stalin did not.

    So keep elaborating on the rubegoldberg contraption that is:

    More misery for others = more money for ME ME ME

    The bottom layer of the “middle class” is GONE – no taxes left and IMF wants SS ##.

    So now you’re going after the doctors, engineers, and innovators (small business) – and that has already begun…TBTF casinos in LV stuck civil engineers with the bills by declaring “bankruptcy”….

    if the “predators” were not as STUPID as they are psychotic, they would not be using MSM to discuss “taxes”…but since they are, it’s probably going to be the last piece of crap they are going to throw at Justice.

    Why are you all unwilling to get behind Amendment 28 and a Constitutional Convention?

  63. Tippy,
    I enjoy more than a two glasses of wine when the occasion/opportunity presents itself.

    I like the slide show very very much. I may even put the slideshow as a link on my blog in the future. Very relaxing. I saw a PBS special where the art was very similar to this, but in my memory I was thinking he was British. Maybe the same guy??? Did this guy spend time around the Florida area??? I bet Audubon could hardly live to see the morrow if he knew how many birds the G of M oil spill killed, much less other species threatened.

  64. Mr. Kwak quoted:

    “Last week, a professor making more than $250,000 per year (with his wife’s income) put up a blog post (since taken down) criticizing President Obama for wanting to “raise” his taxes.* The post basically said, after all of their basic expenses, “we are just getting by despite seeming to be rich.” If his taxes go up, he says he will have to cut back on spending, which will depress the economy, or perhaps even sell his house or cars, which will depress those asset markets.”

    Job Loss Looms as Part of Stimulus Act Expires

    September 25, 2010 – NY Times – excerpt

    “Tens of thousands of people will lose their jobs within weeks unless Congress extends one of the more effective job-creating programs in the $787 billion stimulus act: a $1 billion New Deal-style program that directly paid the salaries of unemployed people so they could get jobs in government, at nonprofit organizations and at many small businesses.

    In rural Perry County, Tenn., the program helped pay for roughly 400 new jobs in the public and private sectors. But in a county of 7,600 people, those jobs had a big impact: they reduced Perry County’s unemployment rate to less than 14 percent this August, from the Depression-like levels of more than 25 percent that it hit last year after its biggest employer, an auto parts factory, moved to Mexico…

    If the program is allowed to lapse, up to 26,000 workers in Illinois will lose their jobs in the coming weeks, along with 12,000 workers in Pennsylvania and thousands more in other states, according to LaDonna Pavetti, the director of the center’s welfare reform and income support division.

    “I think that given what we know about the number of people that have been impacted by the recession and the limited jobs available, this has been a lifeline for many families with kids who would otherwise not know when their next rent payment or meal would be coming in,” Dr. Pavetti said.

    The money came from a pot of $5 billion that was included in the stimulus package as an emergency fund for the Temporary Assistance for Needy Families program, the main cash welfare program for families with children. Of the $4.3 billion that has been approved so far, $1.4 billion has gone toward basic assistance, $1.8 billion has been used to help families pay one-time emergency expenses like rent and utility bills, and a little over $1 billion has been used to subsidize jobs.

    “It was very much a Band-Aid,” said Mayor Robby J. Moore of Lobelville, Tenn. “And now the Band-Aid is coming off.”

  65. Why does Buffet, who is one of the super-rich with uncountable income and resources pay 178% when my hubby (who had a good job but we aren’t in the Buffet class) paid the highest marginal rate, which I believe was over 40%!?

    What’s up with that inequity.

    What I’m wondering is why the folks out here don’t realize that there are “rich” (like the “millionaire-on-paper” next door, and the super-rich whose incomes are sheltered but who could easily help out by paying at the highest marginal rate of Mr. Next-door-neighbor out here in reality-land.

    Where’s the anger about that? I’m not hearing it.

  66. pardon my typo…

    I meant to say…

    Why does Buffet, who is one of the super-rich with uncountable income and resources pay 18% when my hubby (who had a good job but we aren’t in the Buffet class) paid the highest marginal rate, which I believe was over 40%!?

  67. Buffett Slams Tax System Disparities
    Speech Raises at Least $1 Million for Clinton Campaign

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    Who’s Blogging» Links to this article

    By Tomoeh Murakami Tse
    Washington Post Staff Writer
    Wednesday, June 27, 2007

    NEW YORK, June 26 — Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

    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.

    A populist tone permeated the 70-minute talk with the billionaire investor and philanthropist in Manhattan on Tuesday night. The talk, given to about 600 Wall Street bankers and money managers, raised at least $1 million for Clinton’s presidential campaign, the Associated Press reported.

  68. …and you don’t think that the super-rich should pay a bit more so that folks like you — that is, who are in your same situation partly because the super-rich who were at the controls of the housing-market debacle and the other parts of the ongoing scandal and who are protected, sheltered, undictable apparently, and who don’t give a damn about anything but themselves and are laughing as all of us out here in the same boat as you — …you don’t think you should get a break on your taxes?

    What in hell is the matter with you?

  69. So what about corporate taxes? Some discussion on this would also be helpful.

    The Libertarian philosophy is that the private sector is better able to can provide better and cheaper: mercenaries (in lieu of national defence), private security (in lieu of law enforcement), prisons, education, healthcare, roads, bridges, power, etc. We also need to auction off the broadband spectrum as it is better under private ownership.

  70. I can see your point. Never thought about it that way before, and I recently read that at some point in time wages were NOT taxed and not TO BE taxed according to the US code, but only investment income.

    Obviously at some point the ruling class realized how powerful expropriation could make them.

  71. Better for whom?? Better for the shareholders who get to privatize the value of a scarce natural resource? I assume you are familiar with how the ownership of corporate equity is distributed [Source: 2007 SCF, reported at
    Top 1% — 36.0%
    Next 9%: — 42.9% …. top 10% 78.9%
    Bottom 90%: – 21.1%

    And ownership of the value of privately held business is even more narrowly concentrated:
    Top 1% —- 62.7%
    Next 9% — 31.0% …. top 10%: 93.7%
    Bottom 90% – 6.3%

    Please tell us why the value of broadband spectrum should be privatized.

    A better plan would be to auction off the rights to use various segments of it for 5 years, or maybe 10, and reauction them 5 or 10 years from now. That way, this public asset could provide some natural public revenue.

    I’d prefer to see corporate taxes on profits eliminated — but instead they ought to be paying to the commons — the treasury — the full rental value of the choice bits of land they occupy, and the full value of the natural resources they extract from the earth. Pay for what you take, not for what you make. Except, of course, that they ought to be paying for the pollution they create in the process of whatever salable products they make.

    That would create liberty for all, not just liberty for corporations.

    We could reduce or eliminate the burdensome taxes on wages, sales and buildings were we to start tapping these natural sources for public revenue, and we could reduce the wealth concentration and income concentration many of us find inconsistent with our nation’s ideals.

  72. Scooby, the uncountable waste is what makes people hate the government. And why not? Government steals money from people who work hard to take care of their families and then they waste it or spend it on themselves. Why wouldn’t people be angry? The miracle is that the folks do nothing about it!

  73. jonboinAR:

    What if you kept all the money you earn by your hard work, paid your own and your family’s bills, sent your kids to schools you chose yourself for their benefit and were able to pay those bills too, and were able to pay your doctor what you own him, and still could put food on the table and pay your mortgage and have a new car every few years?

    That’s freedom. And we don’t have it.

  74. AFL:

    Quote: …creating an environment where doctors consider the bottom line… Unquote

    I hope you don’t mean that doctors should altruistically charge you less, reducing their own income! Doctors work for a living not for the fun of it and purchasing health care is similar to grocery shopping or car shopping, in that the product is not free; the “buyer” must pay the full cost, or must steal (or have government steal) from the vendor or someone else. What we’re going through right now in the world economy is the result of notions that we can have everything we want and not pay for it.

  75. TonyF – yes!!
    I think what you envision is happening but it may take a little time. Things don’t seem to be going the way D.C. and Wall Street would ike to see, and anger in the hinterlands seems to be building…

    We shall see. It’s interesting.

  76. Interesting ideas! I’ve been thinking recently of all the land that has been ruined both by corporation and government and wondering why we the people have to (1) live with the result (illness, dirty water, dirty air, etc.) and (2) pay the cost of the fixes. I don’t see any downside to what you’re saying, but a big upside. There might be a bit of nastiness while things are being sorted out but it’s nasty right now and no upside in the offing, while if common citizens had more liberty (i.e. kept the money they earned by their labor and spent it all for what they and their families require) things might look up quickly if such changes were made. Might also stimulate what needs to be stimulated, but in a way that would benefit everyone not just the…how did he put it…”the predatorclass”…

    Bring it on!

  77. Dear Annie:


    Because they are sociopaths? And because they can?

    But what if the people stop them?
    It’s doable but it requires a bit of effort.

  78. LTVfan … a Georgian in our midst. One on side with the radical hill billies :) at the University of Kansas at Missouri.

    So why auction off the broadcast spectrum? Because in a decade wireless, 3g, 4g and Xg (version ____) may be as essential and as common as electricity. The rationale here is that natural resources are better exploited under Libertarian-style capitalism. Forget about privatizing water utilities. The wireless spectrum is metaphorical gold.

  79. Dizzyfingers, US taxes are filled with apple and orange mixes that confuse just about everything. Here is a simplified explanation of taxes that Warren Buffet pays compared to others choosing different alternates of organization. First , Berkshire- Hathaway is a ” C” or regular corporation that given the size of their taxable income pays a 35 % Corporation Income Tax imposed only on ” C” corporations. That tax rate for B-H is a flat 35 % ignoring state income taxes. That means any dividends that Buffet gets are paid out of 65 % of pre tax Profits. On these dividends, being B-H sourced he pays a tax of 15 %. That is a combined income tax rate of 35 % of BH pretax income plus 15 % of 65 % or 9.75 %. Thus Buffet really pays a combined income tax on the at the pretax income source of 44.75 %. He pays 15 % on any capital gains he may have had from other sources and a flat 35% on salary income. Excluding the built in corporate tax Buffet pays 17.7 % . That 18 % is really around 45%.

    For comparison, let’s look at the tax structure of most other Corporations in the US. The ” S ” Corp which is treated as a pass though entity and must have fewer than 76 shareholders. All income is taxed to the shareholders whether distributed to them or not as dividends. Thus these taxpayers pay a flat 35 % of their share of the corporate profits if the S Corp income increases their income sifficiently to be entirely in the maximum bracket. These shareholders get a 9.75 % break compared to a C Corp distributed profit as dividends. Most profit making corporations are “S”. I was the tax manager of one of the biggest US ” S” corps before retiring.

    I too personally derived the bulk of my income from wages. Those wages would marginally have been taxed in the highest bracket at 35 %.

    So comparing all upper bracket incomes on the same basis the combined upper bracket tax rate for those deriving their income from ” C” Corp activities , the maximum Tax is really 44.75 %.

    Every one of my shareholder’s paid on some income in the maximum bracket.

    Warren Buffet actually paid more than 44.75 % because he lost his itemized deductions. If his state tax rate were 10 % he paid that too without benefit of deducting the tax for Federal Income Tax purposes.

  80. Re: @ Anonymous____”so shallow are his words – they dredge up the very makeup of a dark heart – cringing in despair – such folly too bequeath on the gullible public – such profanity and utter nonsense from this narcistic faux`naif non`sequitur”

  81. There is just as much waste in industry, including executives who plunder consumers and fatten their bonuses by doing so…financial, medical insurance, credit cards. Waste is intrinisic to any large system, since all systems require “surpluses” of one sort or another to be at all manageable… and surpluses attract parasites… human and otherwise. To presume that government has any more parasites than large corporations (or large churches like the Roman Catholic church) is contrary to all statistical evidence.

    The question for all large systems is how to design them with internal immune systems plus external medical care that keep their parasitic loads within tolerable levels. Nature uses term limits and relentless pruning to do this… we have neither for large corporations.

    The question for citizens and customers is: what is a reasonably tolerable level of waste? If the answer is “none” … then the problem isn’t the waste but the ignorance of the individuals about how the real world operates.

    Or another idea: can you begin to quantify that “uncountable waste”…. in the context of the constructive things done? As an engineer, an unquantifiable assertion often masks a complete lack of essential data.

  82. Sigh, it’s so easy to blame everything on a scheming ruling class…it means we’re merely innocent victims, powerless and pure. Having said that you may be surprised that I recently posted “Class Warfare is alive, well and serving the Rich”…. which on one level supports your thesis, but really talks about design modifications that can reverse the over-accumulation of wealth at the top….which is in no one’s best interests.

    I’ve also posted “Tax cuts are the leeches of voodoo economics” along the same vane.

    We need government. Those who wish to overturn it either don’t realize its benefits, or see that as a way to become relative winners by changing the game. That change has no absolute winners. You could keep all your money, but you couldn’t drive safely from point a to point b….. bad roads, highway robbers, no gas, etc.

  83. Wow…start thinking right…. it is subtle code for “right wing”, where we dumb down the middle class but cutting education investments so that we can give tax breaks to the rich who, at best, loan it back to the government.

    Just followed your link. The argument made is one of the most moronic diatribes I’ve read. It is unworthy of serious consideration. My guess is the author is seriously lacking in education, either formal or home schooling.

  84. You seem to be overlooking that the Bush tax cuts have eliminated Federal Estate taxes… a huge part of the problem. A multi-billion estate of a Texas billionaire who died this year is passing on to heirs untaxed. The long term: wealth becomes inherited, not merited, and served by a mass of poor who have no chance at sharing in wealth. This was the structure of the fuedal system in the Middle ages… it is relatively stable and hard to alter if our economy sinks back into this state.

    Let the tax cuts expire, particularly the estate tax cuts.

  85. But we’d be better off yet if, instead of collecting a portion of the windfall once a generation, we
    collected, month in and month out, the rental value of the right-of-way over which the pipelines pass — not a small figure! — and the value at the well-head of the natural resources drawn from OUR common, and finite, provisioning.

    And whatever pollution of air and water is created during the extraction process and/or the refining process needs to be paid for, month in and month out.

    When they’ve done that, they get to keep the profits.

    Capital doesn’t appreciate. Most so-called “capital” gains are actually appreciation of land or of other natural resources, or of monopoly privilege of one kind or another.

    Eschew privilege! Collect its value for the commons, and we won’t need to tax ourselves so heavily with taxes which burden the economy.

  86. Re: @ tippygolden___Yep…it’s all owned by the military,and they ain’t been known to give any of it away. Just ask Colin Powell’s kid? In fact when the Military hires a private contractor for a specific job…the research is deemed “Top Secret” until twenty years later when that particular “Widget” has become virtually ubiguitous. That’s the funny thing about working for any government “Black Box Project” ie. lithium batteries; nuclear subs (IBM / Software etc.) ; polymers that actually are stronger than titanium/ psi; etc, etc…PS. V/C Spectrum will go into the Light Wave Spectrum as it has all ready. So you are half way correct as – there is gold in the Rainbow?

  87. We agree! Wealth needs to be taxed… in business and in private… after all, a healthy government protects wealth….in direct proportion to the size of the pool of wealth. It protects “property rights” of the wealthy from others within the country and from foreign interests with its armies, police and legal institutions. It ehances the value of wealth with the transportation system, education system, etc. The concept that once someone acquires wealth it remains untaxed is a fundamentally unfair distribution of taxes.

    Evolution has a system for encouraging growth while maintaining the available resources for more growth. The differential process is: rampantly overproduce and relentlessly prune (and then recycle what is pruned). Our, unsustainable alternative is to build and maintain… in this case wealth in all its forms; real property, intellectual property, personal property, capital. Not a sustainable mechanism for an economic system.

  88. I suggest a slight alteration: can have everything we want without earning it. A problem with the rich, and even those doctors who have no oversight mechanisms to keep them from overcharging, also get things they didn’t earn…even when they can pay for them. The focus on the act of paying rather than the act of earning is one that focuses on the poor rather than on the broader population. Rich and poor, we all have the same human tendencies to get what we can with a minimum of effort…. it’s actually a biological imperative in nature. We need to be educated properly to gain concepts of enlightened self-interest, which is to earn what we use.

  89. Genuine capital doesn’t appreciate. Homeowners know deep down that their house is depreciating, offset by gains in land value, just as their cars and lawnmowers and generators and refrigerators are depreciating.

    What rises in value is land, and the value of things which are scarce and not subject to creation by humans: natural resources, clean air, water, landing rights at rush hour at congested — constrained — urban airports, electromagnetic spectrum (“airwaves”), geosynchronous orbits, water rights, oil, natural gas, lithium, copper, etc. (the list is long)

    When we confuse/conflate land (that which nature and/or the community provide) and capital (the result of labor saving up), we make a mess of things.

    Classical economics recognized 3 factors of production: land, labor and capital. (See Adam Smith, John Stuart Mill, David Ricardo, Henry George.) Neoclassical economics, which suited the interests of Rockefeller, Stanford and others who funded major universities very nicely, thank you very much, sees labor and capital, and pretends that land is trivial and a subset of capital.

    Therein lies the root of a wide range of our major social, economic, justice and environmental problems. (I don’t expect anyone to say “of course!” to this — I came around to this point of view slowly, grudgingly and thinking there HAD to be another answer; didn’t find a satisfactory one.)

    When the other places you’ve searched for answers don’t pan out, start reading Henry George. My late grandparents made every effort to get me to explore his ideas, and I resisted for decades. After they were gone, I started to explore, and came around to roughly where they were. Georgists have put a lot of material online. You could start with some of his speeches, or a book of essays entitled “Social Problems” or go directly to his best-selling book (6 million copies between 1880 and 1900, still a respectable figure in 2010 with a much larger reading population!) available in a modern abridgment that reads very easily. Start at if you’re curious.

    Land and capital are different, and we treat them similarly at our peril.

  90. The water supply in my town in Connecticut is owned by an Australian bank. They own an amazing amount of land within an easy commute of NYC; it receives a highly advantaged property tax assessment — better than the local country clubs!

  91. So there are at least three views on taxation.

    (1) The Liberals promise public goods paid for by taxes.

    (2) The Conservatives promise tax cuts so there is more money in your pocket.

    (3) The Georgians would tax neither labour nor business. But they would tax the value of land and natural resources to pay for public goods.

  92. A growing economy requires a growing Supply of Money. Taxes remove money from the economy. Therefore, all federal taxes, whether on the rich or the poor, are anti-growth.

    In 1971, the United States became Monetarily Sovereign. So today, the federal government neither needs nor uses tax money. In fact, if all federal taxes were $0, this would not reduce by even one penny, the federal government’s ability to spend and to pay its bills.

    Rodger Malcolm Mitchell

  93. Of course it’s time! It’s WAY past time.

    WAR, poverty, disease have become PERMANENT, job security “industries” for the predators because – mathematically – they DO provide UNEARNED “wealth”:

    More misery for others = more money for ME ME ME

    We have a government (and a self-serving i-am-god RELIGION) that has been producing LAWS that maximize the damage that can be inflicted upon human beings and the planet’s LAND, if you will,

    because maximizing direct, personal, mano et mano damage to “we the people”

    maximizes THEIR “profits”.

    They are PSYCHOTIC – that’s the diagnosis for their “dysfunction”.

    It’s one psycho after another rising to the top of the food chain since the Industrial Revolution –

    and even WORSE pond scum has layered itself over reality with the “information” age, imho.

    The INMATES have taken over the institution. Of course they blame the institution for the fact that they are horribly NUTZ by choice, no less! – but that’s the danger zone here – the INSTITUTION is not the problem. The way the psycho USES the institution to BE a psycho is.

    Amendment 28 – and BURN THE PATRIOT ACT :-)

  94. The IDEA that the HUMAN SPECIES did not “know” anything about land and capital and labor until Henry George said it

    IS FALSE beyond belief.

  95. I believe that in 1-2 decades, the population of the planet will decrease even faster if the current exploitive, non-sustainable “economic system” remains in place.

    Think about it :-)

    No way around discussing who “deserves” to own a “home” now that someone SECRET declared themselves in charge of that discussion – right now it seems that those who are willing to donate their home as housing for “toxic” assets are IN – everyone else is OUT.

    7 billion people did not seem to produce a golden age of “architecture” for the family unit – go figure…and after all that criticism against the “moon walkers” wasting resources…

  96. Did I suggest that? I didn’t mean to. George was just one in a long continuum. He wrote it out a bit more clearly than anyone before him.

    The bigger problem is that the distinction between land and capital is too little noticed today. We’ve forgotten something once widely recognized, but it is no less true or important.

  97. The issue is not taxes. It is absurd to imagine any government that does not collect taxes for services rendered to provide for, and defend the common good. But the common good part is critical. A healthy tax system would first be equitable, and smart people would design a rate of tax that minimized constraints on growth. A healthy tax system would also prohibit, and punish the dodging of taxes by all entities..

    The behemoth that is the US tax code, is written by the predatorclass, for the predatorclass exclusively, and then – and this fact is particularly ridiculous – regulated and policed by the predatorclass.

    US taxcode is woefully INEQUITABLE and structurally flawed; systemically favoring the predatorclass, (1% of the population), failing to extract adequate revenues, and disadvantaging the poor and middleclass.

    Another bit of ridiculousness that should be disposed of, is the silly suggestion that there could ever be (no) government, or that anyone here was suggesting there should be no government. That said, – our government and our financial system today is commandeered by a sociopathic and criminal den of predatorclass vipers and thieves. This particular government, and this particular financial system are dire threats to the future of America’s poor and middleclass children. Robbing from the poor and middleclass to feed the predatorclass is anathema to every principle this nation was found upon.

    Intense and ruthless concentration of wealth and political power in the claws of a select few oligarchs and predatorclass olympians that own and control the mechanisms of government, all politicians, most of the nations wealth and resources, and the socalled MSM is fascism – not democracy.

    All the kings horses and all the kings men, cannot repair this perfidious government and financial system again. Ashes, ashes, all fall down.
    Tear it all down. Begin again.

  98. Rodger,

    I agree that in a non-convertible, floating exchange fiat currency system, that functionally taxes finance nothing. Regardless, you do need taxes to manage aggregate demand thus taxes are provide a drag on growth. How would you lower inflation if you were unable to lower aggregate demand via taxation?

  99. Tony,

    Rodger is very serious and in fact correct when he states that FEDERAL taxes are unnecessary to finance government spending. Last I checked the US dollar is a fiat currency and is backed by nothing except the full faith and credit of the US govt. The risk is not default nor ability to finance our deficit but rather is only inflation.

  100. You are, of course, entitled to your opinion about “better than anyone before him” but only if it was humanely possible to KNOW what EVERYONE before him said, wrote and LIVED

    by the principles of what they believed that relationship was.

    I would like to suggest that nobody “forgot”.

    Closer to the truth – especially when considering everything since end of 19th century is a “revolution” – industrial, infomatics, etc. – is that nobody cared about the greatest good for the greatest number, or that whole delusional “ask what you can do for your country”, now did they?

    Earth is a spaceship. Psychos are trashing the planet in hopes of getting off the planet – does that make sense to you?

    Not enough Polish cleaning women alive in the past, present or future to clean up this big of a mess caused by PSYCHOS.

    More misery for others = More money for ME ME ME

  101. Interesting that the “full faith and credit of the US government” majikaly eliminates the “risk of default”, or “the ability to finance our deficit”.

    In the process, all that once was America, and the American dream for most of the population has been lost, obscured, distanced, removed, or shipped overseas.

    Bankers want to keep the same system operating in the same ways, just as politicians seek to maintain the status quo insuring that nothing really changes. All the wealth and resources of the nation are radically redistributed to the offshore accounts of select predatorclass olympians or oligarchs, and the people are left fewer much lower paying jobs, no bargaining power, or job security, massive reductions in total wealth and standards of living, shoddy, unhealthy, and rapidly increasing healthcare options, brutal increases in core costs of living outlays, wildy expanding divides between thehaves and thehavenots, no or little hope for sending their kids to college, and a total lack of representation in the conduct of the government.

    The system may be working for bankers, but it’s destroying the American middleclass. Simply printing money and hurling it chari vari into a system based on, and rooted in debt, and where somehow, by some majik debt is made an asset is beyond stupid. It’s criminal. Yeah, a small pack of predatorclass hobgobblins reap imponderable fortunes and exist untouchable bathing in oppulent luxury, – but the rest of us are paying a terrible price for that flawed and corrupt systems, systemic failures, abuses, and criminality.

    The people a fast approaching a critical threshold, where uncertainty and dread concern shapeshifts into desperation and hopelessness. You can only rob, pillage, oppress, and disadvantage people to a certain point, – and then there is a backlash. When the backlash happens here, and it will – it won’t be pretty, or bloodless.

    In a world where there are no laws – there are no laws for anyone predatorclass biiiiaaatches!

  102. 1 Kings,

    You saying you can’t trust the government. OK fair enough. Can you list the corporations we can put our faith and trust for the common good?

  103. Hey Edwin,
    Not sure what or how there is supposed to be a link between clapping and the right wing. I mean “flapping” maybe, but “clapping”?
    I appreciate you taking the time to follow the link but I am a bit baffled when you question the author’s veracity. If we set aside any of his personal thoughts or opinions, what is it that you cannot accept in the article that shows factually that tax cuts increase tax revenues? Logically at some point that statement would not hold true (i.e. if we cut tax rates to 0). But the facts don’t lie. Historically, as the author demonstrated, using the US Gov’ts own data and numbers, when tax rates were cut, tax revenue increased. You have done nothing to disprove that facts presented other than question the intelligence of the author. If you have something relevant to add, by all means do it. But dismissing the author or the article because you don’t like the facts is not a worthy response. In other words, show me the data that refutes the simple statement that historically tax cuts increase revenues.

  104. Hey Edwin,
    Not sure what or how there is supposed to be a link between clapping and the right wing. I mean “flapping” maybe, but “clapping”?
    I appreciate you taking the time to follow the link but I am a bit baffled when you question the author’s veracity. If we set aside any of his personal thoughts or opinions, what is it that you cannot accept in the article that shows factually that tax cuts increase tax revenues? Logically at some point that statement would not hold true (i.e. if we cut tax rates to 0). But the facts don’t lie. Historically, as the author demonstrated, using the US Gov’ts own data and numbers, when tax rates were cut, tax revenue increased. You have done nothing to disprove that facts presented other than question the intelligence of the author. If you have something relevant to add, by all means do it. But dismissing the author or the article because you don’t like the facts is not a worthy response. In other words, show me the data that refutes the simple statement that historically tax cuts increase revenues.

  105. OK, so the Georgians have shown up :)

    Could one of you please explain to me how taxing the value of land and natural resources (rather than business profit and personal income) work in North America?

  106. Ted K.
    I think you’re missing the point, Reagan’s budget problems were “outlay” problems. He spent more than he generated in revenue. Even though tax revenues increased, he spent each year at a much greater clip…the definition of an outlay problem.
    Not sure what your rant and insults directed at TeaPartiers hopes to do; they will be a huge factor in the next election and will tilt power in the Congress back to the Conservatives. With respect to Boehner and Grassley, et al. What is your point? They didn’t vote to enact the Health Insurance they receove. That was done many years ago. I agree that they should do with less, but they didn’t create the problem. Both sides voted for their ridiculous benefit packages. Obama’s a chain smoker. What does that have to do with anything? I ask because you mention Boehner’s habit.

  107. Max Keiser has an interesting spin on taxes.

    He says in some Middle Eastern countries (eg, Saudi Arabia) the government does not depend on taxes to operate so these countries give their citizens (to put it subtly) less rights.

    In America there is something nudging close to this example. At one time, banks depended on deposits for fractional reserve banking. But now banks can make massive loans and then after the fact go to the derivative market to create a deposit. In other words, the banking system is moving away from any need for depositors.

    Keiser seems to suggest that when a democratic government depends on taxation for its operations there is a higher threshold of human rights and accountability. This is an interesting spin on why there should be taxation. Its a democratic right that we should demand our right to exercise?

  108. There’s no magic involved at all, unless you consider reserve accounting to be magic. The fact is that the US is sovereign in US dollars and our “debts” are denominated in US dollars. There is no risk of default.

    The feds could eliminate the income tax completely and it would not impair the governments ability to spend one iota. Taxation, at least at the federal level is not required to fund spending. It is simply a liquidity drain. State taxes are a different story as the states cannot create currency, they are truly revenue constrained.

    Since aggregate demand is well below where it needs to be I would argue for a massive across-the-board tax cut that would be in place until aggregate demand improves and we begin to see economic growth.

  109. We tend to refer to ourselves as Georgists or geoists (when I hear Georgians I think of those 70s ads for yogurt cultures!) And the reference to Henry George is simply a shorthand … sometimes I spell it out as “the ideas most commonly associated with Henry George.” He was an eloquent writer and speaker, if a bit long winded as a writer, in the style of his time.

    The classical economists would recognize as “land” many things that they never lived to see. Yes, urban land, of course, and suburban land, whose values far exceed the value of agricultural land (with the possible exception of land suitable for growing specialized wine grapes?) and wilderness land. And natural resources such as oil, natural gas, coal, minerals of all kinds. But also a long list of other things: geosynchronous orbits (so that various corporations’ satellites don’t bump into each other); the airwaves, of many frequencies (the AM and FM bands, and dozens of others, which most of us would say, almost automatically, belong to the American people, but which have been sold to all sorts of private entities); landing rights at congested airports (e.g., LaGuardia or Newark at rush hours — rights which Bush transportation secretary Mary Peters asserted rightly belong to the American people; she was told that no, they belong to the individual airlines); water rights of various kinds; etc. The list is long and varied. Mason Gaffney has written extensively about many of the specifics; see

    There is an acre in midtown Manhattan said to be worth $400,000,000 to $1,200,000,000 as a teardown. That’s a single block, currently occupied by an 80 year old hotel whose owners are satisfied with $25 to $30 million per year in operating profits. They acquired the property for a trivial amount, not all that many years ago. They’ve refurbished the hotel, perhaps more than once, but the value is not in the building, but in the land itself. That location’s value has nothing to do with anything the current or previous owners have done or not done, and everything to do with the vitality of NYC, the effects of federal, state and local taxpayers’ investment in the goods and services which make NYC a good place to work, live. These are financed by some property taxes (not all that high, and very unevenly applied across various kinds of property, imposed both on land value and building value, but the assessments are, shall we say, uneven); by sales taxes; by taxes on wages (Mayor Bloomberg can name the top 10 wage-earners in NYC). As Leona Helmsley put it, “WE don’t pay taxes. The little people pay taxes.” And the landholders collect the value that the little people create, just as if the landholders had made some significant contribution.

    So how could land value taxation work in America? If cities and states fail to collect the lion’s share of the rental value of land, the federal government could step in and collect it. Just as a disproportionate share of income taxes come from NYS, a huge share of America’s land rent is in its major cities. Localities which chose to collect land rent could reduce, or better yet eliminate their taxes on buildings; reduce their reliance on sales taxes (do you know that Chicago and parts of Alabama have sales taxes of 10% or more, and in Alabama, groceries are taxed? At the other end of the spectrum, Delaware has no sales tax. They also have an awesomely low property tax, at least in the beach communities, which get fresh sand financed by the federal taxpayer. Go figure.)

    I’d prefer to tax our corporations, public and private, on what they *take*: the choice land they occupy in cities; the rights of way for their pipelines; their locations adjacent to publicly-financed ports and other transportation infrastructure; the value of natural resources which they remove from our finite provisioning; the value of natural resources they prevent others from accessing, thereby creating monopolies for themselves; and other like things.

    These values aren’t even measured today! (I wonder why?)

    How high would a land value tax be? Quick and dirty, the ceiling might be about 5% of the market value of a piece of land. That is, 20 years’ purchase. That’s 5% of the market value of the land in the absence of other taxation. Land rent. I’ve got no problem with collecting only 90% of that 5%, and leaving the landholder 10% (which he still didn’t earn).

    Collecting the rental value of land would put land speculators out of business. Collecting the rental value of land would lead to a situation in which no one would buy more land than they planned to put to use in the short to medium term; no “nice nest egg for my grandchildren;” no parking lots on choice urban lots until the owner is “good and ready.” Choice sites would be redeveloped fairly promptly. That process would create jobs, and the resulting buildings would create housing and commercial venues — whatever the market wants.

    Because those who want to open a business would no longer be paying to buy land, credit would be used to finance productive activity. What a concept! (See Mason Gaffney’s “How to Thaw Credit, Now and Forever.”)

    And wealth would no longer concentrate as it does today.

    Okay. This is much too long, for which I apologize. I hope it answers your question, tippygolden!

  110. Re: @ Batman____You must look at a specific period and juxtapose external events eg. NAFTA, WTO (China?) – then you get a better understanding of why and how this came about. ie. Reagan (collaspe of Russian Economy); Bush #43 (WTO: China becomes non-voting member); Clinton (NAFTA: espescially Mexico next door). PS. When these “New Initiatives/Laws are Implemented” these first (critical?) years are very beneficial for the originating entity because of the imbalance in infrastructure/logistics/architecture, etc.,etc., cost (no secrets here). Therefore…it should be no suprise that once said infrastructure is in place, it no longer is a positive tax revenue generator. :-)

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  112. The moment I get more money, the price of the bills goes up. That’s supply and demand for you.

    I don’t currently subscribe to much that isn’t an effective monopoly. My electricity, my phone service (choose one of 2 or 3 “competitors”), my internet provider, etc. The price of gasoline for my commute is dictated by a handful of giant petrocorps. The list goes on, and the exceptions are fewer over time. The moment the yearly income for those in my Socio-Economic-Bracket upticks on some Excel line-chart, the price of everything I actually need to live in a modern society goes up by 5 dollars a month.

    This is why minimum wage rules do not work. We still use them, because we don’t have a better solution, but it’s still a poor instrument.

  113. This article is not a serious assessment of the situation.
    As for the quip regarding Buffett, most of his wealth is not income and will not be taxed in his lifetime. It is the value of his shares of Berkshire that make him a Billionaire and he seems to have no desire to liquidate his holdings.

  114. Re: @ Elder___Why is Warren Buffett (Bershire Hathaway)in China? Why are his counterparties there holding hands with him? Why did Berkshire Hathaway (Warren Buffett) buy the 2nd largest railroad in the United States – “Burlington Northern/ Santa Fe RailRoad” for a meager $34 bn. 11/09 at the bottom? Did he know something we didn’t know, or did it look like Coke, or P&G ? Why is his home in Omaha,Nebraska a few miles from the headquarters of the largest railroad in America…namely, “Union Pacific RailRoad” (Omaha, Nebraska)? Lastly…if it looks like a duck…it quacks like a duck…it’s gotta be a duck – that is to say Mr. Buffett will be bringing/transporting all his imported goods from China via his railroad (`s)…and the “Grand Buffet” will be on him. Such a good american…oh , and let us not forget Bill & Susan Gates?

  115. You need to learn a little economic history! From 46 to 58 there were three recessions not the great wealth creation you say there was. The economy boomed for several years after the Kennedy tax cuts were enacted until Congress started to raise tax rates in the late 60s. If you lived through the 70’s you know it was not a time of great prosperity for the nation. So your claim that the economy boomed under high tax rates just isn’t supported by the facts. But don’t let that stop you!

  116. “Also, remember you can tax Warren Buffet’s $50 billion at 90%. The money you get wouldn’t run the government for one hour.”
    So, assuming the government only operates 2020 hours per year, its budget must be in excess of $90 trillion. That sound about right to you?

  117. I do not consider “reserve accounting” to be majik, Anonymous
    September 27, 2010 at 7:35 pm –

    I consider “reserve accounting” to be CRIMINAL!!!!

  118. If we take tax cuts to its extreme it means no taxation. I am trying to imagine what a society would be like if there was — no taxation — and it is not a nice picture. For example, if law enforcement was privatized, the institution would be accountable to private interests and not the public interest. The same for national defense.

  119. Folks, the bottom line is the tax cuts were ” Temporary” meaning only lasting for a time. Why is this. Because if they included a 10 year out look from a budgetary point of view, they would have never passed. Let them all expire!!!!

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