The Taxation Non-Debate


If you make more than $1 million dollars a year your marginal tax rate should be 70%. Period, end of story. It was that way until the Carter Administration. Look whats happened since then?

Cause and effect?

You bet your ass.

One important note: progressives need to stop arguing that the top .01% of earners need to be taxed more. What we need to argue is that those making more than $1 million plus should be taxed at a higher percentage. Why? Because 19% of Americans think they are in the top 1% of earners. The innumeracy is astonishing, and not until we frame the debate properly will we attain the moral high ground on this. For far too long people making $90k-$300k a year think they are in the top 1% of earners. They aren't. And when the realize it they'll be more than ready to accept a tax on the wealthy.


Sean Paul Kelley March 15, 2008 - 11:18pm

$100,000 to $149,999 11,194,000 9.89%
$150,000 to $199,999 3,595,000 3.17%
$200,000 to $249,999 1,325,000 1.17%
$250,000 and above 1,699,000 1.50%

So, top 1% is somewhere above 250K (could be 1M). These are household incomes.

creativelcro March 15, 2008 - 10:46pm

I think your comment on rephrasing the argument for taxing the rich is spot on. Tie it to a dollar amount, not a percentage or general categorization. In any sort of relative measure, people will always assume themselves to be higher than they truly are. I know plenty of people making $75k for a family of 4 who are very concerned about the estate tax. Then again, I've always been confused by the whole "gay marriage debate". Isn't it really a "same-sex tax-filing and hospital visitations rights" debate as far as the government is concerned?

But that being said, 70%?!?! You're saying that if an individual makes over $1M, they should work through August 15th each year just to pay their taxes? I agree that we have a growing wealth distribution problem, but rallying the peasants to loot the castle isn't going to solve the problem. Perhaps something akin to income paid by a company to one individual exceeding 30 times what the lowest individual is paid is taxed at 70% would create an actual incentive to redistribute wealth equitably. But just saying 70% is putting yourself in a position to fight a battle you'll never win, however cleverly you phrase your argument.

BuddhaSixFour March 15, 2008 - 10:57pm

$1,000,000 you will be taxed $.70 cents on. If you make a total of $100,000,000 million dollars a year in total compensation that means you will take home $31,000,000. You ain't gonna starve on those kinds of earnings, you'll still be able to buy plenty of homes in Vail and Key West and Greece and the South of France. During the golden ages--Eisenhower--this was the tax rate in the country--actually was higher. We did all right back then, no?

And besides, if Democrats start by arguing 50% the Rpeublicans will whittle them down to say 40% and that just won't cut it--not with the ind of financial crisis we are facing. I'd settle for 60%--maybe even 50%. But the the CLinton era 40% tax rates just weren't high enough.

Besides, I guarantee you, if the US had a health care system like that in say, oh, Denmark, and they didn't have to live in fear of getting sick and losing everything a lot more people would be quite happy taxing the very wealthy at a 70% rate. The peasants aren't looting the castle in Denmark--as a matter of fact, Denmark is rated one of the happiest places on the planet year after year, not too mention that their broadband penetration is the highest on the planet too.

High marginal rates allow for real social investments, not just a military-Keynsianistic expirement we have here in the US.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 15, 2008 - 11:06pm

the US (and many other countries) had those marginal tax rates. And during those years the rich and powerful did not cease striving, did not stop working hard, etc...

70% won't be hard to sell after the meltdown. Not hard at all. The problem with Americans right now is that they think they're pre-rich. Once they realize they aren't, that these things will never effect them, except by reducing their tax bill and increasing government services for them, they'll go for it.

They sure did after the Great Depression and WWII. In fact marginal tax rates at the top end were often higher than that. This where I disagree with SP, I don't think 70% is enough. I'd probably have that a million, and at 10 million I'd probably kick it to 90%.

Ian Welsh March 16, 2008 - 3:32am

be but as a practical selling matter at the present time, 70% would be a good start. But 90% after $10 million? Sure, I'm game for that.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 16, 2008 - 4:07am

A multiple of what the legal minimum salary is for a person working 40 hours/week. I'd say, 50 times that is the maximum income. Anything above that goes to the Govt. I think it is hard to live in a society when somebody makes 10,000 what other people make.
But I can live with a 90% tax on incomes over 10M.

creativelcro March 16, 2008 - 5:09pm

Admittedly I missed the marginal point, but still. Denmark is a beautiful country, but you have a people with a different mindset. Most Americans, particularly the wealthier ones, run off of a "well, I got mine" mentality that just isn't compatible. If that kind of tax rate was enacted, what I think you would see would be an exodus of productive wealth. Unproductive wealth might remain. Two examples to illustrate:

1) Individual A is very well paid lawyer. He grumbles and complains, but ultimately he is an expert in American law and therefor continues to work as a lawyer in the US. He accumulates wealth, maybe even facilitates its production, but he does not generate it himself.

2) Individual B is an entrepreneur starting a technology company and is starting to see some success. His business is probably already dependent on outsourcing, and facing extremely high marginal tax rates himself, he relocates himself and his company outside of the United States. The wealth his successful company produces no longer contributes to the health of the US economy.

Unfortunately, a lot of productive wealth is some of the most portable: engineering, manufacturing, etc. The none-portable wealth consists of industries that move wealth, but don't generate any: entertainment, services, legal services, etc. A 70% marginal tax rate might have worked well in the Eisenhower era, but where were the rich going to go?

BuddhaSixFour March 15, 2008 - 11:27pm

used to be run by a rather rapacious, "I got mine" sort. They were called an aristocracy, but over time and political courage the character of Denmark's politics--and Germany's and France's and elsewhere in Europe has changed. That kind of change happens when people see the benefits of government policies. And that's exactly why the Conservatives in this country launched their culture and class war forty years ago: they saw that FDR's and LBJ's reforms were actually providing benefits that people liked. And it terrified them and stirred them to a massive counter-offensive that's been going on ever since. This was the real counter-culture of the 60s and early 70s. All the rest was very, very mainstream and mainstreamed.

Why is it that Germany in the last 20 years has actually added to its industrial capacity, has actually managed to keep industrial jobs and we haven't? Because they have invested and continue to invest in their human capital.

Where are the rich going to go? You think Jack Welch would move to India? Or China? Please! They'll stay here. It's just a threat.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 15, 2008 - 11:44pm

I will agree that Europe has at times been plagued by something worse than what the US currently has, a true aristocracy, and that at the moment their current system seems to be humming along without some of the major problems of ours... but that doesn't mean their system is optimal (not that I am in any way claiming that ours is).They have plenty of issues of their own. Ours just happen to me manifesting right now.

And as far as the rich moving, no I don't see Jack Welch ever moving. But one of the major problems with American industry right now is our lack of "worldly" business leaders. We are great at selling to ourselves, and did a reasonably good job selling to others when we were the only game in town, but that's not the case anymore. Your young entrepreneur with an engineering degree, an MBA, who speaks a second language and has traveled the world is precisely the guy (or girl) who will have no problem moving elsewhere but was your best hope for building a successful American corporation that was a net exporter.

Before discussing a 70% marginal tax rate, start by ending the Iraq War and start dumping that expense into higher education and fixing it so the rich actually pay the tax rates they are assigned now. First things first.

BuddhaSixFour March 16, 2008 - 12:03am

to you if we started calling for the wealthy to pay for their fair share of the war by calling for high tax rates the war would end in an effing flash.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 16, 2008 - 12:58am

If you don't live here or locate your headquarters here, you pay a gross receipts tax on everything you sell here.

Petronius March 15, 2008 - 11:44pm

until we're no longer the dominant global economy (which seems to be rapidly approaching). Then you lose that leverage entirely, particularly if other countries find themselves in a position to retaliate in a similar manner. Why headquarter in the US to gain cheaper access to a limited market when you could be outside it and sell to the world for less?

BuddhaSixFour March 16, 2008 - 12:06am

The UK seems to survive a VAT quite well. A gross receipts tax is no different. A lower tax based on net income if you're headquartered in the US might make it more attractive to plant roots here.

One thing that I've been harping on with the tax code is the insane depreciation tax schedule employed by the IRS for capital equipment. We really need to do away with it and allow industries to simply expense their capital equipment expenditures.

Petronius March 16, 2008 - 1:34am

it'll still be a huge market. People will not just write off the US market unless it's completely unprofitable. And it won't be.

Ian Welsh March 16, 2008 - 3:33am

If we're going to compare this current business to the Great Depression (a comparison I "hope" is unfounded, whereas a few weeks ago I was saying I "think" is unfounded):

"The leading industrialized nations responded to the crisis by imposing trade barriers on imports with the hopes of increasing demand for domestically produced goods and to raise revenue from tariffs. "Concerns about low agricultural prices, an influx of imports, rising unemployment, and declining tax revenue generated public sentiment for trade restraints." The Smoot-Hawley Tariff Act of June 17, 1930 responded by raising tariffs by up to 50% on a wide range of goods. Unfortunately, the resulting fall in imports created unemployment abroad that quickly invoked protectionism in response, creating unemployment back in the US!"

followed by:

"Ironically, even though tariff rates rose by up to 50%, imports declined so sharply that tariff revenues fell 46% from $602 million in 1929 to $328 million in 1932. This not to mention the loss of tax revenue from the domestic unemployment the tariffs caused indirectly."

http://www.shambhala.org/business/goldocean/causdep.html

Long story short, import tariffs on international companies are a form of protectionism that the event we're all looking at as a warning clearly suggests not engaging in.

BuddhaSixFour March 16, 2008 - 7:06pm

The gist of my argument is that one doesn't escape taxes by moving out of the country, but one pays their fair share--just as if they were located in the USA.

At any rate, the USA no longer manufactures most of what it consumes.

Petronius March 16, 2008 - 7:32pm

protectionism and have been predicting it for some time. Tarifs aren't always bad, it depends on how you do them. Odds are pretty good they'll be done stupid, though. But frankly, the US will need to put on currency controls and tariffs in order to rebuild its capacity to produce what it needs once folks won't lend the US money to buy goods.

Ian Welsh March 16, 2008 - 8:09pm

Why isn't it done?

creativelcro March 16, 2008 - 12:09am

sean-paul,

it's still money inevitably going into private pockets and it's still taxation without representation. this is a fine post, and all the economic discourse here on the Agonist is tremendous, rare and lovely, but to my agonized mind it's completely temporally displaced in the larger context of things. my view, likely errant as it is, is that economics are tempting to discuss here for the numerical ease of it, the seeming practicality of it, the seeming maturity -and the seeming sophistication of it -when it seemingly misses the forest for the trees. it may not be as controversial or prone to the greater passion or prone to as much fringey tinfoil-hattism, but isn't it an escapist expense of megs of ascii and brain power and precious time? you have this great mind that escapes me so much. i am convinced i am missing something somewhere and sadly, needlessly, am confused. the minutia of economics can be endlessly followed and speculated upon, as with most topics certainly, but also as certainly much safer to do -but where are we going here? isn't it all rather moot? if as it seems to me, there's an underlying unknown threat to the dollar at large, to focus on money at all seems rather pointless until the human factor has been secured. and so on. forgive me, but this comes from my gut. i just don't understand, just as there's a lot i don't understand in general (like support for clinton or obama etc -or edwards). let me ask you about your views on the amero if i may... we are being savagely raped and fleeced and those doing so seem hellbent on driving us toward that currency, no? they're doing so brilliantly i might add and the challenge to us all is gargantuan and stunning to behold. perhaps so brilliant and so stunning and so gargantuan, it's *hard* to behold. shock and awe and all... (worse, it's been long and loudly predicted by the very bullhorn brigade that we can do better than!)

we're in greater crisis than famine or thirst or economic ruin, and it needs not be so described to be so addressed and even better for sober thought -now at the moment of necessity. prosperity follows what it is founded upon, no? first things first, i say. IMHO... as things are, how can we evade the question of conscience of giving them any money at all?? it *is* at issue, and increasingly so every *single* day now, for the sake of the larger and more germane hobnailed boot issue.

respectfully,

Zuma March 16, 2008 - 12:39am

overlooked and serious problems we face. I just finished reading Scott Horton's amazingly chilling piece about the Justice Department in this month's Harpers. Here's the thing, however, I'm not a lawyer and as much as I scream and moan and complain and howl about legal issues no one would ever listen to me, other than to take a deeply moral stance on it and being the flawed human that I am, some would say irredeemably so, no one would listen either. But it quite possibly is the the key issue we face. And I don't think Hillary or Obama quite understand the seriousness of how fouled our rule of law ethos is.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 16, 2008 - 1:03am

I will totally agree with. Not that you're flawed, but that the rule of law is suffering... you know what I meant. :^P

BuddhaSixFour March 16, 2008 - 1:27am

i appreciate this comment. -and i was *about* to add i thought it still a good idea and proper that you go ahead and you express your views on our legal major disaster, caveat and all, when i considered you may already have... and that a search through your past posts would be a good idea in general for me and beneficial. i really appreciated this, especially the last on clinton and obama. thanks.

Zuma March 16, 2008 - 2:05am

He is a professor of constitutional law.

tjfxh March 17, 2008 - 1:24am

that *did* bear repeating in my case.and i wonder why.
he should hammering that point like crazy.

Zuma March 17, 2008 - 2:13am

The US is spending way too much and the obvious hemorrhaging is due to military spending. Military spending is running around a trillion year these days when you throw in all the extras that are buried.

We need to cut this way back soon or we are toast. It's though military spending that OBL sees the opportunity to bankrupt the US.

We simply cannot raise taxes enough to afford this level of military spending and also fund the social programs necessary for promoting the general welfare and common good — health, education, safety net, basic research, infrastructure, alternative energy, etc.

But so far military spending is the sacred cow that goring us all to death. It's more the third rail of American politics than SS or Medicare.

And speaking of excessive spending, the US cannot afford to be hemorrhaging dollars for oil like it is either. BTW, the US military is the largest consumer of petroleum in the world.

tjfxh March 16, 2008 - 12:43am

go hand in glove, inextricably linked.

“Is not our first thought to go on the road? The road is our source, our vault of treasures, our wealth. Only on the road does the ‘traveller’ feel like himself, at home.”
Ryszard Kapuscinski

Sean Paul Kelley March 16, 2008 - 1:04am

Agreed entirely. It's very easy to vote for spending that isn't coming out of *your* pocket. When the bill for the Iraq war comes due, the very rich know that it won't be them who'll be paying for it, even though among their number are those who profited disproportionately from it, so why care?

An effective taxation rate makes it their problem too -- and it's curious how it leads to more sensible policies about what should be done with that money.

JQL March 16, 2008 - 5:33am

Of course, we need to both raise taxes and reduce excessive spending. However, the question is one of policy.

Policy is based on a vision of what the country is and where it is going. Right now that vision is badly skewed, and raising taxes or cutting spending without changing the vision is almost pointless. Problems will arise, the Right will claim that it's the Left's fault, and they will be reelected to another round of pillaging, as they did when Clinton cleaned up after Reagan/Bush 41.

The underlying premise of US policy is based on feeding the military-corporatist-governmental apparatus. Military spending is essentially an enormous transfer of wealth to this apparatus. Raising taxes to support this is folly, in that this skimming of wealth is inflationary and results in a false notion of growth.

Disaster capitalism is not only using crises, real or manufactured, to advance economic liberalism and neo-imperialism. The entire US policy has been based on disaster capitalism since the Nixon era. The strategy has been to keep the country in constant fear of a bogeyman in order to make excessive military spending a permanent feature of US policy. That has to change or nothing else will work. The game was almost up with glastnost, but 9/11 provided a new bogeyman that the Right has flogged in the name of Islamofascism.

Similarly, Big Oil has maneuvered the US into dependence on petro-based energy, even though it is causing the US to hemorrhage dollars, putting enormous pressure on the balance of payments account. Unless the US reverses this policy quickly, this hemorrhaging will continue and the dollar will continue to tank.

A corollary of this policy is increasing national debt and the expense of servicing it. Congress is not in the process of upping the debt limit to over 10T, and interest rates are definitely going to be heading up as the dollar tanks.

We need to address these issues immediately, before even contemplating raising taxes going into a depression.

When taxes are raised, we also need to rethink how this should be done. Taxing business is not a good policy in my view, since business simply passes this along as another expense, and it gets in the way of global competitiveness. Business should not be paying for anything but doing business, and business related expenses, e.g., road fees for trucks, etc. Business should not be responsible for benefits such as medical insurance that are not directly related to business, such as OHSA. These are all areas of social welfare that the people themselves should be funding through the commons, e.g., universal health care, SS, safety net, etc.

Taxation should not be based on an arbitrary figure but on budgetary needs. One of the chief areas of political debate regarding policy should be the budget. The budget is how the government gets things done. The media should be informing the public about just how this is accounted for in the budget.

Then, after all this, a progressive tax regime should be enacted. But to talk about taxes with going through these steps is folly, because it will just perpetuate a failed system until it implodes of its own weight or destroys itself through ill-advised militarism.

That's just for starters. Then we need to be having a debate about what kind of country and world we want based on visionary possibilities in the long term and practical opportunities in the short term.

Right now, the vision of the US elite is world domination for the foreseeable future, which requires dollar hegemony and superpower status to prevent anyone from ever challenging US supremacy economically or militarily, along with a military-corporatist-financial-governmental revolving door guaranteeing that wealth and power flow to the top.

This requires ever-increasing centralization. The antidote to this is decentralization of wealth and power. Policy needs to be redirected to this end.

tjfxh March 16, 2008 - 12:32pm

Where is the money to come from? U.S. deficits are so huge, and social burdens are so large, that at some point a candidate has to say the truth: the only sources of additional tax revenue are the very wealthy, and the corporations. Everyone else is struggling just to make ends meet and are already tapped out.

Phrasing it as a tax over $1 million is very good. In a way Kerry tried that with his tax over $200,000 per year in earnings, so the tone is set. The only question is the threshold amount.

Numerian March 16, 2008 - 9:44am

when we began talking about the now real and imminent meltdown, here at the Agonist, about 4 years ago, one of the "delusions" as it was called then, was that "the rich and the corporations are going to give the money back".

and as you have said, there is no other place to go. my understanding is that corporations, not so long ago made up ~24% of federal tax revenues which now has dropped to about 8% ? something like that.
given the bloody-murder-screaming we all have done at the profits of Exxon etc. and then some, i don't think it will be a hard sell either. it's way too late, but better late than not at all.

what do you think about the idea that we will default on what we owe China? just say, "hey, sorry about that, we overspent and well,...we're bankrupt." ?

1700: "Abolish slavery!"
1800: Woman's Suffrage!"
2000:"World Peace!"

bernadene March 16, 2008 - 6:58pm

is totally wrong. I don't like him, but he is trying to distance himself from the US economy. His smart move.
These discussions of taxation, economy and the average personal suffering is lost in the general discussion.
The average person in the US is suffering. The government doesn't care about them. Much of this is self generated, but not all.
The problem in the US is greed. The lust for money. The lust for power. The lust for prestige.
What about the average person just trying to make a living.
Everyone keeps talking about the stock market or tax breaks.
What about the average person?
The hell with the top 10%.
What about the average person?

repressive governments mix administrative clumsiness & inefficiency with authoritarian tendencies.

kimmy March 16, 2008 - 11:51pm

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