Wealth Redistribution? Wealthy Americans Are Taxed Less Now Than When Reagan Was President
Apr 1st, 2010 | By Main Contributor | Category: RepublicansPeople often talk about how our country is attempting to redistribute wealth, but people seem to ignore that the wealthiest individuals are being taxed substantially less now than during most of this country’s recent history. From 1917 until now we have had tax rates for the highest incomes groups up to 92% of their income. That rate was not for just a few years. In 1917 the tax rate was 67% for this group and it was still 70% in 1980. From 1950 to 1963 the tax rate was 91% (92% in 1952 and 1952). During the Reagan presidency the tax rate topped out at 69.13%. The top tax rate in 2010 was 35%. The lowest tax rate during the last 90 years was 24% in 1929, the year the Great Depression began. So why are people concerned that the wealthiest Americans are getting taxed too much when they are being taxed at the historic low that they are now?
Chart From http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213
First, your table has the TOP rates, not the average rates or how much income one has to earn before they get to the top rate.
Second, the big problem is that almost 1/2 of the U.S. now pays no income tax. This percentage was much lower during the Reagan years and has been on a steady march upwards since the 60’s. When half your populace lives for free at the expense of the other half, you have a huge institutional bias to more tax and redistribute, and this is the point that a democracy implodes – when the tyranny of the majority sets in and destroys a country.
Third, who says those were “golden” periods? Taxation destroys a society’s savings and capital through consumption. So even if rates were higher in the past, that is not a good thing or a justification for higher rates today.
Woot! Let’s see if we can get that tax even lower!
LOL, no surprise there, none at all. Money attracts money!
Lou
http://www.anonymous-surfing.us.tc
“Historic low” is inaccurate, as you can see from reading the chart. It’s not even the lowest in recent history; look at 1988 and 1989.
Also, as the note says, you have to consider the top tax bracket begins at $373,650. I believe the 90% tax rates were for $500,000+, which of course was even more money, back when those rates were in effect.
That said, I certainly have little sympathy for those making 4x as much at me. I wouldn’t like to see a return to those absurdly punitive tax rates; I believe they inhibit growth. Another problem is I find it inherently unfair to say “soak the rich” and tax a minority at 90%+ as a populist measure.
However, the rich certainly should not be complaining about today’s tax rates — all the more so because the more money you make, the easier it is to find places to hide income from taxes. I make a 90th percentile salary but in a high cost of living area where I cannot (yet) afford a house. As such, I undoubtedly pay more in taxes than the average $200-300k earner who has multiple properties.
However punitive those top rates are, they do not inhibit growth – they were designed for exactly the opposite purpose. All business expenses – including growing your business – is tax deductible. Most business owners, then, would choose to grow their businesses (which grows their net worth) rather than take any money in that tax bracket as personal income. That’s why we had a healthy and growing economy in the 50s, despite those tax brackets.
Chuck, was this your idea of April’s 1st humor, or you just a dang idiot?
http://www.ctj.org/pdf/taxday2009.pdf
It’s a great chart and show that when the rich were taxed heavily on excess income the country and the middle class did well. Now that no one can afford health care or their children’s education, is the country really better off or are just the very wealthy better off?
If you like Medicare and Social Security, or even unemployment insurance, you may be a socialist. Better turn yourself in now.
@Lincoln- “If you like Medicare and Social Security, or even unemployment insurance, you may be a socialist. Better turn yourself in now.”
Seriously, we’d all be better off.
This table ignore a PILE of surtaxes, excise taxes, Medicare, self employment taxes, etc. that small businesses have to pay. As a self-employed person, 50-60% is more like the real rate. need the math?
Socialism, fascism, and communism (“spread the wealth,” “from each according to his abilities, to each according to his needs”, whatever you want to call it) are failed ideologies. They go back at least to the days of the Mayflower colony when almost all died when a “share all” structure was imposed, with the colony quickly recovering when that structure was abolished. The reasons for failure are varied, but the result is always the same – death, destruction, loss of political liberty, corruption, a privileged nomenklatura, and war. The examples are numerous – the Mayflower colony, the millions dead and squandered lives of those under the Soviet state, Communist China, North Korea, Cuba, Communist Eastern Europe, Fascist Germany, ad nausem. For four hundred years people have been seduced by the lure of wealth redistribution – for four hundred years it has never worked and it never will work (except for the political elites who make sure they get their pieces of the pie).
We all want the same – wealth, safety, quality health care, innovation, and comfort. Unfortunately, freedom and wealth distribution are counter-intuitive. It is free markets, and the power of profits to lure men and women into providing the most efficient means of satisfying the needs of their fellow men and women and rewarding those who successfully do it, that has provided the desired fruits, time after time. Look at Hong Kong, look at the U.S. prior to 1913, look at any relative comparison between standards of living and levels of freedom between states, cities and countries. All the things you want are best produced in the society’s with the lowest tax rates, lowest business regulation, and highest levels of personal freedom. NONE of the things you want are produced in societies with high tax rates, extensive regulation of business, and redistribution of wealth. Yet time and again, substantial members of society work to impose redistributionist policies.
Governments don’t produce wealth or innovation – they never have and they never will. They have their role, but wealth redistribution is not one of them. Any economist will tell you that is the stock of capital in a country that dictates economic success or failure for all its members. As much as it goes against our nature to tinker and care for those that are less fortunate, the answer to being able to provide for the less fortunate is to put your society on the path to growing its capital, not consuming it. Many rail against “trickle down economics.” However, there has never been any successful economic system other than that – capital is accumulated and invested in production and factories and jobs, and all benefit, albeit unequally, from such activity. There is no alternative! That is how the U.S. developed into the wealthiest nation, the mainspring of medical and all other innovation, through the early 20th century – through the production and accumulation of capital. The U.S. now consumes its capital, and accelerates the process by borrowing from the world. It is on the wrong path, and the desired objectives of redistributionists will never be achieved. You are either working to divide the existing pie like a redistributionist so the unfortunate get a larger piece and the producers get a smaller piece and which results in ALL eventually getting smaller pieces as capital accumulation ceases and reverses, or working to make more pies so everyone gets a bigger piece (again, albeit of unequal sizes). It is never too late to reverse course and start making more pies, but it requires one to THINK about how wealth is created and fight the natural emotional response of taking from others to create a better world.
One can rail against the wealthy all day long on the grounds of unfairness, greed, and injustice, but acting on those impulses through the authority of government only acts to destroy the wealth and political freedom of all and does nothing in the long term to help the less privileged to the extent that they would benefit from a free and vibrant market economy.
http://www.languageofliberty.com
@Liberty-you may pay that on the dollars over $373K but the real rate is probably closer to 30% on everything, lets be real, it is the people who skew the facts to shore up their arguement that cause all the misinformed “Tea Party types” to be on the wrong side of an issue. Heck 98% of the American public doesn’t even pay enough taxes to cover the services they receive. So 2% of the very wealthiest (see Gates, Buffet crowd) and corp. are paying the way for the rest us.
Progressive taxes redistribute wealth from the relatively rich to the relatively poor.
Socialism, fascism, and communism (“spread the wealth,” “from each according to his abilities, to each according to his needs”, whatever you want to call it) are failed ideologies. They go back at least to the days of the Mayflower colony when almost all died when a “share all” structure was imposed, with the colony quickly recovering when that structure was abolished. The reasons for failure are varied, but the result is always the same – death, destruction, loss of political liberty, corruption, a privileged nomenklatura, and war. The examples are numerous – the Mayflower colony, the millions dead and squandered lives of those under the Soviet state, Communist China, North Korea, Cuba, Communist Eastern Europe, Fascist Germany, ad nausem. For four hundred years people have been seduced by the lure of wealth redistribution – for four hundred years it has never worked and it never will work (except for the political elites who make sure they get their pieces of the pie).
We all want the same – wealth, safety, quality health care, innovation, and comfort. Unfortunately, freedom and wealth distribution are counter-intuitive. It is free markets, and the power of profits to lure men and women into providing the most efficient means of satisfying the needs of their fellow men and women and rewarding those who successfully do it, that has provided the desired fruits, time after time. Look at Hong Kong, look at the U.S. prior to 1913, look at any relative comparison between standards of living and levels of freedom between states, cities and countries. All the things you want are best produced in the society’s with the lowest tax rates, lowest business regulation, and highest levels of personal freedom. NONE of the things you want are produced in societies with high tax rates, extensive regulation of business, and redistribution of wealth. Yet time and again, substantial members of society work to impose redistributionist policies.
Governments don’t produce wealth or innovation – they never have and they never will. They have their role, but wealth redistribution is not one of them. Any economist will tell you that is the stock of capital in a country that dictates economic success or failure for all its members. As much as it goes against our nature to tinker and care for those that are less fortunate, the answer to being able to provide for the less fortunate is to put your society on the path to growing its capital, not consuming it. Many rail against “trickle down economics.” However, there has never been any successful economic system other than that – capital is accumulated and invested in production and factories and jobs, and all benefit, albeit unequally, from such activity. There is no alternative! That is how the U.S. developed into the wealthiest nation, the mainspring of medical and all other innovation, through the early 20th century – through the production and accumulation of capital. The U.S. now consumes its capital, and accelerates the process by borrowing from the world. It is on the wrong path, and the desired objectives of redistributionists will never be achieved. You are either working to divide the existing pie like a redistributionist so the unfortunate get a larger piece and the producers get a smaller piece and which results in ALL eventually getting smaller pieces as capital accumulation ceases and reverses, or working to make more pies so everyone gets a bigger piece (again, albeit of unequal sizes). It is never too late to reverse course and start making more pies, but it requires one to THINK about how wealth is created and fight the natural emotional response of taking from others to create a better world.
One can rail against the wealthy all day long on the grounds of unfairness, greed, and injustice, but acting on those impulses through the authority of government only acts to destroy the wealth and political freedom of all and does nothing in the long term to help the less privileged to the extent that they would benefit from a free and vibrant market economy.
SL62 must not have read Liberty’s comment at all, or knows so little about taxes that (s)he does not understand that businesses pay taxes too, so small businesses really get reamed. Please don’t denigrate the “tea party types” if you don’t even understand small business taxes. I look down on tea partiers too, but just because they’re more big-conservative-religious-government types who hijacked a fairly radical small government grassroots organization.
By “hiding” much of the taxation from the voter, the average voter doesn’t understand how much we really pay. My full income taxes (state + federal + medicare + disability, etc) was ~25% of my gross income this year, which isn’t all that bad. Of course, that ignores sales taxes I paid, but most importantly it ignores the matching payroll tax that my employer pays for me. Corporations may be faceless, but they’re not gigantic money fields that you can just take from without consequences. To my company, the matching FICA they paid on my behalf could have been used to hire an entire minimum-wage worker for the entire year.
I think a major reason that we’re seeing this huge imbalance of wealth going to the rich is because regulation hands money directly to large businesses at the expense of the small. When you create a new food safety regulation, do you think it’s easier for McDonalds to meet this, or a mom & pop restaurant? For every page of regulation to add, you add further favor to large businesses that can afford the overhead, that have the economies of scale to support it. Unless you directly punish companies for the sin of making too much money (ie, some crude “excess profits” tax), even well-intended regulations hurt the small businesses.
Government has NEVER been good about allocating money. I don’t mind so much if they collect taxes and then spend it on fairly-bid private enterprise initiatives, but when you create a government organization to do something, it does it less efficiently than the private sector. The amount of money going to that organization NEVER gets smaller, and the organization NEVER goes away, even once it outlives its usefulness. Think about it: When was the last time a government organization was wound down? We saw lots of businesses fail in this recession, we saw lots of workers lose their jobs and take pay cuts, but government did everything they could to protect the status quo.
It used to be that government workers had more stable jobs and better benefit packages, but lower salaries. Seems like a fair trade. Now government workers represent a massive percentage of employment, and are, on balance, paid far more than their private-industry counterparts.
No matter how you feel about taxes, the government needs to spend less money. Someone needs to take a SERIOUS look at cuts, something that happens in private industry all the time to ensure efficiency, but something that NEVER happens in government.
Can we get rid of:
* Farm subsidies (well-intentioned, sure, but haven’t we been paying these for 70+ years with no end in sight? And then we also pay farmers NOT to grow certain things at certain times? If it’s not economically sustainable, I don’t mind propping them up for a few years, but it can’t continue indefinitely).
* Foreign aid to countries that use the money against us, or at least completely ignore the reason we’re sending them money (I’m looking at you, Israel).
* War on drugs (including foreign aid to fight same in Mexico)
That’s a pretty good start and a huge chunk of change already.
After that we can tackle our military adventures overseas.
@Chuck…” Many rail against “trickle down economics.” However, there has never been any successful economic system other than that –”
Look where it got us. Right to the door of this recession! This is the second time, in fact. It happened in 1929.
The non-obvious purpose of taxation is to extract money from the pockets of the ultra-rich and pump it back into the economy. This happens both directly — taxes paid to government come back to pay for things like infrastructure — and indirectly via the mechanism stockinbug mentions above, whereby it’s more profitable for business owners to direct money back into their businesses than directly into their personal bank accounts. Right now the ultra-rich are bleeding the economy dry, with predictable results; an ever-larger percentage of the GNP disappears into their personal wealth every year, and none of it comes back. Then we wonder why we’re headed for the next Great Depression.
No Lee, that’s all wrong. The ultra-rich do not cause depressions. Government regulation that unfairly interferes with business and production and wealth building are what causes depressions (in addition to most types of monopolies). They don’t horde money if it goes into a bank. Banks use the money in accounts all the time for loans to small and large businesses, for investments and for other wealth production schemes (for the bank and those that get interest from their savings account, etc.). At no time are Bill Gates’ or Warren Buffet’s vast sums of money not being put to some kind of use.
@RLC. I read it perfectly fine. I have been a small business/self employed for 19 years now. I understand all those taxes you both spoke of and also understand all the things I get to write off my income as well. I have done my own taxes the whole 19 years and I stand by what I said. My best year I paid Uncle Sam $115K but I made over $600K so it worked out pretty good for both of us.
People need to either quit bitching or expect crappy schools, roads, police, fire protection, parks, bad food and water, natinal defense, Mom and Dads and/or G’ma and G’pas SS and medicare to be reduced or go away, etc…..you cannot have it both ways
)
@PChalcks you are exactly right if people would take a look at history they would see the truth. We had the same let the wealthy keep the money and it will “trickle down” to the rest theory back then and we almost let it happen again. Actually with the housing mess on top I am surprised it hasn’t been worse.
Damn, only 115 on over 600k? Under 20%, that’s pretty impressive. I paid over 25% total on <100k last year.
I need to buy a tax shelter. I mean house.
@Chuck
The biggest failures in history, in my opinion, share one important characteristic: excessive ideology.
The biggest successes – countries with healthy economies and happy people – are those that embrace a healthy balance between capitalism and some socialism where it makes sense (socialized fire departments, police departments, schools, healthcare.)
The largely socialized countries of northern Europe are not failures. In this Forbes poll of the “Worlds happiest places”, they all score quite well. Far better than the US, in fact.
http://www.forbes.com/2009/05/05/world-happiest-places-lifestyle-travel-world-happiest.html
When you believe you have a pure and infallible ideology to guide you, that’s when the problems start. Because then you will have a hard time acknowledging failures, and making progmatic fixes.
Stockinbug:
“The largely socialized countries of northern Europe are not failures.”
Rampant unemployment, especially among the young. A standard of living 30% below the U.S. A reliance on the rest of the world for medical and technological innovation.
I could go on, but someone else said it better for me, just yesterday! “If We Europeanize, Europe Is in Trouble” – http://article.nationalreview.com/430816/if-we-europeanize-europe-is-in-trouble/jonah-goldberg.
Chuck
http://www.languageofliberty.com
Pchalks:
“Look where it got us. Right to the door of this recession! This is the second time, in fact. It happened in 1929.”
The Federal Reserve was put in in 1913 to protect the economy from recessions and depressions and from the ravages of inflation. How’s that working out? I won’t begin to count the recessions and depressions, but the dollar is now worth 95% less. How’s that working out?
Economic corrections are quick (painful of course) in a free market economy, as excesses are quickly worked out as capital reallocates to its best uses. Government suppression of the free market allows massive misallocations and bubbles and reflation, and long, drawn out down period and recoveries. The economy is a beautiful, self-correcting mechanism, when it is allowed to operate unimpeded.
Chuck, there were 4 depressions in the 70 years ending with the 1930s, there have been zero depressions since. Some of these depressions, like the Long Depression and the Great Depression, occurred while we were on the gold standard or gold-and-silver standard. You didn’t actually say you wanted a metal standard, but that’s what most Fed-bashers do.
I love Europe. I’ve lived for about a year in France and I speak fluent French. I’ve visited roughly a dozen western and central European countries. I’m not the world’s most prolific traveler, but I’m hardly a shut-in American either. I find it amazing that Americans who romanticize Europe seem to know so little about it beyond “wow, Notre Dame is pretty, and they have free health care!” I guess tourists get little feel for what day-to-day life is like for the average citizen.
For one, most European cities strike me as dirtier than the average American ones, with graffiti everywhere.
Ask locals about the homeless people and they shrug them off as if they don’t count. After all, they’re mostly Roma (gypsies).
Young people stay in college extraordinarily late, usually into their mid-late 20s while living at home. Why not? College is more-or-less free and job prospects suck. Then they work for a couple of decades and retire young. I’m not going to judge quality of life, but there’s a reason western European economies are in the dumps.
Their unemployment numbers (which are consistently quite a bit higher than those in the US) ignore the *extremely* large numbers of those who delay entering the labor force until as late as possible, and then retire as early as possible.
I’m sensing a lot of dumb. Why am I here?
The standard of living in Scandinavia is reported to be higher. They live longer and are more literate. One NY Times “Perspective” piece concerning first hand observations does not change that. Neither does spending some time in France. By the way, I’ve been to almost all the big American cities and Zurich is far cleaner, Munich is quite clean, too. Got to give Rittenhouse square in Philadelphia some credit, but it is only a neighborhood (have you been to North Philly?).
Our unemployment numbers ARE SIMPLY NOT COMPARABLE TO THEIRS, they are counting different things. Ours hides stuff, too, which you can learn about if you read up on U6 unemployment.
@Chuck
You said:
>Rampant unemployment, especially among the young. A standard of living 30% below the U.S. A reliance on the rest of the world for medical and technological innovation.
As pointed out elsewhere here, unemployment is measured differently here in the US. Standards of living in Europe are just fine (and they are eroding here in the US). I don’t believe your comment about innovation, either. The world is changing, and has been for a while. I just don’t believe the US will lead in this area anymore.
As I pointed out in my earlier, they are *happier* over there than we are here in the US. In my book, that’s the standard for measuring success. Whatever other economic, business or technological rationale you may come up with, it just doesn’t matter as much as being happy, and enjoying your life.
As an update to my comment above, the attached link is a map showing the United Nations Human Development Index, a measurement of the living standards by country.
http://en.wikipedia.org/wiki/File:UN_Human_Development_Report_2009.PNG
As the graphic makes clear, the standard of living in northern Europe is as high or higher than that in the United States.
Next, the CIA World Factbook puts the unemployment rates of northern Europe well under those of the US.
Chuck’s “facts” are suspect, at the very least.
As an update to my comment above, the attached link is a map showing the United Nations Human Development Index, a measurement of the living standards by country.
http://en.wikipedia.org/wiki/File:UN_Human_Development_Report_2009.PNG
As the graphic makes clear, the standard of living in northern Europe is as high or higher than that in the United States.
Next, the CIA World Factbook puts the unemployment rates of northern Europe well under those of the US.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2129rank.html
Chuck’s “facts” are suspect, at the very least.
Chuck, there were 4 depressions in the 70 years ending with the 1930s, there have been zero depressions since. Some of these depressions, like the Long Depression and the Great Depression, occurred while we were on the gold standard or gold-and-silver standard. You didn’t actually say you wanted a metal standard, but that’s what most Fed-bashers do.
Pchalks:
“Look where it got us. Right to the door of this recession! This is the second time, in fact. It happened in 1929.”
The Federal Reserve was put in in 1913 to protect the economy from recessions and depressions and from the ravages of inflation. How’s that working out? I won’t begin to count the recessions and depressions, but the dollar is now worth 95% less. How’s that working out?
Economic corrections are quick (painful of course) in a free market economy, as excesses are quickly worked out as capital reallocates to its best uses. Government suppression of the free market allows massive misallocations and bubbles and reflation, and long, drawn out down period and recoveries. The economy is a beautiful, self-correcting mechanism, when it is allowed to operate unimpeded.
@Stockinbug: All the first graphic shows is that Europe is, for the most part, dark green, the same dark green that the U.S. and Canada are ranked. There are some parts of Europe that are ranked lower than this. So no, the graph does not clearly show that Northern Europe is equal or better than the U.S. It only shows that they are equal, and nothing else. Obviously, ideologically, you would say they are better because they pander to more leftist thought. I would say the opposite. I agree with your earlier statement that “happiness” is the most important thing in one’s life. That is an absolute and anyone who disagrees with this is an idiot or a liar. Of course, I don’t believe countries that violate your rights and liberty (European socialism) will ever make an economic conservative happy (though leftists may be deluded into thinking that they are).
Nicely put Rick.
@Rick
The Holland Tulip bubble was the reslut of government regulation? I can only hope you are as ugly as you are ignorant, otherwise you might someday breed, and that would, from what you just typed, be a shame.
There were four major recessions in the 70 years before the New Deal, none since.
Ack! I meant four major DEPRESSIONS, not recessions.
@paul
Paul says:
>”It only shows that they are equal, and nothing else.”
Exactly. I posted the graph to disprove Chuck’s goofy assertion that socialist northern Europe has a much lower standard of living than the US does. Nobody here claimed they have it better than us (aside from the fact they are happier).
Paul says:
>Obviously, ideologically, you would say they are better because they pander to more leftist thought.
Where do I say that? Do you like putting words in people’s mouths? Again, I was disproving Chuck’s assertion that socialism = failure. Not wishing to believe blatant lies does not make me an automatic leftist or socialist.
Or, perhaps my willingness to believe the kinds of lies promulgated by Chuck would make me an automatic capitalist or conservative?
You know what my real position is? Look at my first post on this board. All ideology is rubbish. Labels are nonsense. the most successful societies on earth use a healthy mixture of things that work, no matter what ideology they come from.