It’s clear that the GOP love “middle class” tax cuts that benefit the rich and hate “boutique” tax cuts that benefit the poor and middle classes.
Remember when the Forbes on Fox panel mostly voted for tax cuts over food stamps? When tax cuts were touted as the way to help the middle class? Apparently, what the Fox News pundits really wanted was tax cuts for the upper class, only. Now that the Tax Policy Center has projected that about 47% of Americans will pay no federal income taxes, those very same Forbes on Fox folks are up in arms with accusations that the lower and middle classes are not paying their fair share. One panelist even suggested this will lead to increased youth suicide…
…“That nanny state is already here!” Host David Asman began in his introduction to the discussion, before adding, “more Americans are getting more handouts than ever before…Less folks paying, more folks receiving, hello nanny state!”… [emphasis added]
Inserted from <NewsHounds>
However, as much as the GOP Reichsministry of Propaganda foams at the mouth, they do not have a clue about the real problem, of if they do, they are not telling.
The real problem is the gross inequity that has developed in out country, the worst in history. Sure there are wealthy people in stable economies. But consider the analogy of a pyramid. In a stable economy, the conspicuously wealthy capstone must be supported by a prosperous base. If the capstone gets so heavy that it crushes the base, the economy collapses. This is what happened in 1929, and almost just happened again, as the following chart (credit: The Nation) shows.
(click image to view full size)
Note that the top chart, which measures income inequality, demonstrates that it has never been worse, and the only time in our history that it has ever approached its current level was the spike that caused the Great Depression.
The bottom chart measures the top marginal tax rate. Note that when the GOP dropped the top marginal tax rate in the twenties, eighties, and during the Bush/GOP regime, income inequality shot up. On the other hand, high marginal tax rates during the middle of the century, held income inequality down and kept the economy stable and prosperous for all.
Now lets look at how income inequality is crushing the base using the next chart (credit Crooks and Liars).
As you can see, the top 1% get 24% of the income, the next 9% get 26% of the income, while the bottom 90% get only 50%. The numbers are even worse for accumulated wealth.
The bottom 40% of Americans own only 1/5 of 1% of the wealth, that tiny sliver.
If you haven’t noticed by now, the conditions are exactly the same now as they were right before the Great Depression. We just barely averted another through massive government spending on the rich to bail them out of the consequences of their rapacious greed. However, we have not changed the conditions that caused it. The housing bubble was not the cause. It was the trigger. The cause is unchanged, waiting for the next bubble, whatever it is, to trigger disaster. Only by correcting the cause can we avert the disaster.
To this end, I suggest a complete revision of the tax code as follows.
|
Progressive |
Tax |
Table |
Politics |
Plus |
|
From |
To |
Rate |
Max This |
Max Total |
|
$0 |
$50,000 |
0% |
$0 |
$0 |
|
$50,000 |
$100,000 |
10% |
$5,000 |
$5,000 |
|
$100,000 |
$250,000 |
20% |
$30,000 |
$35,000 |
|
$250,000 |
$500,000 |
30% |
$75,000 |
$110,000 |
|
$500,000 |
$750,000 |
40% |
$100,000 |
$210,000 |
|
$750,000 |
$1,000,000 |
50% |
$125,000 |
$335,000 |
|
$1,000,000 |
$5,000,000 |
60% |
$2,400,000 |
$2,735,000 |
|
$5,000,000 |
$10,000,000 |
70% |
$3,500,000 |
$6,235,000 |
|
$10,000,000 |
$25,000,000 |
80% |
$12,000,000 |
$18,235,000 |
|
$25,000,000 |
$1,000,000,000 |
90% |
$877,500,000 |
$895,735,000 |
This needs some explanation, as it is completely different from what we have today.
Everyone pays no tax on their first $50,000 in income, no matter how much they make. Everyone pays 10% on up to their second $50,000 in income. So the family making $100,000 pays nothing on the first $50,000 and $5,000 on the second $50,000 for a total of $5,000. A family making $350,000 pays nothing on their first $50,000, $5000 on their second $50,000, $30,000 on their next $150,000, and $30,000 on their last $100,000 for a total of $65,000. A family making a million pays $335,000. The top category is actually $25,000,000 up, but I capped it at $1 billion, because infinity gives spreadsheets heartburn. Even the family earning $1 billion gets to keep over $104 million. I could live on that. Couldn’t you? These numbers are not set in stone, and I can already tell they need to be tweaked, but it’s the concept I’m driving at. Increasing taxes in progressive increments like this has everyone but the very poor paying a fair share and minimizes the gross inequality of income distribution. However, it preserves the incentive to earn, because earning more always results in keeping more.
So you be the judge? Should we fix the problem or face the consequences of leaving it as is?
This idea is completely original. However, I learned many years ago in Philosophy 101 that ancient Greeks had the audacity to steal most of my best ideas thousands of years before I was born. So, if you had my idea and stole it before I thought of it, may the ghost of Michelle Bachmann haunt your descends until the end of time.. 😉
22 Responses to “Lets Talk Taxes”
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Bravo! TomCat for Treasury Secretary, Chairman of the Federal Reserve, and chief overseer of Wall Street! Naturally, some nimrod who is also a Michele Bachmann follower will decry this proposal as “punishing the rich”, but the rest of us who are sane will applaud this as brilliant! As for those who will argue that “there aren’t enough rich people around to make this sustainable”, I say that is a big crock of feces. For a plan like this has never really been implemented in this country. Besides, the filthy rich have been “punishing” American workers and the poor for more than 150 years. It’s time for a big payback!
Jack, I’m not qualified. But if I’m not, and I can figure this out, it clearly shows that the people we have doing the jobs are even less qualified than I am. Anyway, if you want me to do all those jobs, you have to become Pope. 😉
If it’s not sustainable, it can be made so by tweaking the brackets.
This really isn’t about payback. I tried to plan it to protect everyone’s interests, including the rich. My goal was to be fair to everyone.
I like the tax rate structure – it’s fair and progressive (not regressive) like we have now. The Repubs will say that we are punishing the rich – but they have more so why shouldn’t they pay more – the charts bear this out. Bravo!
Thanks Lisa. Considering your background as a professional auditor, I’m thrilled to have your approval.
Good plan. Combine this with public financed elections and ending corporate personhood and we have a pretty clear path back to salvaging our country.
These are changes we can believe in.
Thanks Dave. As you well know, I support both 100%.
TomCat,
I understand what you mean, and, of course, you are correct in wanting to be fair across the board. Perhaps you could serve as an advisor to the Treasury Sec and the Chairman of the Fed?
“Pope Jack I” 🙂
LOL, Your Helliness. 😉
I’m still not qualified. In addition, were I to serve as an assistant to either of those creeps, I’d be the first suspect, if someone Teabuggered them.
What an excellent post, TC… you DO seem more qualified than what is there. People are tasked right now to make ‘extra’ as a matter of survival. Corporate politicians are keeping this ‘way of life’ in our country more than any other source.
Thanks, Gwen. But I find it hard to blame the politicians when the system forces them to choose between going along and unemployment.
Tom I am in awe, you really need to be emailing the White House! I won’t pretend to know any of what you said here, all I know is thehusband and I have always been middleclass or below and I have never complained about the taxes I pay. Why this subject infuriates the righties is puzzling to me.
Sue, In have emailed the White House, but stuff like this never gets to the President. There are too many people in the way with a vested interest in the status quo. This infuriates the righties, because their talking heads tell them that THEIR taxes will be raised or that they will lose THEIR jobs. Many in the media parrot these lies without challenge. Very few do challenge the lies.
I love the post and think the plutocracy graph was amazing! You would think conservatives would love the idea that so many people don’t pay taxes and that they would aim to eliminating the rest of the taxes, but instead, they are the ones wanting to redistribute wealth and make taxes fair for everyone.
Kevin I agree, but see my reply to Sue, please.
I am exhausted. It was a great read but the conservatives will do nothing as long as a America has a black president. Sad..but true …
Yes it is, Mike. But just as much, as long as we have the best Congress money can buy (and has), nothing will be done. But I figure that, if I throw out the idea, and if enough people like it, maybe someday, after I’m long gone…
Looks great to me, now my wife is a tax attorney would you want her to look at it? I’ll twist her arm and have her eyeball the numbers if you want me to. She knows all too well about the Faustian bargain the state government is making to draw in more businesses down her but yet they are not paying anything in taxes to support society.
If I can get her to do this, it would be strictly unofficial.
Beach, thank you so much. I’d love to hear her unofficial input.
There is a well written out of print book called “1929 the year of the great crash” by Klingman.
I just finished this fascinating book and all the while reading it I kept thinking to myself that if you changed the names of the bankers in the book (the bankers, not the banks) you could tell the story of the years from the great Reagan deregulation to this current crash.
But the bottom line in every bursting bubble is greed. In the Coolidge and early Hoover administration the “middle class” was sucked into investing in a market that seemed indestructible and had no ceiling. Bankers and salesmen were out there shilling stocks on margin (buy stock on the payment plan) and regular folks just fell right in it. Just like buy this house because the value will never decrease and hell if you’re making $8 an hour we’ll show the paper pushers how it will work.
Then the syndicates would get together and run the price of a stock they invested in up, start a frenzy and (cut the derivatives into slices and sell those) and cash out. The difference though between ’29 and ’09 was that in ’29 the lower upper class (pension plans today) lost massive amounts too, it was the manipulators who saw what was really happening because they were causing it and they hedged with insurance or got out all the way before the biggest crashes and them that said it was coming were vilified in the press which also was culpable in getting people to invest their life savings into the market.
Odd though like you say here, at that time it was about 15% of the people who owned about 95% of the wealth. There was no support for the farmers as they collapsed after WWI or labor that was working for about $18 a week and Hoover would not approve any sort of subsistence payment to the unemployed once the months long crash was finally done as all of Europe had done (even Germany which was flat broke). (the market lost 7/8 of it’s value in the space of about 1 year) Even Churchill, probably the most conservative politician on the planet called Hoover a heartless ass.
Funny thing is even then the numbers were staggering, hundreds of billions of dollars gambled away on faith and lost in desperation and none of it tied to real wealth and production, simple paper profits. People spending money like it came from a well that would never go dry on all manner of excess. Just like most of the wealth lost during this depression has been lost and spent.
It will be interesting to see later this year as the government props are being pulled out from the economy to see what happens. The Fed needs to pop up the interest rates to about 4% all at once right now because the banks (same as ’29) are not lending but they are getting discounted money they are sitting on. Personally I still wouldn’t bet on this economy for one reason and one reason only…we no longer have any great manufacturing (production) capacity to put people back to work in and the government is already too far in debt to start the greatly needed public works infrastructure projects that would put money in peoples pockets.
Unemployment will not be passed beyond the end of this year then what?
I agree wholeheartedly with your tax scheme Tom…we should have always had a progressive based model same as we should have never had an employer based model for health insurance. The thing is that taxes going up on the upper classes of people (them making more than 250k) will always be presented by the media as taxes and costs going up on the middle (them making less than 100k) because of the same mechanisms that inspired the build up to the depression of ’29-’41 the media is wholly owned by the uber wealthy and the portions that are not are drowned out in the fear mongering.
This ride ain’t over yet. Not by a long shot. in ’29 the market dropped from 465 peak to 50 bottom, we saw a 15,000 peak drop to a 6,000 I think the next collapse will take it at least as low as 5 maybe 4500.
When you see all of the media starting to try to build trust of the masses in something they can invest heavily in, making grand profits at (for a time) then you will know where the next bubble is being blown. I am thinking it will be commodities, grain, meat, metals oil etc. You’ll see the prices of commodities rise to astronomical levels, far above what they cost to produce.
Mark, I have not read that book, but I have read others than made the same points. I agree with everything you said. TARP was a band-aid. Yoiur last paragraph is the next bubble to which I referred:
The housing bubble was not the cause. It was the trigger. The cause is unchanged, waiting for the next bubble, whatever it is, to trigger disaster. Only by correcting the cause can we avert the disaster.
tomcat, as i related, i really dont have time to analyze this, but at first glance it looks well thought out…and when we had a national crisis, (WWII) all income over $200,000 was taxed at 95%, so there is historical precedent…
here’s the take from ezra klein @ the WaPo
Can we close the budget deficit by taxing the rich? – The deficit over the next 10 years is projected to be $9 trillion. Start with some rough arithmetic. The three million or so fortunate taxpayers whom Mr. Obama counts as rich are projected to earn about $27.5 trillion from 2010 through 2019, according to the Tax Policy Center, a Washington think tank, and about $23.9 trillion after deductions. They are projected to pay $7.4 trillion in taxes. That’s 31.1% of every dollar of taxable income, on average. To squeeze an additional $9 trillion out of these taxpayers would require boosting that to 68.9%. And that assumes these taxpayers wouldn’t find tax shelters to hide their income or work less. There isn’t enough money in the over-$250,000 crowd to stick them with the $9 trillion tab. And this actually makes taxing the rich look better than it is. The deficit that people worry about isn’t the $9 trillion short-term budget deficit. It’s the mega-trillion long-term deficit. To put this in context, the 2009 deficit was 53 percent of GDP. The 2050 deficit is projected to be 350 percent of GDP..
Thanks RJ. I don’t thinks this takes into account such things as capital gains. Undwer my plan all income is regular income. No tax shelters.