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Debates Forum

  1. Standard member spruce112358
    Democracy Advocate
    12 Nov '10 08:26
    Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.

    From 1913 to 1965 one needed at least $1 million in 2009 inflation-adjusted dollars to pay the top rate.

    From 1965-1980 – with top tax rates in the 70% range – inflation kept working away on the top bracket until by the early 1980's the 70% tax was on income over $500,000 in 2009 dollars (i.e. bracket creep). Fifteen years of “super” tax rates were a key contributing factor to the misery of the 1970's -- 10 years of low growth and high unemployment.

    Then we woke up and realized that a society does not tax its way to prosperity. Starting under Reagan, tax rates finally began to drop until in the years 1988-90, the US got as close as we would get to a flat tax rate – 15% or 28% for everyone. These tax rates ushered in the 1990s which was the longest period of growth in American history. Even though the top bracket continued dropping, this became less important as the rates flattened.

    Here are a few data points from http://www.truthandpolitics.org/top-rates.php adjusted for inflation per http://www.westegg.com/inflation/:
    -----------
    Years…………………..Top Tax Rate……….Nominal Top Bracket………in 2009 dollars
    1917-21……………….. 67-73%.....................$1-2 million……………….$12-24 million
    1930's…………………….60-80%......................$1-5 million…………….$16-76 million
    1942……………………….88%...........................$200,000…………………$3 million
    1950-63………………….90%...........................$400,000…………………$3.5 million
    1965………………………70%...........................$200,000…………..……$1.3 million.
    1981………………...….70%............................$200,000………………..$500,000
    1982………………………50%....................... ....$106,000…………………$230,000
    1988-90…………………28%...................... ....$30,000…………………..$50,000
    1992……………………….31%...........................$86,500………………...$130,000
    since…………… between 28-40%...........................................roughly $350,000


    So the lesson is clear. Low taxes means a prosperous economy with low unemployment. High taxes means a stagnant economy with high unemployment which no amount of government spending can fix (in fact only makes worse). So increasing taxes on “the rich” with something disasterous like 50% on income over $250,000 would take us right back in the direction of another lost decade like the 1970's.

    Dumb idea.
  2. Standard member Lundos
    Back to basics
    12 Nov '10 09:26
    Originally posted by spruce112358
    So the lesson is clear. Low taxes means a prosperous economy with low unemployment. High taxes means a stagnant economy with high unemployment which no amount of government spending can fix (in fact only makes worse). So increasing taxes on “the rich” with something disasterous like 50% on income over $250,000 would take us right back in the direction of another lost decade like the 1970's.
    It's a little more complicated than that. I recommend reading "The economics of taxation" by Bernard Salanié.
  3. Standard member spruce112358
    Democracy Advocate
    12 Nov '10 09:51
    Originally posted by Lundos
    It's a little more complicated than that. I recommend reading "The economics of taxation" by Bernard Salanié.
    Give us the thumbnail sketch.
  4. 12 Nov '10 11:08
    Perhaps a more sensible comparison can be made if you look at e.g. the effective nominal tax rate as averaged over the top 10% of earners.
  5. Subscriber Wajoma
    Die Cheeseburger
    12 Nov '10 11:13
    Originally posted by KazetNagorra
    Perhaps a more sensible comparison can be made if you look at e.g. the effective nominal tax rate as averaged over the top 10% of earners.
    Perhaps it's better not to shape the criteria and statistics to suit your own agenda.
  6. 12 Nov '10 11:16
    Originally posted by Wajoma
    Perhaps it's better not to shape the criteria and statistics to suit your own agenda.
    Says Mr. Eyepatch himself! Hilarious.
  7. Subscriber Wajoma
    Die Cheeseburger
    12 Nov '10 11:20
    Originally posted by KazetNagorra
    Says Mr. Eyepatch himself! Hilarious.
    You didn't notice, I argue from morality not stats. Hehe,
  8. 12 Nov '10 11:25
    Originally posted by Wajoma
    You didn't notice, I argue from morality not stats. Hehe,
    Yes, who needs facts when you have the laissez fairytale.
  9. Standard member spruce112358
    Democracy Advocate
    12 Nov '10 11:33
    Originally posted by KazetNagorra
    Perhaps a more sensible comparison can be made if you look at e.g. the effective nominal tax rate as averaged over the top 10% of earners.
    Perhaps. I have an open mind. Let us know what you come up with.
  10. 12 Nov '10 12:50
    Originally posted by spruce112358
    Perhaps. I have an open mind. Let us know what you come up with.
    Unfortunately I do not have access to this kind of data.
  11. 12 Nov '10 12:53
    Originally posted by spruce112358
    Time to deal with this fiction about high top tax rates producing prosperity.
    Who precisely is advancing this "fiction"? I've heard people say that tax rates aren't especially relevant to economic growth (which is to say, the rate of growth and the tax rate are independent variables). I don't think I've heard anyone say that high top tax rates actually produce prosperity.

    I have, however, heard people say that high top tax rates produce social cohesion by reducing the gulf between rich and poor, and that they allow for the provision of public goods not always satisfactorily provided by the market.

    In other words, you've started from the assumption that prosperity and economic growth are the primary goals, and then arguing for low taxes on that basis. But even if one accepts that high taxation retards prosperity, one might still seek to give priority to other goals: equality, for instance. Once one has accepted that there are a variety of possible goals in addition to economic growth, then one can begin to talk sensibly about taxation and its function.
  12. Donation bbarr
    Chief Justice
    12 Nov '10 13:21 / 1 edit
    Originally posted by spruce112358
    Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.

    From take us right back in the direction of another lost decade like the 1970's.

    Dumb idea.
    Do you have any economic data that supports the claim that 'growth', as you use it above, has a high correlation to the median wage (not mean wage) of U.S. citizens, or to their overall financial security, or to their ability to buy a home, send their children to college, afford health care, retire comfortably, and so on? Why should we care about growth if it doesn't reflect how well off we are, but rather simply how much more ridiculous the profits of the very rich have become over the past 30 years at the expense of the working poor and middle class (you know, the 90% of americans that the Financial Times reports have had basically stagnant wages since the mid 70's)?

    EDIT: Here is an interesting graph of median income from 1991 to 2005, adjusted for inflation. If, as you say, the 90's was a period a substantial economic growth, and if growth correlated at all to median wage, you'd expect a discernible increase in median wages from 1991 to 2005. But this is not the case, according to the U.S. Census data.

    http://en.wikipedia.org/wiki/File:Historical_median_personal_income_by_education_attainment_in_the_US.png
  13. 12 Nov '10 14:29
    Originally posted by spruce112358
    Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.

    From ...[text shortened]... take us right back in the direction of another lost decade like the 1970's.

    Dumb idea.
    The biggest reason why the 1970's were a "lost decade" was because of the high inflation rate (as well as OPEC's machinations) -- so it becomes a lot harder to make wise investment decisions when you don't know what constitutes a "good price" and you have to keep guessing about what next year's inflation rate will be.

    And indeed - there have been past periods of strong growth (such as during the 1950's-60's) despite extremely high marginal tax rates. So if anything, your chart seems to show that tax policy in of itself doesn't have any real effect at all on how prosperous the economy is.
  14. Standard member bill718
    Enigma
    12 Nov '10 15:44
    Originally posted by spruce112358
    Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.

    From ...[text shortened]... take us right back in the direction of another lost decade like the 1970's.

    Dumb idea.
    Sounds great! Sadly however, like so mant tax cut advocates, you give no details on what government programs would be slashed or cut back to pay for these tax cuts, also, you've not taken into consideration that with these tax cuts less revenue will be available to pay down this huge deficit. So...how do you intend to balance the budget? Hold a car wash?
  15. Subscriber no1marauder
    It's Nice to Be Nice
    12 Nov '10 15:48
    Originally posted by spruce112358
    Time to deal with this fiction about high top tax rates producing prosperity. The whole argument is nothing more than socialist wishful thinking because the top-tax bracket cut point hasn’t generally been inflation-adjusted. So while top tax rates have varied, what matters much more is that the definition of who is "rich" has steadily broadened.

    From ...[text shortened]... take us right back in the direction of another lost decade like the 1970's.

    Dumb idea.
    LMAO!!!!!!!!!!!!!!!!!!!!!!!!

    How phony is an argument which uses a chart which omits virtually the entire 1920s (a period of massive tax cuts which led to something other than "prosperity" and virtually the entire 1940s (a period of high taxes and robust growth )?

    Just looking at the cut off for the very top rate is a bogus argument as well; the tax rates were graduated and when you had a top rate of 70-90% people in the brackets immediately below also had marginal rates far higher than the present ones.

    Finally as bbarr points out, the so-called "prosperity" in the last 25 years has missed the average worker who's income has stagnated. By contrast, in the higher taxes on the wealthy era of 1947-1975, worker income more than doubled in constant dollars.

    More baloney from the religion of Spruce.