The top marginal income tax rate: 100 years at a glance

[Jay]

Re: The top marginal income tax rate: 100 years at a glance

whats funny about this thread, is that nobody seems interested in discussing it - again i say its because for most, actually paying for this .gov 'of ours' seems to be an abstraction - it definitely not 'real' for the DC aristocracy, otherwise something would be happening - maybe its the heat?

Sometimes quiet reflects the courtesy to let a great thread continue without interruption. I learned a bunch, thanks.

[mesyn191]

Re: The top marginal income tax rate: 100 years at a glance

But at least here we're coming up with ideas. I don't know why there's no interest. When there was a bill to put Glass-Steagall back there was a lack of interest too.

Interest in solving problems has never been strong. Interest in whining about them always has. Hence Opera has huge ratings and the damn racist caveman thread wins.

I think we're going to have to regress further as a country towards a failed state before people in general start getting serious about solutions. Right now they're either too caught up in certain ideologies and politics to care or confused and ignorant. I don't know what the tipping point may be...but I hope it happens sooner than later.

[flintlock]

Re: The top marginal income tax rate: 100 years at a glance

As other pointed out, these are maringal rates, what was the effective rate in 1960? Also, taxes are increasing everywhere else.
In Illinois, my first paycheck was taxed at 2% in the 70s. Now it is 5%, SS, and medicare withholding have been raised. sales tax has gone from 5% to 7.75%, on a wider class of products. Utility taxes have increased, more local and state services have fees. Property taxes have gone from from 5K in 1996 to 8k in 2010.

Exactly. Politicians play a shell game with taxes, making it hard to compare "rates" over generations. If figures exist(?) of total taxes paid as a percentage of earnings, then you'd get a better picture. But it would have to include all taxes, not merely federal income tax.

[lektrode]

Re: The top marginal income tax rate: 100 years at a glance

Exactly. Politicians play a shell game with taxes, making it hard to compare "rates" over generations. If figures exist(?) of total taxes paid as a percentage of earnings, then you'd get a better picture. But it would have to include all taxes, not merely federal income tax.

+1
and then theres the issue - a BIGGIE - of the 'total take' (the states cut, outside of NH anyway)
the few brief glimmering 'moments' (the boom years) i made it into the 25% bracket, the total take was just about 50% (tween the feds, HI state, HI genl excise, our 'sales' tax biz pays + the tax on every dollar we spend) - noted this since on the final run thru the fed return a couple years back had fergot to include dec's celtel bill on the sched c and the effective/marginal rate was 50%

so clearly the total load/burden is the issue - esp when the much over-hyped 'tax cut' of obama's was in the FICA and this was swamped by the increase in states various levies and fees = total BS/propaganda 'taxcut' (and then it reduced the input to the socsec/medicare funds, and who gets to pay the price for _that_ ??)

[cjppjc]

Re: The top marginal income tax rate: 100 years at a glance

Sometimes quiet reflects the courtesy to let a great thread continue without interruption. I learned a bunch, thanks.

Very true Jay.

[Sharky]

Re: The top marginal income tax rate: 100 years at a glance

In a recent interview, I heard Greenspan say that the single biggest factor lacking in the current "recovery" is housing starts. Something like a 1% increase there would apparently bring overall unemployment back in line with historic averages.

They've already tried enticing people to borrow, which didn't work due to the existing, excessive debt.

So, I wonder why there hasn't been some discussion of abolishing the capital gains tax on the sale of residential property. It would also help the big banks in their ongoing efforts to repair their balance sheets. This is the way it works in New Zealand, so there is precedent that it's workable. Seems like a broad-based win-win approach like that, targeted in an area that would produce jobs, would be worth considering.

[Milton Kuo]

Re: The top marginal income tax rate: 100 years at a glance

In a recent interview, I heard Greenspan say that the single biggest factor lacking in the current "recovery" is housing starts. Something like a 1% increase there would apparently bring overall unemployment back in line with historic averages.

Greenspan has proven himself over the decades to be not only a shill but a lousy economist. [Look for comments made by Michael Hudson and Jeremy Grantham on their first introductions to Greenspan.] He is hardly someone whose opinion is worth listening to.

In this case, he's shilling again by saying that an economic recovery cannot occur without a recovery in housing. Like many of the other shills being paraded out by the mainstream media, he's got it backwards. Housing cannot recover until after the economy recovers and without resorting to creation of yet another bubble.

If Greenspan is talking about putting people to work building stuff, why must it be building even more houses in an already glutted market? Why not put people to work updating and repairing the national infrastructure?

They've already tried enticing people to borrow, which didn't work due to the existing, excessive debt.

So, I wonder why there hasn't been some discussion of abolishing the capital gains tax on the sale of residential property. It would also help the big banks in their ongoing efforts to repair their balance sheets. This is the way it works in New Zealand, so there is precedent that it's workable. Seems like a broad-based win-win approach like that, targeted in an area that would produce jobs, would be worth considering.

If you're talking about the tax code of the United States, the capital gains tax on the sale of residential property is, for all intents and purposes, non-existent. Capital gains of up to $250,000 for individuals and up to $500,000 for married couples are tax-free provided the home is one's primary residence and one has lived in it for two years. This giveaway to the banks has been in effect since 1997.

The only way to help the banks repair their balance sheets is to steal from savers through financial repression, steal from taxpayers by putting bad paper onto the public balance sheet, and find suckers to buy any bad paper the banks themselves still hold. In other words, there is no honorable or honest way for the banks to repair their balance sheets.

The way to put the economy on the path to a real recovery is to first do a real audit of the banks' balance sheets and put into receivership any banks that are insolvent--too big to fail be damned.

Jobs can be created in the U.S. by reindustrialization through incentivizing companies and eliminating the wage arbitrage that is currently taking place. For example, based upon the per capita income of a country that exports to the U.S., a tariff is levied to roughly equalize the wage differences. For countries with comparable or higher wages, there is no tariff. This creates a situation where outsourcing or offshoring is used only when said country has some sort of comparative advantage in the production of the good.

To encourage American companies to hire American workers, make it such that some percentage of the wages of every American citizen on the company payroll up to a certain amount, say $250,000, can be used as an offset to corporate taxes paid. This deduction ensures that if the company hires a non-American, it is because the non-American is truly better than the American worker and is worth the higher cost. The revenues lost from the corporate tax giveaways are recovered through the taxes paid by the American worker.

Finally, Americans who are too heavily indebted to ever recover should be allowed to discharge their debts through bankruptcy. This includes student debt. The lenders, who are supposed to be experts at lending money, should be forced to eat the losses as punishment for their incompetence in lending. For government guaranteed debt such as student loans, it'll have to be paid off either by having all tax payers sacrifice a bit or it can be made less painful with careful use of the printing press.

[photon555]

Re: The top marginal income tax rate: 100 years at a glance

There are some very good ideas in this thread, but I haven't seena solution that makes everybody angry, so I'll give it a try. I'mgoing to confine myself to the issue of taxation. The care andfeeding of politicians is an area covered by sinkholes and landmines,and I have no desire to be a zoo keeper. Also, I know these ideasare not new. But, I wanted to see them all together in one post inthis thread.

But, before beginning domestic issues, as stated earlier in thethread, selective tariffs should be imposed wherever “Free Trade”is not a two way street. If it's not a two way street, it ain't freetrade.

For a start, since we hear so much about fairness and equity, allincome would be treated the same, no exceptions. No more trust fundbabies getting preferential treatment and no more gaming the systemwith special rates for dividends and capital gains, etc. Everybodyshould pay for what they get, so we need a national sales tax so the"cash under the table crowd" pays their fair share. Peoplewho save would be rewarded by not paying sales tax on their savings.Eliminate all income taxes for incomes under about $75,000. Mostpeople wouldn't have to file. Bye bye EIC. Then start with 10% and goup to 25%, because no one should pay more than 25% in federal incometax. The exemption and bracket amounts would double for marriedcouples and would be tied to an inflation adjustment based on severalinputs including PM's and oil. No more marriage penalty or bracketcreep. However, there would be no exemptions or deductions for anyreason. No more gaming the system and no more tax credit schemes tochange behavior.

The national sales tax, or NST (acronyms sound so professional andacademic) would be about 15-20% on everything except food (butincluding soda and flavored and/or carbonated waters), and a loweramount on the sale of stocks and intangibles. No more high frequencytrading or gaming the sytem with "innovative financialinstruments." The NST would be dedicated to funding a minimunpension and health plan for all citizens and legal residents (with aminimum residency requirement), and at least half would be requiredto be invested in the private sector. Payroll taxes would beabolished.

Illegal residents would receive minimum health care and bedeported. Their home country would be billed and the money seized inany legal manner. Anyone who applies for assistance would be requiredto work for it, and would be required to have photo ID, and would beentered into a database so fraud would be detected and punished. Ifyou don't want to be in the government database then don't apply forwelfare. Almost everyone can do something to earn their assistance.The idea is to make it easier and more profitable to get a real jobthan to go on welfare.

Unemployment taxes would be paid by employers, but recipientswould only receive what they were actually entitled to usinginsurance tables. A bare bones Major Medical health insurance planwould be required for everyone and premiums paid for by employers.There would be nation wide competition by insurance companies for thebusiness. We would need a assigned risk pool just like autoinsurance. The premiums for those on welfare or unemployment would betaken out of their pay (see above.) Cadillac plans paid for by theemployer would be counted as income for the employee, but would notbe a tax deduction for the business or corporation.

The monstrous tax code we now have would simply be abolished. Taxexempt organizations would pay NST on purchases and there would be nodeductions for contributions, so their actual status as tax exemptwould become less important. Essentially, there would be no tax code.Simplicity and transparency would rule.

Now for the really good stuff. We hear constantly from somepolitical organizations and politicians that the wealthy should paytheir "fair" share, whatever that is, and it's alwaysdetermined by aforesaid group or pol. SO... There will be a wealthtax. Every year the wealthy will pay a small percentage, say 3-5% oftheir actual wealth. There will be a fairly high threshold so smallbusinesses and farms are not destroyed, perhaps 5-20 million USD. Butthere will be no exemptions on individual wealth! Tax exemptfoundations and organizations including churches will pay based ontheir financial wealth above the threshold, buildings andinfrastructure will be exempt.

Corporations will be exempt from the wealth tax and corporateincome taxes will be reduced. The premise is that corporate incomewill be taxed when it is distributed. But as stated in the threadabove they will be taxed for off shoring jobs and the tax code willno longer allow off shoring of profits. Also, corporate deductionswill be limited to strictly income producing activities. No moreretreats or lavish vacations paid for by the taxpayer. Corporate jetswill be deductible if used for income producing activities byemployees who actually work, say engineers and technicians.Otherwise, the use of corporate jets and airline fares above businessclass will be counted as taxable income for the recipient limited tothe price of first class travel, and will be deductible for thecorporation at 50%.

Stock options will no longer be tax deductible unless thecorporation actually buys them on the open market. The dilution ofvalue is no different than stealing. Something should not bedeductible unless it actually directly incurs an expense, eitherupfront or in the future. Again, the watchword is simplicity andtransparency.

Well, there you have my ideas. Of course, this is only a bareframework with a few examples. But I do hope I have managed to goreeveryone's bull at least once. If I missed yours please let me knowand give me another chance.

[DSpencer]

Re: The top marginal income tax rate: 100 years at a glance

Simplicity and transparency would rule.

Now for the really good stuff. We hear constantly from somepolitical organizations and politicians that the wealthy should paytheir "fair" share, whatever that is, and it's alwaysdetermined by aforesaid group or pol. SO... There will be a wealthtax. Every year the wealthy will pay a small percentage, say 3-5% oftheir actual wealth. There will be a fairly high threshold so smallbusinesses and farms are not destroyed, perhaps 5-20 million USD. Butthere will be no exemptions on individual wealth! Tax exemptfoundations and organizations including churches will pay based ontheir financial wealth above the threshold, buildings andinfrastructure will be exempt.

Well, there you have my ideas. Of course, this is only a bareframework with a few examples. But I do hope I have managed to goreeveryone's bull at least once. If I missed yours please let me knowand give me another chance.

I don't agree with the wealth tax for multiple reasons:

1. Idealogical - I just don't think it's right to take peoples money that has already been taxed just because they have a lot of it.
2. It defeats your goal of simplicity for those people getting taxed. Who determines your wealth? Are all possessions audited and appraised every year? Many possessions of wealthy people are hard to value.
3. It encourages people with money to leave the country.
4. It encourages people to hide their money. If you had 10 million dollars and were going to lose 5% every year, why not just keep hard cash in your mattress?

I think you need to go further with the simplicity goal. I dont agree with some of your other proposals either for many of the same reasons.

These discussions always seem to reach idealogical stopping points. I'd like to see the federal component of government shrunk dramatically and the states offer different options so people could choose and experiment.

It would be disruptive but I'd be willing to move if I could have the degree of freedom I desire. America as a whole used to be that place. Then for some reason we decided to copy the failures of the past and less successful countries.

[c1ue]

Re: The top marginal income tax rate: 100 years at a glance

So, I wonder why there hasn't been some discussion of abolishing the capital gains tax on the sale of residential property. It would also help the big banks in their ongoing efforts to repair their balance sheets. This is the way it works in New Zealand, so there is precedent that it's workable. Seems like a broad-based win-win approach like that, targeted in an area that would produce jobs, would be worth considering.

Terrible idea given there is already a historic number of vacant homes, plus real estate prices are falling (and will for the foreseeable future, barring hyperinflation).

For a start, since we hear so much about fairness and equity, allincome would be treated the same, no exceptions. No more trust fundbabies getting preferential treatment and no more gaming the systemwith special rates for dividends and capital gains, etc. Everybodyshould pay for what they get, so we need a national sales tax so the"cash under the table crowd" pays their fair share. Peoplewho save would be rewarded by not paying sales tax on their savings.Eliminate all income taxes for incomes under about $75,000. Mostpeople wouldn't have to file. Bye bye EIC. Then start with 10% and goup to 25%, because no one should pay more than 25% in federal incometax. The exemption and bracket amounts would double for marriedcouples and would be tied to an inflation adjustment based on severalinputs including PM's and oil. No more marriage penalty or bracketcreep. However, there would be no exemptions or deductions for anyreason. No more gaming the system and no more tax credit schemes tochange behavior.

The problem with this idea is that it actually either penalizes the poor or subsidizes the wealthy.

Someone who makes $20K a year has zero disposable income. Someone who makes $10,000,000 a year has 99.9% disposable income.

The fundamental reason why progressive taxation exists is because of this disparity.

The problem we have today is that while the government gets the largest part of its income from income taxes (about 33%), social security and excise taxes well exceed this percentage (about 45%). Effectively all of the income taxes are paid by those in the upper income brackets, while effectively most of the SS and excise taxes are paid by the lower income brackets.

Breaking this logjam is one of the big problems.

The national sales tax, or NST (acronyms sound so professional andacademic) would be about 15-20% on everything except food (butincluding soda and flavored and/or carbonated waters), and a loweramount on the sale of stocks and intangibles. No more high frequencytrading or gaming the sytem with "innovative financialinstruments." The NST would be dedicated to funding a minimunpension and health plan for all citizens and legal residents (with aminimum residency requirement), and at least half would be requiredto be invested in the private sector. Payroll taxes would beabolished.

This sounds nice, but would you like a 20% tax on gold and other PM purchases?

Secondly a 20% sales tax, on top of state and local sales taxes, is extremely regressive.

Illegal residents would receive minimum health care and bedeported. Their home country would be billed and the money seized inany legal manner. Anyone who applies for assistance would be requiredto work for it, and would be required to have photo ID, and would beentered into a database so fraud would be detected and punished. Ifyou don't want to be in the government database then don't apply forwelfare. Almost everyone can do something to earn their assistance.The idea is to make it easier and more profitable to get a real jobthan to go on welfare.

Another sexy sounding notion. Except of course the real problem isn't illegal aliens - it is the cost of health care.

Should we deport those tourists who get hurt/fall ill while in this country? It is the exact same thing.

If you want to fix the illegal alien health care spending problem, first you fix the overall health care spending problem.

Unemployment taxes would be paid by employers, but recipientswould only receive what they were actually entitled to usinginsurance tables. A bare bones Major Medical health insurance planwould be required for everyone and premiums paid for by employers.There would be nation wide competition by insurance companies for thebusiness. We would need a assigned risk pool just like autoinsurance. The premiums for those on welfare or unemployment would betaken out of their pay (see above.) Cadillac plans paid for by theemployer would be counted as income for the employee, but would notbe a tax deduction for the business or corporation.

No one offers private unemployment insurance because there is no money to be made from it. This isn't like health insurance.

As for paying unemployment premiums - I'm unclear as to why this is different than what already exists. Barring a change in minimum wages, any unemployment premiums just get kicked down to the worker via lower wages.

The monstrous tax code we now have would simply be abolished. Taxexempt organizations would pay NST on purchases and there would be nodeductions for contributions, so their actual status as tax exemptwould become less important. Essentially, there would be no tax code.Simplicity and transparency would rule.

Sounds nice. Until you fix the entire regressive nature, there will about about 3% of the population that would vote for this.

Now for the really good stuff. We hear constantly from somepolitical organizations and politicians that the wealthy should paytheir "fair" share, whatever that is, and it's alwaysdetermined by aforesaid group or pol. SO... There will be a wealthtax. Every year the wealthy will pay a small percentage, say 3-5% oftheir actual wealth. There will be a fairly high threshold so smallbusinesses and farms are not destroyed, perhaps 5-20 million USD. Butthere will be no exemptions on individual wealth! Tax exemptfoundations and organizations including churches will pay based ontheir financial wealth above the threshold, buildings andinfrastructure will be exempt.

Corporations will be exempt from the wealth tax and corporateincome taxes will be reduced. The premise is that corporate incomewill be taxed when it is distributed. But as stated in the threadabove they will be taxed for off shoring jobs and the tax code willno longer allow off shoring of profits. Also, corporate deductionswill be limited to strictly income producing activities. No moreretreats or lavish vacations paid for by the taxpayer. Corporate jetswill be deductible if used for income producing activities byemployees who actually work, say engineers and technicians.Otherwise, the use of corporate jets and airline fares above businessclass will be counted as taxable income for the recipient limited tothe price of first class travel, and will be deductible for thecorporation at 50%.

Stock options will no longer be tax deductible unless thecorporation actually buys them on the open market. The dilution ofvalue is no different than stealing. Something should not bedeductible unless it actually directly incurs an expense, eitherupfront or in the future. Again, the watchword is simplicity andtransparency.

Well, there you have my ideas. Of course, this is only a bareframework with a few examples. But I do hope I have managed to goreeveryone's bull at least once. If I missed yours please let me knowand give me another chance.

This set of ideas seems political rather than economic focused.

While I object mightily to generational wealth being passed on, I don't object to people who earned wealth having/using it.

Secondly the prescriptions for who is/is not wealth taxes seems incredibly bureaucratic and thus subject to the same forces which resulted in our present tax code.

The same could be said for corporate taxation/deductions.

I don't see any reason whatsoever why corporations cannot also have a flat tax rate.

Deductions: what's the point of siccing a gigantic 'deduction police' onto corporate spending?

[flintlock]

Re: The top marginal income tax rate: 100 years at a glance

I think that is an excellent start photon555. I'm also wary of wealth taxes, for the same reasons DSpencer gives. But I'm also in the camp of taxing all income equally and shutting down exemptions and loopholes used "steer" the economy.

[ekemon]

Re: The top marginal income tax rate: 100 years at a glance

I posted this on another older thread but no response. Hat Tip to Bart's forum and iTuliper's charts on the debt to GDP in Gold.

Can iTuliper’s come up with a plan that balances the US budget using market mechanisms?

Here are some ideas to start with:

1. Eliminate the US income tax for both individuals and corporations. Replace it with a 5% National Sales Tax on all transactions including stock and bond purchases / trades.

2. Eliminate all subsidies and taxes on business and individuals. Charge 5% on all profits returned to the US from abroad.

3. Eliminate Medicare and Medicaid and replace it with a single payer health plan identical to France’s single payer public/private system. (1/2 the cost of the US with #1 ranking in health outcomes).

4. Make the dollar convertible to Gold reserves held by the US payable to international Central Banks on demand on a 40:1 (to start) market determined floating basis (350,000 US Debt in (Metric Tons of Gold) / 8,965.6 Total US Gold Reserves (Metric Tons)

5. Congress and the president can spend as much as they want each year on any infrastructure, social or military programs however this would directly affect the Gold to US dollar convertibility ratio (which would be floating).

[c1ue]

Re: The top marginal income tax rate: 100 years at a glance

I posted this on another older thread but no response. Hat Tip to Bart's forum and iTuliper's charts on the debt to GDP in Gold.

Can iTuliper’s come up with a plan that balances the US budget using market mechanisms?

Here are some ideas to start with:

Frankly these are all completely gold bug/libertarian fantasies.

The hint is in the requirement that the US balance its budget immediately. The issue isn't that the US' credit is already crap, the issue is that the current economic path that the US is on is bad and getting worse. Krugman isn't a moron for advocating more spending per se, he is a moron for advocating more spending without any coherent plan or objective.

But let's look in more detail

1. Eliminate the US income tax for both individuals and corporations. Replace it with a 5% National Sales Tax on all transactions including stock and bond purchases / trades.

The US federal budget is presently around $3.8 trillion. The entire US GDP is estimated to be around $14.7 trillion in 2010.

If 5% were charged on every dollar of every transaction (GDP), you only get $0.735 trillion.

So unless you're talking about cutting the federal budget over 50%, this proposal is completely nonsensical. (income taxes are roughly 1/3 of present federal revenues: $1.5 trillion. Of course spending is at a huge deficit at present).

This also doesn't speak about the state, local, and city taxes/budgets.

2. Eliminate all subsidies and taxes on business and individuals. Charge 5% on all profits returned to the US from abroad.

Given that the present tax system charges the normal corporate tax rate on income, whether from abroad or not, your proposal amounts to a gigantic tax break for corporations.

To put this in perspective: the corporate repatriation one-time event being pushed now by Cisco and others is a tax rate of 5.25% - higher than what you're proposing.

The last 'one time' offshore profit repatriation holiday in 2004 charged a similar amount as above (5.25%).

3. Eliminate Medicare and Medicaid and replace it with a single payer health plan identical to France’s single payer public/private system. (1/2 the cost of the US with #1 ranking in health outcomes).

Sounds nice. Who's going to hire all those doctors and hospitals in the public system (and pay them)? Do you nationalize all existing hospitals, nationalize some of them, or build new hospitals? Who sets the policy for what national health care does and does not provide? How will all this be paid for?

4. Make the dollar convertible to Gold reserves held by the US payable to international Central Banks on demand on a 40:1 (to start) market determined floating basis (350,000 US Debt in (Metric Tons of Gold) / 8,965.6 Total US Gold Reserves (Metric Tons)

So is gold redeemable for dollars then? freely by anyone or just central banks? What about deficit spending - guaranteed necessary due to the ramping up of a brand new medical system noted above? What about the money held by private people - apparently it doesn't count in your conversion scheme as having any value? What about state, local, and city debts/assets - equally not accounted for in this scheme?

5. Congress and the president can spend as much as they want each year on any infrastructure, social or military programs however this would directly affect the Gold to US dollar convertibility ratio (which would be floating).

So you're saying the US will pay its debts in gold. Are you ready to get your gold nationalized? Because that's the immediate next impact as the government scratches for gold in order to make ends meet.

[lektrode]

Re: The top marginal income tax rate: 100 years at a glance

This set of ideas seems political rather than economic focused.

While I object mightily to generational wealth being passed on, I don't object to people who earned wealth having/using it.

Secondly the prescriptions for who is/is not wealth taxes seems incredibly bureaucratic and thus subject to the same forces which resulted in our present tax code.

The same could be said for corporate taxation/deductions.

I don't see any reason whatsoever why corporations cannot also have a flat tax rate.

Deductions: what's the point of siccing a gigantic 'deduction police' onto corporate spending?

finally!... he 'returns to the scene of the crime' (since you started this one ;)
was wondren when we'd have your laser-like analysys and commentary on this topic, likely the most significant issue of our time (all time?), since the can has been kicked to what appears to be the end of the road, with the BRIC wall coming up fast

wondren now when we will have more the itulip's heavy lifter/econ types weigh in...
or is this one a bit too close to the 3rd rail?

[c1ue]

Re: The top marginal income tax rate: 100 years at a glance

finally!... he 'returns to the scene of the crime' (since you started this one ;)

I was out of town for a couple of days - what little time I had was spent testing my product as I'm finally almost ready to launch.

On top of that I was deliberately not commenting on this thread. So much for that.