more taxing thoughts…

Posted on Friday 9 October 2009


Let’s Get Our Stuff Back
Open Left

by: Chris Bowers
Oct 07, 2009

… The best bet is for Progressives to target the budget next year. Specifically, they should demand a substantial, probably 10%, increase in taxes on the wealthiest 1% of Americans. Here is why:
  1. Increasing taxes on the rich is pretty popular. In fact, it is one of the most popular things the federal government could do:
      CBS News/New York Times Poll. April 1-5, 2009. N=998 adults nationwide. MoE ± 3 (for all adults).

      "Do you think the tax code should be changed so that middle and lower income people pay less in taxes than they do now and upper income people pay more in taxes than they do now, or don’t you think the tax code should be changed?"

      Should be changed: 65%
      Should not be changed: 29%
  2. The messaging has tons of populist potential, and would be easy to win. Sell it as "let’s take our stuff back," while pointing out that the top 1% of income earners took two-thirds of the benefit from the last economic expansion:
    They took our stuff from us, and we are taking it back. How can the top 1% argue that they are the only people who add wealth to America? This is the sort of fight that can help Democrats regain the populist mantle heading into 2010.
  3. People are worried about deficits, and this would be a lot more popular than cutting spending.
  4. It is a clear bright line, an undeniably must-pass piece of legislation, and guaranteed to have 100% Republican opposition.
  5. No question about Senate reconciliation for a budgetary measure like this. So, we wouldn’t have to deal with the 60-vote Senate.
This seems like a winnable campaign and could shift the balance of economic and political power in this country. After health care, I hope the Progressive Block pivots toward addressing income inequality through a big, progressive change in the tax code.
I really was going to lay off the graphs, but then I read this by someone I respect a lot. He’s thinking about it politically – what can we succeed with next. And about how they took our stuff. The direction I was taking in my graphing frenzy was different, but ended up in the same place. The Tax Cuts – Reagan, Bush I, Bush II, even LBJ in 1964 – were political, not based on any kind of responsible accounting. And none of them actually got the job done. LBJ’s cuts made the most sense. We really were overtaxing the fabulously wealthy. But the cuts weren’t matched with any spending changes, so the net result was ineffective.

Given the circumstances, we need to look at the receipts side of the equation. We’ve been forced into a spending bind that isn’t likely to change for some time. And its obvious from the graph that the place where there’s wiggle room right now is INCOME TAX. So I’m out of retirement after a whole day of being graph-free, with a graph and tables that relate to Chris’s point [the top 1% of our wealthiest]. Here are the tables of income levels and taxation results for reference [from The Tax Foundation]:

Dollar Cut-Off [Minimum AGI for tax return to fall into various percentiles]
Year Top 0.1% Top 1% Top 2% Top 3% Top 4% Top 5% Top 10% Top 25% Top 50%
2001 $1,324,487 $292,913 $199,620 $161,491 $140,721 $127,904 $92,754 $56,085 $28,528
2002 $1,191,673 $285,424 $193,600 $159,364 $139,997 $126,525 $92,663 $56,401 $28,654
2003 $1,262,760 $295,495 $198,413 $162,893 $142,928 $130,080 $94,891 $57,343 $29,019
2004 $1,548,941 $328,049 $216,491 $175,495 $152,344 $137,056 $99,112 $60,041 $30,122
2005 $1,848,791 $364,657 $236,741 $188,534 $162,297 $145,283 $103,912 $62,068 $30,881
2006 $2,044,689 $388,806 $250,869 $199,799 $171,579 $153,542 $108,904 $64,702 $31,987
2007 $2,155,365 $410,096 $261,166 $207,560 $178,965 $160,041 $113,018 $66,532 $32,879

This first table showed the bottom cut-off for the different percentile income levels. Just looking down the columns in the Bush years, it’s easy to see what every other graph shows. The wealth inequity is increasing at a very rapid rate. Besides putting us in a world of debt, the net result of the Reagan years and what has followed  is that the rich are not just getting richer, they’re getting way richer. That’s what Chris means by "getting our stuff back." What the rich would say is that they are getting their stuff back – the stuff that FDR and the Democrats have been taking away from them all these years. You decide who is right

Percent of the total AGI earned by each group
Year 0.1% 0.1-1% 1-2% 2-3% 3-4% 4-5% 5-10% 10-25% 25-50% 50-100%
2001 8.10% 17.3% 4.91% 3.69% 3.10% 2.77% 11.12% 22.12% 20.96% 13.81%
2002 7.06% 16.12% 4.84% 3.67% 3.13% 2.79% 11.22% 22.61% 21.40% 14.23%
2003 7.57% 16.77% 4.85% 3.66% 3.11% 2.79% 11.18% 22.50% 21.15% 13.99%
2004 9.14% 19.00% 4.95% 3.67% 3.09% 2.73% 10.90% 21.78% 20.46% 13.42%
2005 10.65% 21.20% 5.07% 3.70% 3.08% 2.70% 10.70% 21.08% 19.65% 12.83%
2006 11.22% 22.06% 5.09% 3.71% 3.08% 2.71% 10.66% 20.84% 19.33% 12.51%
2007 11.93% 22.83% 5.12% 3.71%0 3.08% 2.71% 10.61% 20.66% 19.04% 12.26%

This second table shows the growing wealth inequity in even more dramatic terms. The lower 50% of Americans live on 12% of the money, which happens to be the same amount made by the top 0.1%. Notice the falling share in the lower groups and the rising share in the upper groups. It makes it kind of hard to sell the idea that we’re taking their stuff

Percent of the total Federal Income Tax paid by each group
Year 0.1% 0.1-1% 1-2% 2-3% 3-4% 4-5% 5-10% 10-25% 25-50% 50-100%
2001 16.06% 17.83% 7.43% 4.88% 3.82% 3.24% 11.64% 18.01% 13.13% 3.97%
2002 15.43% 18.28% 7.66% 5.04% 4.00% 3.39% 11.94% 18.16% 12.60% 3.50%
2003 15.68% 18.59% 7.79% 5.03% 3.94% 3.33% 11.48% 18.04% 12.65% 3.46%
2004 17.44% 19.45% 8.06% 5.10% 3.86% 3.21% 11.07% 16.67% 11.85% 3.30%
2005 19.26% 20.13% 8.22% 5.14% 33.83% 3.10% 10.63% 15.69% 10.94% 3.07%
2006 19.56% 20.33% 8.22% 5.06% 3.83% 3.12% 10.65% 15.47% 10.75% 2.99%
2007 20.19% 20.23% 8.26% 5.07% 3.77% 3.11% 10.59% 15.37% 10.52% 2.89%

The third table is the stuff of Republican Talking Points. Rush Limbaugh’s recent version, was "The top 5% of wage earners are already paying 95% of the taxes." The correct version would be that "the top 5% of wage earners are now paying more than the bottom 95% of wage earners." If you look at the numbers and ponder what that means, it simply says that the wealth inequity in America is rapidly increasing, but we already knew that. There is a point to note. If you look at the last two tables together, the wealthy really are paying a greater share of the taxes than their share of the income.

Percent of the total AGI paid in Income Tax by each group
Year 0.1% 0.1-1% 1-2% 2-3% 3-4% 4-5% 5-10% 10-25% 25-50% 50-100%
2001 28.20% 26.89% 21.53% 18.83% 17.54% 16.66% 14.89% 11.58% 8.91% 4.09%
2002 28.49% 26.28% 20.63% 17.91% 16.67% 15.83% 13.87% 10.47% 7.67% 3.21%
2003 24.64% 24.04% 19.10% 16.35% 16.06% 14.20% 12.72% 9.54% 7.12% 2.95%
2004 23.09% 23.87% 19.69% 16.79% 15.14% 14.22% 12.28% 9.26% 7.01% 2.97%
2005 22.52% 23.74% 20.20% 17.27% 15.49% 14.28% 12.37% 9.27% 6.93% 2.98%
2006 21.98% 23.62% 20.34% 17.24% 15.64% 14.53% 12.60% 9.36% 7.01% 3.01%
2007 21.46% 23.54% 20.44% 17.32% 15.52% 14.56% 12.66% 9.43% 7.01% 2.99%

[These numbers of what have actually been paid are strikingly less than the published tax brackets.] In every group, the percent of the income being paid in taxes is falling. Since the National Debt is clicking right on up during this period, I personally see this as a Reagan/Bush vote getting technique – only an illusion.

CARTER 1979
REAGAN/BUSH I 1991
CLINTON 1999
BUSH II 2007
TAX RATE OVER TAX RATE OVER TAX RATE OVER TAX RATE OVER
0% $0 15%
$0 15%
$0 10%
$0
14%
$19,458 28%
$81,985 28%
$67,517 15%
$16,050
16%
$31,476 31%
$198,091 31%
$163,185 25%
$65,100
18%
$43,495     36%
$248,659 28%
$131,450
21%
$68,104     40%
$444,073 33%
$200,300
24%
$91,568         35%
$357,700
28%
$115,605            
32%
$140,786            
37%
$171,118            
43%
$201,450            
49%
$262,113            
54%
$343,380            
59%
$489,889            
64%
$626,096            
68%
$929,415            
70%
$1,232,734            

This is a table of the Tax Brackets [corrected to 2008 dollars] from the end of Carter, Reagan/Bush I, Clinton, and Bush II showing widely variant approaches to raising [or not raising] the money to finance our government.

I’m going to put my own conclusions about this data and the historical data in the other taxing thoughts… post in a separate place. I apologize for the barrage of data here. I post it because it’s not easy to find, and I suspect that when this comes up in Congress, we’re going to be assaulted with a firebombing of misinformation and outright lies. For now, I agree with Chris Bowers that this is the next matter on the agenda, but I think it’s going to be much more contentious than he imagines. This is the big one
  1.  
    October 9, 2009 | 7:19 PM
     

    […] At other times, it looks something like a war between factions [see taxing thoughts… and more taxing thoughts…]. I think we’ve established that the extreme tax rates of FDR were a bit much, and the slash […]

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