Split Verdict Syndrome
Declare a mistrial! My brain can’t decide if I’m a libertarian or progressive or some bizarre, twisted blend of the two.
I passionately agree that the most reliable, proven path to economically benefitting the most people is by constructing a society that consistently encourages “the entrepreneur, the risk taker and the cultivator of wealth through human intellect.”
That belief leads me to question the skewed schedule of effective tax rates in America — where the top 0.5% of wage earners are taxed at a rate that’s more than seven times greater than the bottom 20%, and more than two times greater than the middle 20%.
But I also have to consider after-tax income: For the bottom 20%, it’s $15,300 per year. For the middle 20%, it’s $50,200. And for the top 0.5%, it’s between $830,000 and $24.3 million.
At that point, I’m thinking maybe we could still adequately encourage “the entrepreneur, the risk taker and the cultivator of wealth through human intellect,” even if it means reducing their take-home pay a smidge, so it’s somewhere between — oh, I don’t know — a mere $700,000 and $20 million?
Call me crazy. I clearly deserve it.
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9 Responses to “Split Verdict Syndrome”
An apparent unstated assumption in your analysis is that our economic mechanisms ensure there is a monotonic positive correlation between income level and the degree to which the beneficiary of the income has indeed been rewarded because “they are the entrepreneur, the risk taker and the cultivtivator of wealth through human intellect.” It is straightforward to find gutwrenching counterexamples. Bernie Madoff anyone? (Example discounted to the extent that we’re willing to accept outright fraud as one mechanism of cultivating wealth through human intellect.) How about Paris Hilton? Finally, consider Douglas Prasher (google him along with the word jellyfish). Moreover, I suspect that as the economy continues to unravel we’ll find that the correlation is problematic indeed.
Hey futz, if in your mind earning a high income is positively correlated to the incidence of dishonest activity, so be it and move to Cuba where you obviously won't be subjected to it.
However, given the number of high income individuals compared to the number of non-tax filers, under-reporting cash basis earners, insurance fraud events, reported robberies and burglaries, I think you are full of bs.
Define High income…
People confuse wealth and income, making a couple of hundred G's a year doesn't make you wealthy, it makes a well paid professional… Making a couple of hundred millions a year, makes you wealthy, but rarely does it improve the human condition.
Most wealthy people got their wealth the old fashion way, they inherited it.
The people who can be described as “entrepreneur, the risk taker and the cultivtivator of wealth through human intellect” are in fact almost never in that top tier of wealth. They might eventually get there but when they are in the process of creating those wonderful things they are more likely to be somewhere below the top quintile of income.
Re “But I also have to consider after-tax income”, why is that? Social engineering and wealth redistribution is not demanded in the Constitution. Neither should it be assumed to be a correct or natural policy of the government. The purpose of government, after all, is not to manage the happiness of its citizens. It is to provide for the common defense and ensure that civil order is maintained.
[...] to an op-ed by Stephen Moore in yesterday’s Wall Street Journal, Pete Abel, writing at The Moderate Voice declaims: I passionately agree that the most reliable, proven path to economically benefitting the [...]
As of 2007, $91,705 will get you into the top quintile. The real money is in the top .5% of the income distribution.
When a small businessman is starting up, odds are that his actual personal income is lower than that $91,000. But you're right about where the really big bucks are.
Pete, you're not crazy. Entrepreneurship and progressive taxation are not at odds with each other. I also believe in both, but I consider myself a progressive, not a libertarian. Entrepreneurship and innovation are by definition progressive.
You're right–at the highest level of income, seemingly burdensome tax rates still leave the person with huge take-home income.