There's no double negative there, much less a triple negative.

Sure there is: “Nor does it have to do anything to make people not want to be poor.” And you didn't address my point. If you're advocating taxing the rich aggressively, you're advocating an active disincentive for them to work hard. There are no incentives on the table. Unless, of course, you consider forbearing from seizing their assets a gift you bestow.

Show me where illiterate farmers exist in America.

100 or 1000 years ago we had plenty, and there are still plenty in other parts of the world. What has changed and is continuing to change standards of living for all of us is investment and improvements in productivity, not compulsory distribution of wealth. I'll totally grant that organizing can help small groups of people squeeze more out of a corner of the economy, but that's not what drives big-picture economic growth.

I'm struggling with your phrasing. You're using a triple negative about what the government can stand back and let happen, in order to justify aggressive government intervention.

There's no double negative there, much less a triple negative. What you're struggling with is your ideology. It doesn't fit with reality. Being rich doesn't need to be incentivized. There are no incentives needed to make people want to escape poverty. This is otherwise known as “self-interest” and is the basis of all economic principles.

The question isn't what people will do on their own, it's what they'll do when the government is confiscating their earnings or paying them for doing nothing. Marx figured they'd keep working hard, to better themselves, to help their society, and for the satisfaction of an honest day's work. But the societies that have tried Marxism have found that the satisfaction of an honest day's work isn't enough to keep the economy afloat.

Who cares what Marx said? It has nothing at all to do with our modern economy.

So all a group of illiterate farmers living on $2 a day has to do is organize and demand more money from the local shopkeeper? Trouble is, the shopkeeper doesn't have the money either, and he can't simply raise his prices because none of his customers could pay. The economy as a whole simply isn't productive enough to improve people's standards of living. What the farmers need is investments that will improve their productivity–better education, better farm equipment, and so on.

Show me where illiterate farmers exist in America. Then show me where they deal directly with a local shopkeeper.

What I have witnessed is cotton farmers in Texas forming cooperatives (otherwise known as “organizing”) so they could demand a better price from the textile mills. I've also seen grain farmers (wheat, corn, and rice) do the same thing. The best tractor in the world doesn't do you a bit of good when your buyer has the market cornered.

Being rich is its own reward, and the government doesn't need to do anything to make people want to be rich. Nor does it have to do anything to make people not want to be poor. You don't believe that?

I'm struggling with your phrasing. You're using a triple negative about what the government can stand back and let happen, in order to justify aggressive government intervention.

The question isn't what people will do on their own, it's what they'll do when the government is confiscating their earnings, or is paying them for doing nothing. Marx figured they'd keep working hard, to better themselves, to help their society, and for the satisfaction of an honest day's work. But the societies that have tried Marxism have found that the satisfaction of an honest day's work isn't enough to keep the economy afloat.

People get paid more today largely because of union activism and government regulation. Unions forced employers, even non-union employers, actually compete for workers, resulting in higher wages.

So all a group of illiterate farmers living on $2 a day has to do is get organized and demand more money from the local shopkeeper? Trouble is, the shopkeeper doesn't have the money either, and he can't simply raise his prices because none of his customers could pay. The economy as a whole simply isn't productive enough to improve people's standards of living. What the farmers need is investments that will improve their productivity–better education, better farm equipment, and so on.

The govt doesn't have to do anything to make people want to be rich, but it does have to show that it's not going to prevent people from becoming rich even when they make the decisions that would lead to them acquiring more wealth- and what the govt needs to do to assure that is to not operate under the assumption that the wealth they create belongs first to the govt until the govt decides how much to return or allow the earner to keep.

Any investment I hold in my retirement account is not counted today as spending ability. It might allow me to spend more in twenty or thirty years when I retire, but that is moot when discussing today's economy.

Where you as an individual get the money you spend is a moot point, sure, but what Dr J challenged you on is why you'd think that what retirees spend is moot. They make up a big, and growing, segment of the population, so the return on their investments certainly is relevant.

Interesting choice of phrasing, as if letting people keep what they earn were a gift from the government. I don't agree with that point of view, either on moral or practical grounds.

Economics is built on the idea of people operating in their economic self-interest. it doesn't matter if you like it or not, being rich is its own reward, and the government doesn't need to do anything to make people want to be rich. Nor does it have to do anything to make people not want to be poor. You don't believe that?

Sorry, I couldn't make any sense of that at all. Companies don't spend investors' capital developing products and bringing them to market? People can buy more than they could 100 or 1000 years ago because…we just feel like paying them more these days? Retirees' spending doesn't count in the economy? Could you take another run at that paragraph?

1) On an ongoing basis, no, companies don't “spend investors' capital developing products and bringing them to the market.” Like the rest of their budget, R&D generally is taken out of profits from selling existing products. Most investors, on the other hand, purchase company stocks – most of which are not actually bought directly from the company anyway. There can be some notable exceptions, such as Initial Public Offerings – but, even then, no more than about five percent goes to R&D, on average.
2) People get paid more today largely because of union activism and government regulation. If the minimum wage had been adjusted for inflation, it would be over ten dollars an hour now. Unions forced employers, even non-union employers, actually compete for workers, resulting in higher wages. As unions have become a smaller part of our workforce – and as government regulations have been repealed – inflation-adjusted wages have stalled and fallen behind inflation.
3) Any investment I hold in my retirement account is not counted today as spending ability. It might allow me to spend more in twenty or thirty years when I retire, but that is moot when discussing today's economy.

I really hope you can follow that

I think people of reasonable intelligence should all be able to agree that 100% taxation would be counterproductive to raising more revenue, and that if you start at 0% and then go up the revenue will in fact go up.

The question is where the optimum range is, and figuring out when you have leeway to raise top brackets without deincentivizing investment and work so much that the increase is counterproductive. Lots of people on the left are arguing that return to Clintonian levels should still keep us in the range where we'll see increased total revenues, and that's probably true (although it's not as clear whether these changes will produce similar results in a deep recession as they did during an economic boom.)

But regardless, it's been shown that even taxing the top 5% at 100% (if we could make that retroactive so that we don't have to account for changes in the decisions made by those top earners, and actually assume we can confiscate all of their earnings) won't pay for everything that Obama and the Dem Congress want. So, it's a dishonest discussion on both sides if lefties and moderate lefties keep talking about how the Clinton rates won't hurt anyone- because obviously those top rates will have to go much higher before you can even begin to address the current deficit spending.

Of course not. But there's an opportunity cost to anything we do. It's not a choice between making more money and doing nothing. It might be, for example, a choice between starting a business for the purpose of making more money (and incidentally also providing some people with employment) or having more time to pursue some non-monetary hobbies. If someone is making this decision and is already undecided, a higher marginal tax rate might be enough to discourage them from making the decision that would make them more money, as well as provide employment. That's not to say the decision-maker would make the wrong decision, but they would be more likely to choose the decision that does not help the economy grow.

So, of course increasing the marginal tax rate does not discourage a middle-class person from seeking to be rich. Nor does it encourage a rich person to give up his wealth to avoid the taxes. As should be expected, raising the marginal tax rates takes its effect at the margins, when people are choosing between more wealth and more of something else that is worth something to them.

“Investing doesn't cause economic growth”

Tell that to any small business owner who has ever had to present a business plan to a potential investor.

“Finally, throughout history, much more evil has been done by neglecting the poor than by taxing the rich.”

This is the argument for a progressive tax policy (I don't support a flat tax, by the way). But, you agree (based on your previous comments) that we shouldn't use this argument to increase taxes on the rich indefinitely. At some point, they are taxed enough. The question of what is “enough” is what is important, but is a difficult thing to debate since it is so subjective.

I have spent most of my comments in the past few days pushing back on the conservative interpretation of these new IRS numbers on various blogs, but assuming we can raise taxes on the rich with no adverse economic consequences is equally wrong.

I also roll eyes at those who deny the reality that increased taxes are a disincentive to what is being taxed, such as work, as well as the case taken logically and realistically out of context, that those who are at income or wealth levels near or above the threshold of practical independence are representative of the public as a whole, as if everyone can afford to pay additional taxes for the hell of it, or as a game.

And, of course then comes another real world defect in the lefty-fools' dreams, that “the rich” are nowhere numerous enough to constitute a tax base that will support all the dreams these same fools have for the government to spend money on. Which is why, as I've already noted before, even lib Dems like Obama during his campaign have revised downward the threshold beneath which people won't face increased taxes (why not, if they aren't bad?), the ever-revised-downward threshold of what constitutes “rich.”

* * *

J. West: The ideal would be to weigh voting not only on one's taxes paid (especially with progressive taxation of wealth or income, which in practice and reality is unjust and envy-based), but also (multiplied by) a gauge of competence, such as a score on a citizenship test or test on relevent issues of the day on which government is imminently acting (during the next election cycle), or a worthwhile surrogate such as an IQ obtained from a suitable test. Short of that, weighting according to taxes (compulsorily) paid is OK.

* * *

“as if letting people keep what they earn were a gift from the government”

Such morally inverted (perverse) views are common, and unfortunately, aren't limited to Washington and to more-retarded and in-decline state governments in this country. Yes, like children receiving an allowance or a periodic ration of candy from government, their surrogate parent…

That is one of the best-written, smartest arguments against the “soak the rich” mentality that I have ever seen. Thank you.

We do not need to incentivize wealth any more (or less) than we need to de-incentivize the lack of wealth.

Interesting choice of phrasing, as if letting people keep what they earn were a gift from the government. I don't agree with that point of view, either on moral or practical grounds.

Total hogwash. R&D budgets are not based on investments or stock purchases. True, people earn more when they earn more – but that is generally due to wage increases, not investment returns. Most people who hold investments hold them through retirement accounts, which means that they cannot possibly be using that money to increase spending for many years.

Sorry, I couldn't make any sense of that at all. Companies don't spend investors' capital developing products and bringing them to market? People earn more than they did 100 or 1000 years ago because…we just feel like paying them more these days? Retirees' spending doesn't count in the economy? Could you take another run at that paragraph?

Of course they wouldn't. Why bother, if the money will simply be confiscated?

Because making money is its own reward.

But you're arguing against a strawman. While a 100% marginal tax rate would indeed kill the golden goose, I don't believe anyone on the left is seriously proposing that. Nor is anyone on the right claiming that the goose would be dead at a 50% rate, just that it wouldn't be laying as many golden eggs.

I'm not doing anything with a strawman. You are right that no one on the left is arguing for a 100% tax rate, the tax rate being decried by the right is a combined 50% or so. Read just about anything from Heritage about the combined federal/state tax rates.

Of course it does. All the innovations that move the economy forward, from basic research to the dishwasher to the iPhone, come about because somebody invested the money to develop them and bring them to market. People can buy more stuff when they earn more, and what enables them to do that is investments that make them more productive, from education to technology.

Total hogwash. R&D budgets are not based on investments or stock purchases. True, people earn more when they earn more – but that is generally due to wage increases, not investment returns. Most people who hold investments hold them through retirement accounts, which means that they cannot possibly be using that money to increase spending for many years.

Throughout history, much more progress has been made by rewarding success than rewarding failure.

Poverty is its own punishment, just as wealth is its own reward. We do not need to incentivize wealth any more (or less) than we need to de-incentivize the lack of wealth. That is a most basic part of human existence. Success is, by its very definition, a reward.

Of course they wouldn't. Why bother, if the money will simply be confiscated?

But you're arguing against a strawman. While a 100% marginal tax rate would indeed kill the golden goose, I don't believe anyone on the left is seriously proposing that. Nor is anyone on the right claiming that the goose would be dead at a 50% rate, just that it wouldn't be laying as many golden eggs.

“Investing doesn't cause economic growth”

Of course it does. All the innovations that move the economy forward, from basic research to the dishwasher to the iPhone, come about because somebody invested the money to develop them and bring them to market. People can buy more stuff when they earn more, and what enables them to do that is investments that make them more productive, from education to technology.

“Finally, throughout history, much more evil has been done by neglecting the poor than by taxing the rich.”

Throughout history, much more progress has been made by allowing success to be rewarded, failure punished, than demanding it be the other way around.

The question about progressive taxation is not “why hate the rich” (by taxing them more) but “why hate the poor” (by taxing them when they can't afford it).

Plus, let's not pretend as if income tax is the only tax that is paid. In 2009, anyone who earns more than $106,800 will automatically get a 6.2% tax cut on every dollar made after that. If they are self-employed, the tax cut is 12.4%. That's the impact of the Social Security tax on low income earners. So someone making $100,000 pays 28% income tax, plus 6.2% SS tax, but someone who makes $110,000 pays only 28% income tax. Everyone in the 33% and 35% bracket makes a ton of money with this built-in tax break.

There's a bit of magical thinking on the right on this matter. It's taken as a matter of faith that the rich are that way because they are simply better at making money. But, if they were subjected to any amount of additional taxation, they would lose this magical money-making ability. It's as if they believe that being rich somehow needs to be incentivized beyond the natural benefits of being rich. What nonsense!

Marginal tax rates have been much higher than they are today – and yet not a single person ever said, “Oh, I don't want to make a hundred bajillions of dollars because I might have to pay ninety bajillions in taxes and only have to live on ten bajillions.” Honestly, anyone who doesn't want to be rich because they would have to pay more taxes is one of those people we hear about whose financial idiocy keeps them poor.

Plus, higher taxes are entirely voluntary. No one is forced to make $1 million a year. In fact, anyone who works for a million a year salary can decide to take a pay cut. They could say, “I'm only going to take $110,000 a year because that will save me seven percent on my income taxes.” They don't – because it's stupid. Saving that percentage points means giving up hundreds of thousands in real money. Money is it's own incentive, but people would give it up if taxes were really so punative.

Beyond that, if wealth simply reflected the ability to make money, then we could tax everyone down to their last $100,000 and the wealthy would simply make it all back. If wealth/income is directly related to someone's marketability, then taxation doesn't hurt them at all. Yet too many of those who will never have eight figure incomes are afraid to try this experiment.

I'm not advocating that approach, I'm just saying that the idea that we could tax rich people so much that they wouldn't want to be rich anymore is ridiculous. Of course, anyone can be taxed beyond their income limits – but that's just as true for the poor as the rich (and the poor can reach that point much quicker).

Another bit of magical thinking is the idea that paying a higher tax would result in the wealthy being unable to invest, and thus destroy the economy. Marginal income tax rates have been at fifty year lows for the last two years, not to mention reduced capital gains taxes and inheritance taxes. Yet our economy has tanked anyway.

Investing doesn't cause economic growth – outside of debt derivative trading. Economic growth is caused by people buying more stuff. When people buy more stuff, the investing class benefits from a higher return on their investments, and then have more money to invest. Whether or not the lower 90% buy more stuff isn't determined by the tax rates of the top 10% (unless, of course, we want to take about running up a deficit so that the money held by the lower 90% is worth less, in which case raising taxes on the wealthy as a means of controlling the deficit could actually boost the economy).

In the end, I don't think we need to worry about hurting the wealthy to the point where the economy stops. First of all, if that points exists, we are a very long way from it. Secondly, the wealthy have the means at their disposal to effect change much more rapidly and more efficiently than the poor do. Finally, throughout history, much more evil has been done by neglecting the poor than by taxing the rich.

Last time I used a line like that I was accused of being elitist.

And I don't necessarily disagree with those who say that the rich are already paying their fair share, but that isn't supported by these incomplete numbers. I dislike bad arguments on my side just as much (perhaps more, since they weaken the argument) than I dislike bad arguments on the opposing side.

But slow down on the conclusions there. The top 1% paying more tax is consistent with the robber-baron picture, but it's also consistent with the other 95% being lazy slobs who decided to work less in 2007 and caused gross tax receipts to fall. It's consistent with the rich getting married more, producing more two-wage-earner households and pushing them up the household-income charts. It's also consistent with every single rich person in 2006 going broke and a bunch of people from lower down becoming the new top 1%. I'm not saying that's what happened, just that it's not contradicted by these figures.

These IRS numbers are based on household income tax data, which has a couple caveats. First, it looks at only earned income and ignores thousands of redistributive programs through which the rich are already giving back to the poor. The more progressive welfare and medicaid and public school and hot lunch and public transportation programs we enact, the *worse* the financial disparity looks relative to what people actually consume.

Second, the IRS stats are by household rather than individual. The top 20% actually has more individuals in it than the bottom 20%, nearly twice as many wage earners, and more hours worked per wage earner to boot. Which is to say the rich owe a good bit of their edge to working harder and smarter.

So when you talk about “benefiting the rich disproportionately,” the question is disproportionately with respect to what? To how many of them there are? To how much work they're doing? To how much HemmD thinks they deserve? As Nic suggests, what's “fair” involves a set of value judgments that don't flow inevitably from these income numbers but exist on a plane all their own.

The top 1% are paying more of the total tax burden not *because* of the tax code, but *in spite of* it. According to the very numbers linked to by the Tax Foundation, the tax rate on the top 1% has actually fallen, faster than it has fallen for the general population. Therefore, the reason the top 1% are paying more of the total share of taxes is because they are making more of the total share of income. So, when viewed with all of the facts, the graph and numbers cited by the tax foundations are actually better for liberals than conservatives, as they support the case that any economic growth we've seen in the past few decades has benefited the rich disproportionately.

What happened to our critical thinking skills people?

Because we have a progressive income tax, we don't all pay the same porportion of our income in income taxes. And while their is a certain logic to having higher tax brackets for people who make ore and lower tax brackets for people who pay less, the percentages set up for each tax bracket are completely arbitrary.

Now, I realize that much of the taxes paid by the rich consist of taxes other than income taxes (estate taxes, corporate tax, capital gains tax, etc.) , but for simplicity, let us just consider the income tax.

For 2009, the marginal tax rate (not factoring in the $5,700 deduction that everyone is entitled to):
10% for individuals making $0 – $8,350
15% for individuals making $8,351– $33,950
25% for individuals making $33,951 – $82,250
28% for individuals making $82,251 – $171,550
33% for individuals making $171,551 – $372,950
35% for individuals making $372,951

Now, some people might argue that individuals with an annual income of $10 million have more than enough wealth and would still be able to live quite comfortably if marginal tax rate for the highest bracket were 39% instead of 35%. And some of these people might argue that the rich should pay their “fair share” and pay a 39% marginal tax rate for every dollar earned over $372,950.

Yet I absolutely guarantee you that if the marginal tax rate for the highest bracket were 39% instead of 35%, those same people demanding that the rich pay their “fair share” with a marginal tax rate of 35% would now be demanding that the rich pay their “fair share” with a marginal tax rate of 39%. And they would likely be repeating this mantra, even were the marginal tax rate 42%, or 45%, or 48%, and so forth.

It is one thing to support a progressive tax structure for income taxes. There is a utilitarian argument for doing so, and I am neither arguing for or against our current progressive income tax or criticizing anyone who would argue for or against it.

But we should call things for what they are, and the “the rich should pay their fair share” argument is nothing more than populist rhetoric intended to divide the American people and inspire hatred and resentment in one group so that it may be pitted against the other. It is the politics of division cloaked in self-righteousness so that we may demonize a minority group (because let's face it, the poor and the middle class far outnumber the rich) and feel good in doing so.

We're in an economic recession with the government fighting two wars and running up record deficits. If you truly believe that “the rich” should be paying higher taxes for the good of the country, make the argument on utilitarian grounds. Convince rich people that they have as much to lose as everyone else should the government go bankrupt and collapse.

But enough with the injecting of moralism into politics. Let's not pretend that the marginal tax rates are anything more than arbitrary numbers subject to constant fluctuation based on the whims of the politicians running the federal government. And let's stop demonizing groups of people in order to score cheap political points.

Our main complaint is targeted at the paper shufflers, the financial wiz kids who literally create something out of nothing. They didn't make anything. They're not improving anyone's life, except their own. They're in the business of gaming a system for them to make a buck, no matter the cost to anyone else. They are in many many ways similar to the bloated federal government bureaucrats that exist. They shuffle paper and stare at a rectangle for hours and call it a day. They exist to game a system and leave behind a legacy of twisted numbers and cutesy gimmicks. I simply don't have the same respect for those people because I don't feel they deserve their money, which is sucked directly from a government teat when their house of cards come crashing down. I mean…some criminals work hard too, but we don't give them a pat on a head for it. Besides, you've contradicted yourself by saying “just because someone's smarter and works harder” defense of the rich in one post then follow up that with the “secret” of making money: Rolling the Dice! Now why didn't I think of that? It's just some of us noticed that the dice seem to be loaded with the corporations with big, fat, government connections. And make no mistake: I'm laying the blame at Obama's feet.

It's just funny to watch you guys defend these financial wizards who are sucking down YOUR taxpayer dollars by saying they “worked hard for it.” Also notice that when their business model FAILED, most of them DID NOT go to zero, which is what happens to all the rest of us. But you defend them anyway.