Trump and his MAGAs are a symptom of this sick tax structure
4
The authors cleverly lump the bottom 50 percent together and omit the welfare and social security payments as well as unemployment and earned income tax credits, food stamps, Medicare and Medicaid, housing vouchers and other such transfer payments. Why? Because it would destroy their arguments and reveal that the lower quarter pay nothing the next quartile some but not much and the middle 40 to 80 percent a vast burden along with the upper classes. These polemics discredit the left and qualify as propaganda, not scholarship, what a pity they have earned the endorsement of this newspaper, it is a disservice to both its readers and reputation.
66
I have been hearing about how the rich have been getting away with murder for so long now; I could literally scream. Because that is ALL it ever amounts to...talk. Wake me up when (more likely IF) it ever happens. I sincerely doubt it will ever really happen. The rich have far too many friends in high (and low) places. They know whose palms to grease; and the poor will never see the day when fairness (let alone justice) will ever see the light of day. So keep dreaming that politicians all of a sudden have a conversion on the road to Damascus. They owe their political soul to the 1% Oligarch; and one cannot buy what has already been sold. The game is rigged for the rich! They do not even pretend to say otherwise anymore. What they do say is...YEAH, So What are you going to do about it. Not Much. Not when the game is forever rigged for the rich. Depressingly sad Realty.
20
Tax is theft.
12
This needs to be the headlines of every news station and why isn't it?
9
Americans are completely ignorant in economy. They think it is about making money.
4
Most progressive thing I've ever read in the NYT. I guess the subscription is worth it.
9
By the way don't forget that most of the wealthy get there through inheritance. Which is fine. But I for one would not conflate "successful" for what Warren Buffett has dubbed "the lucky sperm club."
15
So, middle and low income (if there are any) republicans are happy with this arrangement? They can’t be that stupid, but then again, if it’s against their own self-interest it’s fine.
5
So honest presidential aspirants like Elizabeth Warren work with brilliant, insightful economists like the authors, while the illegitimate gangster who currently squats in the Oval Office listens to grifters and conmen like Kudlow, Navarro, Moore, Mnuchin, Ross, and to media blowhards like Dobbs, Hannity, and Pirro.
What could possibly go wrong?
18
.
"The taxrate is absurd"
Yes AND a wound from this Class War !
The plutocratic rulers of the US think the 99% are too rich,
so theyr trying their best to cut spending for Medicare, Medicaid & SS and much more.
The Class War is SO obvious now
.
18
It is maddening, and constant, that no discussion of Tax Policy in the NYT ever discusses the ugly facts of where our taxes go -- to nuclear weapons we don't need, to high-tech planes and tanks that don't work, for weapons systems that never get built. Pentagon and Military waste is a huge sucking wound draining the lifeblood from this country, and if we don't talk about it, we're enabling it. Should the rich pay more? Christmas, yes. But we also must talk about where our taxes go -- and right now, too many of our taxes go to war waste and theft-by-contractor.
25
How much this segment pays v that segment is, in many ways, a distraction. What we have is a system that is beneficial for the very wealthy at the expense of things we need to invest in, such as infrastructure, education, health care, protection of of environment, and so much more. We basically sacrifice overall benefits to everyone so the ultra rich can cackle to each other in the country club locker rooms of America about how little they can get away with paying, as the country falls down around our ears. Slumlords don’t care if their buildings fall down as long as they can keep their income flowing. As a group, the ultra rich are America’s slumlords, and if everything here goes to pot, they can sail off into the golden sunset on their mega yachts.
10
This paper is often misleading on this topic. These articles almost never give credit to the fact that capital is often invested in businesses that create jobs and industries. They often claim that real and legitimate deductions, like depreciation, are tax shelters when they legitimate expenses. If you have a rental property and spend $30k on a new boiler, expenses should be spread over it’s life.
I’ve seen claims that so-and-so paid no taxes this year. Well, if you invest and take losses in the prior year, you should get credit for that too.
It’s getting harder to keep reading this paper.
29
How about getting rid of multi-generational trusts?
8
The pitchforks will not come next year, or in ten years, perhaps not even in a hundred years. But if the trend since 1980 continues, maybe in two hundred years, three hundred at the most—if the French, Russian and Chinese revolutions are a historical guide—the pitchforks will come.
It is always a mistake to put anyone—or any group of humans—in a position where they have nothing (or almost nothing...) to lose.
6
This is very simple.
Two cents now or one head later.
4
Buying politicians is an excellent use of resources if you are a billionaire.
8
How does earned income tax credit shift this, if at all ?
8
I think it goes farther than that. The US defeated the USSR by causing it to spend itself into bankruptcy. If you were Putin and wanted to get even, wouldn't you have your US puppet work to generate massive deficits and reduce government revenues so that in a downturn the US might go under too?
10
When the laws are made for and by the rich what do you expect? And the Dems - particularly DINOs like Joe - are equally culpable in this. Something like 85% of new legislation now is directly written by the elites/big biz and given off to their political stooges to enact. America is a corporatocracy, plain and simple.
11
We all admire the Scandinavian countries, right? All the free healthcare, education and solid infrastructure they have makes many quite envious. Because all the people pay very high income taxes. Would Americans be willing to do the same? Not sure.
The facts:
People living in Denmark pay some of the world's highest taxes - up to half of their income. On top of this, Danes pay a 25 % value-added tax on most items, and a tax of up to 150 % on new cars. ... In Denmark, few have too much, and even fewer have too little.
The average annual income in Denmark is about 39,000 euros (nearly $43,000) and as such, the average Dane pays a total amount of 45 percent in income taxes. Danish income taxes are based on a progressive tax system, so if you make more than 61,500 euros (about $67,000) per year, an additional tax rate of 7 percent is added over this threshold.
Corporate taxes are around 22%.
Sources:
Why are Danish people so happy?
https://denmark.dk/people-and-culture/happiness
Why Danes Happily Pay High Rates of Taxes
https://www.usnews.com/news/best-countries/articles/2016-01-20/why-danes-happily-pay-high-rates-of-taxes
13
Money corrupts. During the Eisenhower years, when there were many marginal income tax rates, the middle class was strong, Many companies offered their employees profit sharing, performance bonuses, and pension plans. Today’s relatively very low income tax rates for high income company officers encourage greed and little loyalty to employees. Sometimes a company will fire employees so that the CEO can reap his high annual raise and stock options. High marginal income tax rates would put a brake on this behavior. Not because Uncle Sam would take the extra revenue in taxes, but because the CEO wouldn’t be so stupid as to step into that tax bracket in the first place. Employees would be hired, not fired. Employees might get a raise. Equipment would be upgraded. And instead of spending life’s limited time scheming about a palace on the Riviera, the CEO might find more pride and concern for his workforce.
9
I just had to write a $25,000 check to the IRS when I only took in $75,000.
Does that seem fair?
9
Billionaires reduce benefits for their workers so they can do what? Buy more shares of stock? Buy another private jet?
Workers lose things like health care and job security, while CEOs get's a multi-million dollar bonuses. Today's "winner take all" culture is immoral, and I'm suspect unrecognizable to the "greatest generation," (that generation who fought againt Nazi's and helped save democracies across Europe). The deterioration of our democracy today can be directly linked to the current trend of greed that persists among the wealthiest in the nation. It's as if the wealthy class doesn't realize their wealth only exists because there's a nation of workers who helped put them there. And now laborers pay higher tax rates than trust fund babies? Shame on them!
7
Profs Zucman and Saez, your arguments and ideas are powerful, but why is it that so many people -- especially people who are supposed to know -- believe that our tax system is already progressive? Just today on The View (see link below), Rand Paul claimed that the top 1% pay 40% of the taxes. Of course, the show hosts and the audience disputed that claim, but he's a Senator and has a very big pedestal. When faced with disinformation like that, how can we educate the masses on the truth??
https://youtu.be/2tnX-F5KQWM?t=1026
2
These 400 leading lights of America are all that stand between us and the dark forces of tyranny. Increasing their taxes would simply force them to immigrate to Russia or some other safe haven where they would have the liberty to create jobs free of the heavy yoke of the mob in Congress. Moving all of the Wal-Marts alone to Russia would cripple our nation. Freedom!
2
The graph shows a progrssive tax system. The top 10% are clearly paying a higher tax percentage than the bottom 90%. (The top 400 people out of 128 million households have no relevance-too small a group)
The title of the article is misleading and not supported by its own data.
25
Sorry but it’s time for an English language lesson here as is faulty use in this article diminishes its intent. The rich don’t pay a lower tax rate. Form 1040 has rate levels that don’t distinguish between rich and poor. However if you utilize deductions, which are available to all Americans, than you might lower your “ effective” tax rate. Help yourself by using proper English.
10
I am at the bottom of the pile, earning about $16K a year for the past few years. I haven't been able to pay IRS taxes, because it's a choice between homelessness (which I experienced for 2 out of the last 3 years) and eating, or paying taxes. I regularly receive Certified mail from the IRS, demanding payment, but I'd rather eat and have a roof over my head. The tax system is NOT progressive. It is radically unfair and regressive.
11
The authors conveniently fail to mention that the U.S. makes no effort to index capital gains and interest for inflation. Many assets fail to return even the rate of inflation but yet are heavily taxed.
14
The real problem rests in the federal income tax system, which depends on Congress to define "taxable income".
Since it must be defined, the definitions are subject to lobbying, and then the games begin.
The best way to solve this is to enact a simple, transparent federal flat tax on consumption to replace the federal income tax. This would eliminate the quid pro quo playground where lobbyists exert influence and money to obtain exemptions and exclusions from federal income.
There will be no "equality" tax-wise without a flat consumption tax.
2
Not clear that our commonweal, as constituted, requires reducing the gap between the uber haves and the have-nots. Those who argue that it does suggest maintain that principles of fairness (defined by whom?) and, what lies behind it - the threat of social disruption ( see the French and Russian revolutions) impel wealth taxes etc., to even the playing field.
What are the consequences and, of course, the unintended ones too, of such a program: inevitably, economic disruption and decline before the ill effects are transformed, in the presumed fullness of time, and the wise economic policies adopted by the new "fairness" mavens running the show.
2
Fantastic article, wonderful graphics! For those losing sleep about taxing the rich or corporations too much, keep in mind the following:
1. U.S. household net worth is just over $100 trillion. If we split that evenly, each family would have a net worth about $800,000. Instead, the median (50th percentile) family has a net worth around $100,000.
2. The top 1% have about 40% of this net worth, versus 25% in 1979. That 15% increase in share is about $15 trillion. For scale, that's about the size of the national debt component owed to investors.
3. In terms of income, if we had the more egalitarian 1979 income distribution, the middle quintile (40th to 60th percentile) family would average about $20,000 more income per year pre-tax, or $4,400 after-tax.
How did we get here? Well, Clinton and Obama both raised taxes on the top 1%, so it wasn't them. Reagan, Bush Jr., and Trump all cut taxes for the rich.
In the case of the Trump tax cuts, the those earning $500,000 to $1 million got a 3.1% federal tax rate cut, while the typical family making $50,000-75,000 got a 1.3% tax rate cut. As you go up the income scale, you got a bigger tax break.
15
Not sure why the authors, who helped develop Warren's wealth tax proposal, conclude the best way to fix our tax system is to raise income tax rates. The authors know the wealthiest 400 typically increase their wealth without generating taxable income. The only way the wealthiest 400 will pay their fair share of taxes is via a wealth tax.
The argument is the wealthy will devalue their assets. A natural check and balance would be to require the use of asset values provided, for example, to banks for a loan, by Forbes for their "richest" list, by CEOs pitching their next round of VC financing, or by hedge fund GPs touting their portfolio performance.
Make the wealth tax an alternative minimum tax, so those paying their fair share via income tax would not be doubly taxed -- a taxpayer would pay the higher of the wealth tax or income tax. With a 2% wealth tax on net assets in excess of $50mm, a taxpayer paying $500k in income tax would pay no wealth tax unless their net assets exceeded $75mm.
As additional incentive, repeal the estate tax (a wealth tax at death).
Many of the wealthiest 400 support a wealth tax. Top US CEOs recently agreed that maximizing corporate profits and shareholder value is no longer the primary goal of a company ... contribution to our society, our communities, our country must be considered. This momentous philosophical change might signal that singular focus on wealth creation is changing.
Write your legislators in support of a wealth tax.
3
Like growing around taxing companies isn’t going to stagnat wages ang cause inflation. My brother owns some fast food franchises. His profits as an LLC, like other companies relate to their worth. A companies worth is based on earnings. If Apple pays more in taxes and doesn’t raise the cost of its goods and services, it’s worth diminishes accordingly. If they raise the prices, inflation occurs. Pension funds would be unable to incur the losses. So the government takes the taxes it receives and increases entitlements. The cycle repeats. What about the people not receiving higher subsidies? They need higher wages, and the cycle repeats. Eventually, everyones income is controlled by the government, Venezuela.
5
Utterly misleading. There are two parts to the equation: taxes (think withdrawals) and benefits (think deposits). Payroll taxes are returned to taxpayers in the form of Social Security and Medicare benefits. Take payroll taxes out of the calculation and the wealthy do pay more. The only regressive element occurs within the top 1%
17
"...work conditions deteriorated and debts ballooned, their tax rates increased..."
What world do these "economists" live in?
According to Gallup, U.S. job satisfaction hit an all-time high in 2018.
In 2018, debt service as a percentage of disposable income hit the lowest level every recorded.
In 2018, personal income taxes for all families of four or more making $53,000 or less were reduced to zero.
In countries, such as France, which take the advice of these "economists" seriously such families are considered to be upper middle class and subject to tens of thousands of dollars in taxation.
As a result, in France, the median household income is $37,000 as compared to our $63,500.
And, that $37,000 has to cover gasoline which is $7 per gallon as compared to our $3.90 per gallon and electric rates which are 80% higher than U.S. electric rates.
This entire column is straight out of bizarro world.
In 2018, a record 3.1 million full time jobs were created, the largest number since 1984.
Their incompetent advice is already cratering our economy because rational expectations know that it is coming.
Tragedy in the making for our poor.
17
The full extent of this is not visible, because the data from the study ignores transfer payment and the “earned income tax credit.”
15
A little more attention please to the boondoggle of TEII (tax-exempt inherited income.) The greatest trick the devil ever achieved was convincing the world he didn’t exist. The greatest income tax heist the wealthy ever achieved was convincing people that inheritances aren’t income.
Of course, they actually are, under the IRC; section 61. But there’s an inexplicable exemption under section 102. This indefensible exemption has normalized the counterintuitive: If a plumber earns $80K, he and his employer pay tax on his income. If his fellow citizen inherits $11 million +, the decedent and the inheritor pay zero, thanks to today’s estate tax exemption.
Where is the $11m exemption for the plumber’s income?
5
We all agree that the current state of affairs is unsustainable and that something needs to be done to remediate the outrageous level of income inequality. This is a battle that so far has been won by the rich, thanks to decades of the pervasive power of Neoliberal ideologies -free market trade and deregulation of financial markets, which allowed the accumulation of extreme wealth in the hands of the few. Unfortunately, the rich have not only inmense wealth but also infinite power to infiltrate all levels of governement, allowing them to change the rules of the game -Citizens United comes to mind.
Therefore, I think it will take more than just good will and nobel intentions before we can make any real changes to our social system -let alone taxes, which has worked so well for the One percent.
After all, Voltaire was right when he said: "The wealth of the rich will always depend upon the abundance of the poor"...
4
As long as Trump is president taxes on the wealthy are not going to rise. It's a foregone conclusion that Trump will win more votes in 2020 than he did in 2016, purely by virtue of the fact that he's already president. This means he'll win every state he won before plus New Hampshire, Minnesota, Nevada, and probably Virginia and Colorado as well. The news and events of his presidency don't matter because nobody is listening anymore. Despite our current slowdown and the effects of the Tariffs Trump has imposed on American businesses, the masses are still doing better than they were in 2016. For many people a job at Wal-Mart is better than no job at all. Impeachment or no impeachment. it will take a miracle for the Democratic Party to hold the House in 2020. Get ready for further tax cuts, or the abolition of taxation altogether, with the possible exception of an increased income tax for the lower 90% of earners.
5
"Walmart already had its turn as the corporate villain in the 1980s. Now, as tech companies bear the brunt of the scrutiny, the retail giant is amassing wealth — earning $514.4 billion in revenue, the most of any company on Earth, in 2018."
And Walmart employees have to use food stamps to survive provided by the American taxpayers. Sad commentary on the United States of America.
12
One of the most obvious changes that would help reduce inequality (and likely help the economy at the same time) is to modify the way payroll taxes work, in a revenue-neutral way.
The most straightforward way to do this is to keep benefits as they are now, and reduce payroll tax rate while removing the income cap beyond which one pays no additional payroll taxes.
This has two effects: 1) It dampens inequality by making the overall tax code more progressive, and 2) it has the additional bonus of slightly increasing incentives to higher low to medium-wage workers, as the cost to the employer is reduced by the amount by which payroll taxes are reduced.
Even without other changes, this would be a substantial step forward toward leveling out income inequality, and its effects on the overall economy would be neutral to slightly beneficial.
2
Good grief, we are at the bottom of the top 10% and even we lost out. I wish more folks were aware of Robert Frank and his proposal for a progressive consumption tax. The oligarchs can haven their yachts, their 2nd, 3rd .. nth homes, but they will pay dearly in taxes.
7
"So too will the power of the wealthy, including their ability to shape policymaking and government for their own benefit."
This is the result of decades of "trickle down" economics, purposely put in place for this exact outcome. We live in an oligarchy, shrouded behind the facade of democracy, and the myth of "one man; one vote". But in our oligarchy a small handful of ultra-wealthy and powerful people control all decisions. Their wealth and power have bought the only votes that count: those of our elected representatives.
With the elimination of the "Equal Time Rule" and Fairness Doctrine, and the consolidation of the media under a few owners, right wing talk radio and tv exploded, allowing the saturation of a conservative agenda, one that favors authoritarian principles, and the elimination of government and the oversight it provides. Then the loony interpretation that money equals "free" speech, followed by the even loonier decision that a corporation is a person, essentially removed any guardrails to the 1% taking over completely.
I don't know if it's already too late for us to take back our country. The oligarchy is so deeply entrenched, and holds almost all the cards that they can erase any threat. What is left to the People, is the power of numbers. In the end, votes DO matter, and we need to wake up start making our voices and votes count. Majorities of the lower classes have proven this many times in history, and we need to prove it once again.
5
Billionaires and democracies do not coexist peacefully. It becomes not about the money, but the power and prestige.
I have seen graphs that show when a democrat is in the White House everybody does better. The very wealthiest actually make more in real dollars during those periods.
When republicans are in control the top wealth does a whole lot better while everyone else does worse. Everyone actually makes less during those terms, including top earners but I guess because they are able to see that they do so much better than the rest of US they like republicans better.
It is crazy for the uber rich to think they will be able to live peacefully on islands of extreme luxury while surrounded by an ocean of despair and poverty. Especially as a lot of those who will be despairing are heavily armed.
Something has got to give.
5
But most of those heavily armed folks hate the government and would do the bidding of the uber rich.
1
The proposed corrections to the tax code would require Democratic control of congress and the presidency. It would also require 60 Democratic senators or procedural modifications to eliminate the filibuster. Of course, that's what Mitch did to get Trump's massive tax giveaway to the rich passed in 2017.
Sounds good to me. Somehow I can't see too much harm being done to our 400 wealthiest if they have to pay an average of $134 million a year on wealth of $6.7 billion (the Warren 0.02% wealth tax), plus 48.8% on their annual income. They'll still be fabulously rich and getting richer each year. I do insist Trump pay the full rate on his supposed $10 billion fortune, whether he's in jail or not.
The only downside is when our rich try to compete with the rich from autocratic or kleptocratic countries. Poor babies.
4
The first graphic cherry-picks three taxes, leaving aside several progressive taxes levied at the federal, state and city levels. And even if these were included, the picture that would emerge is misleading unless real deductions are taken into account (some people have actual expenses!). What one might see is that business owners and those making “passive” income, while highly salaried W2 earners pay more taxes than ever.
In the end, the article casts all of this as a question of fairness. But shouldn’t we also care about what’s best for the nation, and for the planet? The system incentivizes investments, taking risks, and so on: the opportunity society. Can the system not adapt to societal challenges, i.e., our health care system and global warming? These are, objectively, more important questions than whether the system is “fair”.
11
When the filthy rich control the political party in control, this is what happens.
A long time ago there was an adversarial relationship between government and business. Politicians had the hand-shake, and business leaders had the money. After a while, the business owners got wise and proceeded to completely buy out one of the two political parties in this country.
And they have controlled the GOP ever since Ronald Reagan.
When half the people who are supposed to keep unbridled greed and usury in check are actually bought and paid for by those who would engage in those activities, this is what happens.
Republicans are the foxes who run the hen house. And it has meant and end to the term "conflict of interest", because the interests of the GOP are identical to those who pay to keep them in power - which is the subjugation and exploitation of the masses.
If the voters in this country were a little more enlightened, the GOP would go out of business overnight. Because that's exactly what the GOP is - a business. A business who's sole objective is profits for the few over the welfare of the many.
6
Today’s GOP is much more like a racket than a business.
2
Spot on!
This problem can be solved, but not without serious campaign finance reform. Today's elected officials in Washington of both major parties are beholden to donors who will fight tooth and nail to oppose fair taxes and keep myriad loopholes that serve only the wealthiest individuals and corporations----these donors are extremely happy with a regressive system, and if the current elected officials will not serve them, they will finance candidates who will serve their financial interests. Citizens United has made every big donor's voice equal or arguably more powerful than the voices of thousands of voting citizens. At the moment, those of us who cannot afford to finance a campaign have lost our voices in democracy.
4
All company selling in America should be taxed as follows
Tax = Pretax world wide income times (gross US sales divided by gross World wide sales ) times tax rate of 35%.
For example, if a company in China makes 80% of its sales to the US, then 80% of that companies income is taxed in the US.
1
Corporations, they should do this; and rich people, they should do that. They, they, they. To paraphrase President Kennedy, maybe it is time to stop asking what they should do for the country and instead ask what you should do for the country.
3
What do you recommend?
1
An excellent expose of how unjust our taxation has become. Even many who advocated like Ayn Randian Paul Ryan & Co may not have realized the US taxation is this "flat."
We are too oblivious to how unjust the system of taxation has progressed to. The federal taxation is still progressive. Then Payroll tax is far too regressive. Another much more biting regressive taxation is sales tax: The bottom 20% pays 7 times more as a share of their income compared with the top 1%. In Piedmont & Mexico MS the sales tax has been 12%.
Compare that with the just 15% federal income tax paid by John Paulson on most of his $4.9 billion, with a B, income in 2010 (I think) as a hedge-fund manager! GW Bush in 2003 cut capital gain-tax to 15% & treated hedge-fund managers' $billion wage-like incomes as capital gain - Steven A Cohen made $2.3 billion in 2013, but paid $1,7 billion as criminal & civil penalties that same year for insider-trade related activities; several of his traders are doing time for it but Cohen "escaped" unscathed; he still pocketed $500 million for that year!
It's not necessary to go back to 1950s-level of taxation. But the rich ought to pay more. A top rate of 50% on over $5-10 million and 1 or 2 other higher rates of 40% & 45% on $1M & $2.5M; treat all incomes alike over $1M.
Cut payroll tax to 1% on first $10K & to 2% on second $10K, Lift the cap but cut again to 1% on over $250K or so, so that rich won't revolt.
3
The “rich” and corporations forget that taxes pay for roads and trains, a military and bully pulpit that protects their capital in foreign lands , a legal system and police force, and free r&d at state universities to create their WEALTH. And it also help “poor” people eat, plan families, get to work; etc. “Rich” people pay more (and should) because they get more.
6
Leona Helmsley was right after all. "Taxes are for the little people."
14
No Americans should amass so much money that they can buy our government or our democracy.
15
Well Bernie has been shouting about this for years, glad it is finally taking hold.
6
@cheerful dramatist
Warren is promoting a wealth tax, I'm all in.
2
Ah, the old bait and switch. Will taxing the rich make you wealthier? No. But will it make you feel better? Perhaps, for a week or so. Then reality sets back in and you realize that the politicians did nothing to make your life better.
19
@Jon Galt
Not the experience I had working in Norway and Sweden. But then they had 85% voting participation.
9
This is an absurd analysis. Getting rid of the carried interest loophole (which democrat Chuck Schumer does not support doing) is appropriate. But the billionaires paying low tax rates pay the same as everyone else... it is just that their income, under tax law, is not proportionate to their wealth.
Progressive taxation is inherently unfair. Why should a successful person bear a bigger burden than anyone else. We use the same roads and far less services than others with lower incomes...... the only fair system is a flat amount. Next up, a fixed percent. Progressive is absurd.
19
ok, what should that rate be? Should there be any exemptions?
1
Perhaps the best article I have read ever in the NY Times. Lobbying for a rational progressive system of taxation ought to replace demonizing billionaires. Americans are great believers in fair play and level playing fields.
3
Thank you. Thank you. Thank you.
As one of our greatest philosophers, Mr Rogers, said, "Fear makes us crazy." Elizabeth Warren recently pronounced, " I am not afraid and you cannot be afraid either." I think the time for demanding social justice, partly in the form of fair taxation, is rolling in. We have done it before. As someone else also said, "We are the ones we have been waiting for. " I think Elizabeth Warren looks like the leader we have been waiting for, too.
How doe we get her nominated and elected? This puzzle troubles my sleep and leads me to contact the League of Women Voters, Our Revolution, and anyone else who I can team up with to make it happen. Thank you for this stunning article!
4
@pamela mercier,
good activism
.
The problem is that the "working class" is actually not paying ANY federal income tax at all. I am in the working class. 48% of American households of any IRS tax designation have zero federal income tax liability.
While it is very correct that the income curve is concentrating upward, it is also true that that fact is outstripped by the percentage of total federal tax burden carried and paid for by the "rich."
The problem is an inability of the middle middle class to afford the daily cost of living. UBI is worth a trial run. The experiment in California with UBI has succeeeded. Lets roll it out across the country and move a good chunk of the country into the ""being able to afford the cost of living class.
Making the wealthy poor will not make the middle middle class rich.
9
@Mark
Paying more in taxes will hardly make the rich "poor."
Business is organized for the greatest possible return for the stockholders, not the greatest prosperity for the people who do the actual work.
And everybody pays taxes. Sales tax and property tax are as important as income tax. No one gets by for free.
6
@Mark
most of the middle class doesnt WANA be rich,
unless its as easy as buying a lottery ticket
.
1
@Mark
No experiment with UBI has ever succeeded because it was not tested under the conditions it would be implemented.
UBI is nothing more than "entitlement reform". Here's a lump some of money, and be on your way to pay market rates. No more SNAP, no more affordable housing, no more school lunches. That's what UBI, actually implemented is.
What was actually tested is giving people more money, while they also got to keep the benefits they're already getting, including SNAP, affordable housing, etc.
4
A common way to bolster false arguments about government and how to pay for it is to count only the costs but not the benefits. In this case, the authors only count the taxes paid but not the entitlements, which are overwhelmingly means-tested and accrue almost entirely to lower-income people. In reality, about 60% of people receive more in benefits than they pay in taxes, the next 20% roughly break even, and the top 20% pay for everything (with top 2% accounting for 50% of the total).
142
Well said and concise. Do the authors of this piece know this ? You bet they do.
31
@Troglotia DuBoeuf
Do these entitlements constitute any real wealth gain? For the most part entitlements are fed directly back into the economy.
69
@Troglotia DuBoeuf The authors don’t even correctly account for the earned income tax credit. If a taxpayer has a $1,000 tax obligation pre-credit and $1,500 in tax credits, thereby receiving a $500 refund with no taxes paid, the authors don’t account for the $500 received. Doing so would change the results of their study, and they have a clear agenda.
43
For the first time last year, I hit the cap on income that can be taxed for Social Security. I got my December paycheck and thought something was wrong and then when I looked into it, realized I had hit the cap in the prior month. I was shocked at this sudden windfall. I think that this is bananas. The more income I earn from here on out, the lower my Social Security taxes become. Get rid of the cap and make Social Security payroll taxes progressive.
286
@AJ Your eventual social security benefit is based on how much you paid in through SS payroll taxes. The cap on taxes means a cap on payments. If you pay more in taxes you'll get a higher payout. Or are you just offering to pay higher SS taxes while accepting the cap?
12
And subject all income to social security. Right now only earned income s-- that is an easily corrected inequity.
24
@AJ Social Security is premised on the idea that it is an earned right, part of the reason why it is so popular and commonly known as the "third rail" of American politics. The idea is that you take out in benefits what you pay in in taxes. That's why your benefits are higher the longer you put off retirement and lower if you elect to begin taking benefits at a younger age (say, 62). As another commenter mentioned, the benefits are capped, however, because the thought is that wealthier Americans do not need to rely on Social Security as much as the middle class and the poor do. But due to the "earned right" nature of the system, that also means payroll taxes are capped, again because you take out what you pay in. This really was never a controversial idea, and it was a feature of the system that FDR was adamant about including. In other words, FDR did not want to create an entitlement system with Social Security; rather, he wanted to create a form of insurance that helps keep the elderly out of poverty.
26
I am certainly not a member of the 1%; not even close to being within the 10%.
But a quick back-of-the-envelope calculation tells me that the total gross tax contribution of the top 10% roughly equals that of the "bottom" 90%.
To call this state of affairs "regressive" strikes me as tendentious, whether or not it is demagogically appealing.
15
@Joseph Palumbo
Groups don't pay taxes, individuals do.
What matters to individuals is not the total amount, but their own rate.
Surely you must have figured out that taking twenty percent of a millionaire's income still leaves him/her pretty well fixed, whereas twenty percent of a low earner's income might mean avoiding seeing a doctor or eating lunches.
4
A number of critiques of this analysis have recently been published, which have been detailed in a recent oped in the WSJ (New Problems with Elizabeth Warren’s Inequality Math). That wealth inquality is reaching unprecedented rates cannot be argued. That policymakers need to adjust their approaches to improve redistribution should not be argued. But simply stating that the lowest quintile pays less than the top 0.1% because you feel that discussing tax credits overcomplicates the message is a blatant obfuscation, and does a disservice to this important debate.
It also contributes to the politicization of facts, and gives Trump ammunition to continue to call this paper fake news. Numbers are not open to interpretation.
14
@David Symmonds
That comes down to whether you accept the New York Times report or that of a WSJ opinion columnist.
“Figures don’t lie but liars can figure” per an old expression. Would be great to see the underlying assumptions since some of these results are not obvious. How does the earned income tax credit fit into this? Why are payroll taxes for the lowest group 11.2% when social security and Medicare combined are 7.64% for the employee share? My suspicion is that the research was done after the conclusion was known.
9
This article has it wrong. It is not that the rich watched their tax rates go down. Rather they aggressively worked to lower their tax rates. The authors make it look like the rich have been passive recipients of government taxation changes. Not so!
7
The Saez and Zucman analysis has been refuted by any number of economists, including those at the Congressional Budget Office. It's not clear where they get their data since the IRS hasn't released any 2018 data. Here are a few obvious flaws with their data:
1. Saez and Zucman say the top 400 pay a total of 23% in ALL taxes. But the CBO says the richest Americans pay 33% in JUST Federal Income Taxes. I'm willing to trust the CBO data.
2. By their own admission, the authors treat the earned income tax credit as a welfare payment rather than as a negative income tax. That's fine, but it certainly distorts the actual level of income inequality.
3. According to OECD data the US has the most progressive tax structure for households among all developed countries. That's because many other countries rely heavily on value added (i.e. consumption) taxes that hit the poor harder than the rich. So if the US is bad, the rest of the world is worse.
4. Both the Tax Policy Center and the Joint Committee on Taxation stated that the 2017 tax law would have little effect on the progressivity of the US tax system. That's probably because the lower rates were offset by the elimination of some deductions that overwhelmingly benefitted the rich.
I recommend that everyone wait until someone has replicated the authors' conclusions, which I doubt will ever happen.
19
Also impose an economic embargo, like the one that has been imposed on Cuba, on any tax haven country that won't cooperated. If the Cayman Islands or Bermuda ever want to see another American visitor, they had better cooperate with the American tax man.
This analysis would be more illuminating and more accurate if it used medians and included income based transfer payments.
3
This is spot on. We have decided to fund the campaigns of elected officials with "gifts" from supporters. Does anyone think it was an accident how our tax rates benefit the rich at the expense of the poor and middle class? The more money, the more influence.
4
For the rich, this is exactly as it is supposed to be.
They're at the top, trickling stuff down to rest of the people.
2
Working class, middle class, working poor and uber rich are all nice catch phrases. If we want fairness we collectively will need to pay for fairness. If equal tax burden addresses a pre-tax rate, or a graduated rate it does not matter someone or many someone will play more or less depending on how we count.
I don't believe any graduated tax rate will be considered fair anymore than a flat rate. Perhaps we should focus on doing the best we can and moving on. I believe in 10% flat rate on all income above $50,000.oo per year. No adjustments or exclusions, no dependent or local tax credits. Just 10% on all income above $50.0K.
2
Bravo guys! Keep banging the drum. You are on the right side if this issue.
2
The new york times just had an editorial about how socialism would have meant no mickey mouse and how successful walt disney was. Well the highest marginal tax rate was over 75%.
4
When Trump said he was going to Make America Great Again, I thought he was thinking of when we invested in every form of growth in America-- from education to public health to infrastructure, like we did in the Truman and Eisenhower years. However, it was the same greedy "trickle-down" con.
What drove that growth and gave us a Middle Class that was the envy of the world was high taxes on corporations and the very wealthy. This kept CEO pay at 40 times the lowest company employee, and corporations paid over half the annual national tax bite.
Individuals were taxed on investments made, and taxed higher when buying foreign investments, and capital gains taxes were also higher on foreign investments. The best way business could lower their tax bite was to invest in employee pay, pension and benefits, and in plant and equipment.
The other thing that made America great was immigration. Immigration that made the American Dream work: your children could do better than you. This was because there were employees grabbing on to the first rung of the wage ladder, meaning your children did not have to take those jobs.
4
Let's start small, incremental, achievable.
First, end the "capital gains" differential (preferential) rate. Tax all income, whatever the sources, at the same rates. Tweak this change as need - perhaps exempt the first $500K of gain from the sale of a 'primary residence' from tax, for people with incomes under $500,000 a year. So the "middle class" can still profit from their home sales.
Second, remove the cap on income subject to FICA tax. I don't hear of too many old wealthy people refusing to take the Social Security payments they "earned"... so tax all their income when they are working, all the way up. The working poor and 'middle class' have all or most all of their income subjected to FICA, while for a billionaire "earning" a few tens of millions a year, the FICA on the first $133,000 is a rounding error. Make all the income subject to FICA's rate, all the way up. Use the money to improve the stability and solvency of the Social Security system, which can be the wealthy's contribution to the retirement security of old people in their communities.
These two changes are easy to understand, and make a modest start, even if the tax rates are not reduced and restructured as the authors propose, on improving the equity (perceived and actual) of our tax system.
5
Justice won't matter if we don't go for fiscal solvency. The Medicaid program for the working poor, middle class with lots of dependents(children), and most nursing home residents is a healthcare program for 75 million, a federal-state partnership that is premium free for all of them. It is set to run out of money to pay all the bills in less than 3 years. Then, the fact that the government pays out about $1.6 trillion for both the Medicare and Medicaid programs when there is up to 40% fraud in the states of California, Florida, New York, New Mexico, and Texas because that is where not only 140 people live, but most of the fraud takes place as well. Government doesn't work anymore because it is spending 30% more each year already than what it takes in in revenue. Think this can last. It can't! Start there first, and the other will have a greater chance of succeeding as well.
5
@MaryKayKlassen 140 million people live
2
The "middle class" on these charts is an American fiction.
Everyone who sells his/her labor for wages is working class, regardless of the amount he/she earns.
Middle class traditionally means small entrepreneurs, petty bureaucrats, and those in the professions.
By making an artificial break based on income, abetted by the media, the US ruling class divides the working class.
4
Once again as with starting the Vietnam War and allowing federal workers to unionize the fault lies with JFK. Ike kept rates high to pay for the government but since him they have all lowered rates and borrowed more. I should have voted for Nixon.
1
Hard for liberals to digest, but top 1% pay 42% of the total tax burden in the United States.
Lyin' Liz may have ideas about a state run economy leading to a "fair" distribution of wealth, but there is no example of a socialist economic model that actually works.
Fun to hear her spiel, however, especially as she and her husband are multi-millionaires.
Unfortunately for those of us who can't vote for Trump, she does not offer a real alternative.
She is the Pied Piper of pipe dreams.
14
@Stephanie Wood There are plenty of successful democratic socialist countries in Europe.
4
More constructive for Saez and Zucman would be to go to work on the crushing annual burden that American citizens resident abroad bear when they are required to file US Tax Returns on worldwide income.
Citizenship based taxation should be outlawed. The US is only one of two countries that does this. The other one is Eritrea.
The time involved, the cost involved to hire US tax system accountants in foreign countries, and the tax payments required to be sent from overseas to the US treasury is a burden on US Citizens who are already tax compliant where they reside.
Try explaining to your children, having grown up abroad, whose knowledge of the US is hazy, that they will be filing US tax returns for the rest of their natural lives because they, or one or both of their parents were born in the USA.
Every single child born in the US living in families with undocument parents that Trump has deported out of the US must file a US tax return when they start earning income every year for the rest if their lives. Think about the injustice they will feel when the IRS comes after them.
Boris Johnson was the high profile case. Millions more just haven't yet been caught up in the IRS net.
The time and financial resources required to continue this system
is not productive. I believe that it
costs more to maintain than it brings in to the Treasury, Saez and Zucman!
Taxation needs to be residence based, worldwide. All countries,
particularly the US, need to be brought into compliance.
3
Thank you both, and professor Thomas Piketty, so much for the extraordinary groundbreaking work you have done to expose how much the wealthiest humans earn, and how little they pay to help support all of our human rights. As championed by Eleanor Roosevelt, signed by almost every nation of the world, including the USA, and passed by the UN general assembly in 1948, the Universal Declaration of Human Rights promised to provide all people w/ guaranteed jobs, housing, food, healthcare + free education "at least at lower levels". The only way for our nation, and world, to provide for our human rights is to tax the rich.
18 years ago, I started running for president w/ a wealth tax on the 1% as the centerpiece of my platform, along w/ ending victimless crimes+war+ freeing 2m jailed slaves. The reason that we live in the "richest nation in the world" but the govt is always broke is b/c USA taxes income, not wealth!
I'm still running, trying to make it to the next debate+ crunched my numbers in your online "wealth tax calculator", + my wealth tax, which currently starts at $10m, or or the top 1%, would yield over $10.5T over 10 yrs, which is over 2x Sanders' proposal and over 4x Warren's! Also, I'd tax rich "non-profits"! I love your idea to guarantee corps pay fair share! However, I believe the yield of my plan would be far higher than your calculator says, b/c economy will explode, from bottom up! We must guarantee jobs, housing, free college (pub+priv), childcare, etc!
The percentage issue is a bit of a red herring, as lower income filers benefit from various social programs and incentives that the wealthy do not. Also, even on the numbers you provide in your tables, the percentage may be less, but at the highest rates the amount of tax paid is 100 or more times greater than the lower filer. How is it fair for someone to drive on the same roads, use the same police service, airports, etc but pay such an extreme multiple of what the the lower filer pays? The authors should redo their tables and show absolute tax paid and it does not look so unfair then.
14
The authors have very possibly cherry-picked the data as they clearly have an axe to grind (has this analysis been peer-reviewed?). For a critique of their methodology, see: David splinter.com
In any case, perhaps the problem is that the bottom 90% of the income distribution are burdened by consumption and payroll tax rates that are too high? The data show that the wealthiest 10% are clearly paying higher income tax rates than the lowest 90%.
13
This article, as has been pointed out elsewhere, completely ignores the EITC, earned income tax credit that many poor working people get and which quickly makes our federal tax system look more progressive. Also I wonder if the 400 richest people give a lot of their income to charities to avoid more of their money going to taxes.
11
If anything needs to be indexed for inflation, it should be the Poverty Line. That should be calculated by zip code.
When enough people can not afford to live where they work, and even more are forced to buy cars to get to low paying jobs in wealthy communities in most areas of the country that have 3rd world public transportation systems, people will be in the streets.
When Corporations kiss up to our politicians with donations for special tax breaks, and cities and states actually make it part of policy, they are defrauding the entire economy while enjoying the perks of citizenship without the responsibility. Corporate tax returns need to be published in exchange for an operating licence. As they claim they want..."Let the market decide."
Just give "the market" the tools to reach a decision.
3
For anyone actually interested in the true facts, I commend you to data published by the Peter G. Peterson foundation. The premise of this article is the percentage tax RATE for individual income groups. That is far different from the percentage of the tax BURDEN shouldered by each income group. When the actual dollars being paid by each income group are revealed, it is clear that our tax system is hugely progressive.
With regard to all federal taxes, the top 1 percent pay 30 percent of the total burden, the top 20 percent pay more than 50 percent and the top 40 percent pay nearly 80 percent. State taxes, which include a variety of regressive sin and consumption levies, would shift those results, but only slightly.
In other words, contrary to the plain thrust of this article, the top 20 percent already pay the majority of the costs to sustain our governments, and the top 40 percent pay almost all of those costs.
It is sad that our friends at Berkeley need to use such a deceptive presentation to buttress their argument for increased taxes on the wealthy.
25
@AR Clayboy: The article stated this quite clearly. We all understood they were discussing rates, not total payments.
With our national income skewed so grotesquely toward the tippy top of the scale, of course the very rich are shouldering most of the burden. They're the only ones who have money. I'm not losing sleep over how Warren Buffett will manage to pay his rent this month.
2
@Jomo Well then Jomo, let's drop the argument about whether or not the tax system is progressive and move to the more important point that many Americans have become wildly envious of those doing well and would like the government to seize their wealth to benefit those doing less well. I think the kids call it "player hatin'. I'm not wealthy, but like to think of myself as a player congratulater.
6
You missed the point.
"if the growing political will to address the rise of inequality takes hold"
A large percentage of Trump's base falls within the bottom 50%, but they do not question income inequality. It's all about marketing, and the Dems have failed miserably in this regard.
2
It is NOT absurd that the working class is now paying higher tax rates than the richest people in America. It's exactly what happens when "the richest people in America" are able to buy politicians and control the political system. "Michigan Man Of The Year"and Moscow Mitch are the champions of the .1 percent. It's very hard to have a democracy when the 3 Richest Americans Hold More Wealth Than Bottom 50% Of The Country. Let that sink in.
8
This is the kind of stuff that makes for revolutions because at some point matters of economics stop being purely economics and become matters of morality. That the poor should pay more for their government than the wealthy is simply immoral.
218
@Manuel - the poor don't pay more. The poor pay hundreds while the rich pay millions. This is a theoretical discussion about rates. Personally, I support a flat tax.
18
@DRS It IS more to the poor though because it's a greater portion of their income. Taxing the wealthy more so the poor have to pay less seems like a win/win. More tax revenue for infrastructure and the military (that should please the hawks) and the poor will be left with more money to spend (or waste on lottery tickets...).
19
@DRS
It is not even a discussion about rates. It seems like an argument to rescind tobacco, alcohol, and gas taxes. But is sure has lots of likes.
2
Any tax/wealth rate change of this much significance will pass--over Joe Biden's dead body. Stop listening to the Establishment; they're the ones who are stealing your money. Google "Joe Biden Elizabeth Warren bankruptcy," and you will see video of Joe and Liz fighting it out back when Liz was a university professor and Joe was a corrupt Senator. Then make the decision of which one of them is really on your side.
2
Taxing is not about fairness. That is the old days when we could afford to think about that.
Taxing is about survival.
Am I the only one in America that has noticed that the massive iussance of Treasury bonds nearly choked off the repo market two weeks ago? Now? We have started buying debt again to prop everything up because worldwide demand has dropped.
And, when our debt finally does overwhwelm all other aspects of our economy? What then?
2
@Michael
Only the article has nothing to do with Federal income tax revenues.
1. It is misleading to include employee contributions for health care insurance as a tax. It is a purchase.
2. Government needs to do what it has to do to keep citizens safe and provide an infrastructure on which the economy thrives. It has to ensure that every person has sufficient and healthy food, decent housing, good quality healthcare and an opportunity for advancement through education If those needs are met, I don't care if some are bazzilionaires. Taxes should be fair and progressive but not aimed purely at redistribution of wealth.
12
This all sounds fantastic......increased taxes to pay for nearly everything...even for people who won’t work or are entitled.
Until the government runs out of other peoples money
2
What is really interesting is that this reality has been masked for so long, partially by a pretense that federal income taxes are the only taxes that are worth mentioning in tax discussions. This standard Republican pretense is furthered by media coverage, which repeats the anti-tax claims rather than reporting that the usual biased analysis is being repeated.
Reporting someone's statement (of a known falsehood) is objective reporting, while reporting that a known falsehood is being repeated is biased and partisan. Only with our country's enemies is it permissible to report that the propaganda continues without giving it airplay by repeating it. Otherwise the propaganda is given airtime, and noting that it is propaganda is biased reporting.
A similar logic occurs in most of our public debates and keeps them unproductive, so that the winner is the one with the best and most propaganda rather than the truest ideas. Thus does our plutocracy preserve itself.
1
With a slight of hand this article has conveniently made
rich "millionaires and billionaires" targets for those who want more and more money for government to re-distribute as they see fit. Billions for education, road repairs, help for the homeless....all worthy programs but nothing to show for it.
In California the state legislature recently levied a large gas tax increase w/out voter approval for road repair. Last November Californians voted to keep in in place with the states promise to use it for nothing else. This week Gavin Newsome re-directed tens of millions illegally for....who knows what ? California has some of the highest income, sales and property taxes in the country yet we have the highest number of homeless and least affordable housing, attributed to building regulations and taxes that drive up the cost of construction, causing shortages that make the problem worse all the time. Rich people will always be rich but let's say it like it is...government is greedy and unaccountable and taxing the rich will do nothing to help the middle class.
16
"It is absurd that the working class is now paying higher tax rates than the richest people in America."
Yes, it is.
3
My only question is: who is the accountant adding up the wasted dollars Trump is spending traveling around in his (our) helicopter, flying around in his (again, actually our) 747, his playing golf while letting his mind wander (some more, he didn't get enough executive time at the WH), and eating lots of chocolate cake? It must be a large sum I'm sure. All wasted, while people are getting fewer healthcare benefits, or building a border wall instead of spending it on defense infrastructure, protecting our purple-heart recipients as it were? We can't sell soybeans to China either, because of cyber-theft- two completely unrelated items. So the Treasury has to give money away to corporate farms to keep them quiet until the "big showdown" in 2020. My tax dollars have never been more misdirected since Vietnam... Oh sorry, also WMD's hiding in Iraq (we're still investigating their location). All to support the fossil fuel industry, who gets to charge us AGAIN at the pump. Trump may be a sort of blessing- he rips us off so shamelessly that as soon as MR.GREEN JEANS finally notices that the system is robbing him blind, he might want to join us in the battle against flagrant corruption. As dangerous as our predicament is becoming, it's also a golden opportunity to turn the page and return the power to the people.
It's not just a catch-phrase- it IS our country, too. I know only 13 colonies were a lot more manageable way back in 1789, but we HAVE to make this work- and we can.
3
We need a new definition of obscenity that includes the information posted here about the richest 400, as well as their enablers.
4
10% Flat tax. Everybody pays something. No loopholes. Done.
6
Highly regressive approach that will only exacerbate inequality. But you know that.
1
@M we basically have a 28% flat right now and billions in annual deficits. Of you want flat that is one thing. But cutting it to 10% means halving govt revenue collection. So either HUGE deficits or HUGE cuts to programs.
2
The solution to the profound inequality—
Sanders/Warren Warren/Sanders—
And a compliant and helpful Senate (meaning out of GOP control).
3
@srwdm
Sanders/Warren Warren/Sanders...the path to a Venezuela.
2
It's funny, but I haven't found any other experts who agree with Zucman and Saez. Those who disagree include the chair of the Council of Economic Advisers under Barack Obama.
It also includes David Splinter, an economist at the Joint Committee on Taxation at the U.S. Congress.
This is not the first time these scholars' work has been questioned. James K. Galbraith found that data on their “world inequality database” (with Thomas Piketty) is “sparse, inconsistent, and unreliable” and “not very consistent with other reputable sources.” He said: "The resulting estimates are beyond heroic, and based on far less information than is actually available, since actual country‐year inequality measures available from [many sources] are not used, or even cited."
As a matter of professional ethics, it is questionable that the authors have jumped into print at the New York Times without addressing, or even acknowledging, the objections to their study.
22
This won't happen until the President and Republican Senate are out of office.
1
@V - let's hope this never happens.
3
Uncorrected, this, in the past, has led to revolution.
3
Frankly we should be grateful that the top 10% pay the majority of federal taxes.
They deserve a big thank you for carrying the load.
14
@Driven
You should know that the readers and believers of articles like this are not interested in anything beyond class warfare and state-run economies.
As Margaret Thatcher said, "Socialism is a great idea until you run out of other peoples' money."
12
@Stephanie Wood Ike was a socialist? Who knew?
The federal government simply spends too much money. You could tax the "Top 1%" at a one hundred percent rate and it wouldn't make much difference. The government needs to trim its spending and stop generating massive deficits. What happened to the deficit hawks ?
Seems like the authors of this piece would prefer that lower income people pay no sales or payroll taxes. Furthermore, this article doesn't take into account the numerous tax credits given to lower and middle income people that are not available to upper income people.
Complete waste of my time reading this garbage.
12
If I were in the uber-rich parts of our society, I’d be very concerned about income inequality. Even the most decadent of the Romans remembered the “bread” half of “bread and circuses.”
3
The authors are both California state employees (working for big education), so their salaries are publicly available. In 2018, Saez's total salary (excluding benefits) was $412K; Zucman's total salary in 2016 was $203K. Saez is pretty close to being in the 1 percent club (adjusted for CA) and make his a contributor to this "injustice."
As a comparison, the Governor Newsom's 2019 salary is $210K. Not to feel sorry for Newsom as his total 2016 income was $1.3MM, since, like our president has not divested himself from his outside businesses. I'm pretty sure Newsom thinks redistributing income is great progressive policy.
I imagine that Saez and Newsom's wealth is pretty substantial (which is not reported on tax returns).
That leaves Zucman in the driver's seat, as he can now make a case to confiscate Saez and Newsom's income and wealth.
I'm wondering how that's gonna work out...
7
@Steve so should we trust them more knowing that their proposal would raise their own taxes?
1
@Todd Like most affluent liberals, they want to go after the biggest fish so the small fry don’t go after them! If anyone’s really concerned about this value judgement, they can additional money to the government (beyond their current tax payable).
1
How about creating a tax union. Everyone can voluntarily pay dues of about $1 per year. Get all the tax attorneys and tax accountants together to run it. Then the ordinary citizen can influence tax policy like only the rich do now.
2
Well, I'm afraid that tax avoidance IS a law of nature - at least in the free market system. The market does not have a conscience. Profit is the ultimate goal, not contributing to society. The wealthy and corporations, with armies of accountants and lawyers will find a way to work around tax laws, or they will hide assets offshore. Or, they will simply move. Or they will cut costs and jobs.
Even now with the tax laws in their favor, corporations aren't satisfied. They have financial arms who do nothing but try to find ways to squeeze out more profit from the tax system and the free-market paradigm.
Add to this that there is little will to challenge the free market system when that system owns the political process. Money is now free speech. Congress is beholding to its donors.
I'm afraid that the only thing that may trigger change is when society hits rock bottom, when inequality is so great that society can no longer function.
4
This is a well written, convincing argument for legislation that will encompass the authors' ideas.
4
This is not "absurd" results. This is the expected and well-paid-for outcome of a "money as speech" political system, and the natural decisions of people in their self-interest. The wealthy take care of their self-interest by taking steps towards getting 'a better deal' by shifting the costs of operating a nation (also known as "taxes") onto someone else. The politicians tend to their self-interest in doing the wealthy people's bidding, in order to get support to gain election, re-election and keep their own power. They also manage, generally, to increase their weath, sometimes substantially, while in office - perhaps with a 'little help here and there' from wealthy people. The poor, working people, having no way to 'pay and play' with the politicians, just pay and pay and pay. Self-interest above any concept of patriotism, above any understanding of community, of national unity, and always as short-sighted as next quarters numbers, and the next election.
13
If we were to follow through on these proposed tax rate changes, I think the voila moment in a few years won't be look at all the income equality and revenue we have, it will be where did all the 1%'ers go?
7
@JG where did they go in the 50s and 60s when tax rates were higher?...no place...oh, sure, I'm certain there were exceptions, but by and large they stayed put...please read the article in the Sept. 5, 2017 NYT by David Leonhardt "When the Rich Said No to Getting Richer"...this Opinion piece should have a link to it...
@JG The proposed increases would be a drop in the bucket for the richest. Although Betsy DeVos might have to tighten her belt by giving up one of her yachts (oh the horrors).
With regard to corporate/partnerships/business taxes it seems to me that taxing profits misses the point. Presumably, taxes pay for social services and amenities provided by various levels of government (for example, public safety, transportation, legal redress, enforcement of contracts, etc.) If this is correct, these services are available (and provided) whether or not a business entity makes profits. To my untrained eye, profitability is as often or not a highly contrived and adjusted amount based on complex decisions having nothing to do with the "social contract". Therefore, it seems more fair and egalitarian that business taxes should be paid on gross income/receipts rather then a highly fungible calculated item called profits. I wish the authors had addressed this point.
3
Looking at tax rates by themselves presents a deceptive picture because it assumes that taxable income reflect real income more or less accurately. For the very wealthy, tax shelters of one variety or another are the main way that they escape taxation, but they don't show up in the tax distribution.
7
If the argument against high wealth concentration is that the money threatens the political balance than the obvious solution is to ban the money from entering politics, not attempt to redistribute wealth so that money comes in to politics in an even-handed way. On the other hand, if what you really want is to redistribute wealth out of a sense of "fairness" then be honest that it is about taking what others accumulated because, well, you want it. Rarely has that justification worked out well for anyone...
8
@michaelf The accumulation itself is usually gained, or enhanced, via political manipulation and favoritism. Get real.
1
Why solve this with Corporate Income Tax rather than Personal Income Tax? Intuitively it doesn't work very well:
I see how you can make US companies pay 35% no matter how they structure for tax purposes; but the way to go would be, 1st all corporations need to file audited accounts, and 2nd we change our tax system so that taxable income is determined the same way as accounting income.
The system proposed for foreign corporations doesn't make sense: multinationals sell stuff everywhere, sometimes they go back and forth with parts of products in and out the country, and it would be crazy to try to measure which part of their profits the US is entitled to tax.
The result, in either case, would be that the US would become an isolated economy, like North Korea: US companies wouldn't be able to compete overseas if their fiscal costs are higher than that of foreign companies, and foreign companies wouldn't deploy their capital in the US if their returns here are 35% lower than deploying it elsewhere.
Ask the North Koreans how this is working for them?
With Personal Income Tax all you have to do is increase the Personal Income tax rate. We would see who stays and who goes to live somewhere else
2
@JB ...When you tax corporations they simply pass the added cost of doing business on to their consumers. When you tax dividends (individual income) at a progressive rate you address the tax inequity.
We definitely need to revise the tax laws, but we also need to have more say in where the money gets spent?
Maybe I’m naive, but how about we reduce our defense budget and use that money to fund major infrastructure projects in the US and revamp our education system...
Another wild idea is UBI! Andrew Yang is the candidate pushing for this and it makes a lot of sense - we would all benefit with extra money in our pockets.
3
The problem with capitalism is that sooner or later the rich have all the money.
9
@gratis
That is definitely not true as I am certainly not rich and have plenty of money to live a decent life. I have food, water, and shelter.
3
@gratis Like most americans you mean?
It’s ironic the authors contributed to Senator Warren’s economic plans.
This analysis demonstrates in clear terms that many of the favorite tropes of the progressive left related to inequality (Bring back unions! Higher corporate taxes!) Are nonsense.
More basic policy interventions (which doesn’t quite set leftist hearts thumping quite as fast)
Fix tax policy. More effectively tax the owners of capital (not companies). This will take us much further.
2
@James, the big companies (Apple, Amazon, etc) are the biggest owners of Capital by far. And they pay little to no taxes.
You want to make America great again? Let’s go back to the tax rates (individual and corporate) from before the trickle-down craze of the Reagan era.
An unjust economy and unfair taxation, and illegitimate, anti-democratic political system are existential threats to our national security- just ask our Founders. National security systems which fail to take white collar crime, tax evasion, and corruption seriously, or even enable it (like Citizens United), are part of the insider threat.
3
These data are borderline incomprehensible, but can you trust a couple of Berkeley academics? I wonder.
Higher income tax rates for the rich are probably appropriate - emphasis on income. It would be unwise, however, to attempt to significantly raise tax rates on investment income, unless, of course, you want to kill the economy.
8
@Mr. Moderate
Yet that is precisely what Ronald Reagan supported and implemented during his presidency. My understanding is that he found it morally reprehensible to tax investment earnings, particularly capital gains, at a lower rate than earnings from labor.
@JAH
You may be right about Reagan. I don't know.
But the investments producing the capital gains have already been taxed as income.
Is this an appropriate place for one of my biggest gripes? I'll go for it. With over 800 comments, who cares?
Drives me crazy when people complain about undocumented people not paying taxes. They have a minimum, in my area of an 8.5% tax rate and they are the poorest of the poor, so it's no insubstantial. Plus, that money (SALES TAX), goes to the services that they have the most access to. Like local schools and parks.
But if you are wealthy and only paying taxes on stock income and sales tax, your rate would be nearly the same. Especially after mortgage deductions and whatnot.
Drains on society. Pfft.
4
A big part of the American myth is that in 1845 there was a famine in Ireland. One million of Ireland's poorest starved to death and one million more were deported or sold into the squalor of the new cities of the industrial revolution.
The Economist was only a couple of years old and neoliberalism and the idea of the importance of capitalism and capitalists was sold as the greater good and the decision to starve Irish peasants was not an act of God but a political genocide. Ireland's economy was based on food export and Ireland's food exports boomed as its peasants starved.
Robert Peel's Tory government fell as its member's fractured on whether to allow Ireland's peasants to be fed and enough Tories joined Lord John Russell's Whigs and the culling of the bottom two million of Ireland's population began in 1846.
While Ireland exported tons of beef, pork, cheese,and grain, ships loaded with food from around the world were forbidden to unload the food from around the world to feed Ireland's hungry.
Even as I wonder what would happen if the USA was faced with a shortage of food for its all you can eat buffets I am glad to see Emmanuel Saez and Gabriel Zucman write an op-ed for the NYT. I wonder however when they will be credited with the idea of a 70% top marginal income tax. They are the authorities on the disaster we call inequality who provided Alexandria Ocasio Cortez with the figures which the right ideological propagandists dismiss as fantasy.
2
As a California tax payer, I absolutely dislike the elitist rhetoric of these authors (France-born professors from Berkeley, the fact that I contribute to their salaries is wrong). They are literally a couple of Marie-Antoinettes slicing a piece of populist cake to any fool who will listen. Who benefits from the tax system? The very rich and the poor (no mention in here about earned income credit - which redistributes income to the very "neediest"). Take heed, Democrats (and Democrat Presidential candidates: Sanders and Warren), this hogwash will cause Dems to loose the election and bring on 4 more deplorable years of Trump.
7
As I previously expected, these numbers are garbage. The OMB analyzes taxes every year, and our tax system is progressive. It's only when Saez tortures the analysis by removing transfers and earned income tax credits, and inferring the business taxes, does the tax code vaguely resemble what they claim. People want to believe they can get free money from undeserving rich people. It's a great class warfare meme, fed by lies spun by Saez and Piketty.
13
"It is absurd that the working class is now paying higher tax rates than the richest people in America." It may be absurd but it is supported by Trump, the Republicans and the pitiful, uneducated voters who have been duped by Fox News, Evangelical Ministers, and their own fantasy aspirations to be super rich.
Absurd that is true, but quite a clever thing to bring off.
3
"the richest Americans watched their tax rates collapse."
Why the use of the passive voice? The richest Americans did not "watch" anything happen, they forced their own taxes lower and the bulk of the tax burden onto the middle class. They did this by outright bribery of Congressmen, calling it "campaign contributions" and equating it with free speech rather than the criminal subversion of representative democracy that it is. They, and their hacks, stole a supreme court nomination to insure that Citizen's United would stand. They did it by buying control of the media and carefully repeating think-tank generated and poll tested memes to the masses. The less historically and politically literate among us are highly susceptible to this propaganda. This is how we wind up with a society where people in the very lowest socio-economic tranche will spout off about the need for tort reform or a return to the gold standard, and then vote for a self-aggrandizing fascist who never stops spouting lies.
3
Why is anyone surprised. It amazed me so many working people were applauding the tax bill...the outcome was obvious. The president and most of congress, especially the republicans, feel obligated to the big donors. This is their tax plan. The fools will try to vote in this same crew again.
4
Clever solutions to inequality of taxation. With current technology, there is nowhere to hide.
1
It’s interesting how payroll taxes shift between retirement contributions when people scream about how they want what the contributed and taxes when they complain they are downtrodden in a rigged system. It’s either retirement or welfare. Not both.
The game plan is the same election after election and year after year. The Republicans know that further enriching the wealthy class is not popular and won't get them voted in. Instead, they use emotional and moral topics such as abortion, welfare, immigration, anti-LBQT views, and religion to convince people to vote for them.
For every law that require citizens to pay a tax, the Republicans sure make there is a loop hole or legal wording that allows the wealthy and corporations to exploit it such as losses that can offset your next year's tax liability. Or how executives use stock options as their main income and only tax it at 15% as opposed to getting a paycheck which is taxed at a much higher rate.
The problem with our tax system isn't due to people's net worth but the Republican Party that always corrupts our tax system to benefit the wealthy.
4
I favor a tax of 0.125% on all stock trades as well and a marginal tax of 80% on incomes over $10 million.
Those numbers can be changed, but anybody making that kind of money charges too much (or as one person told me, is stealing.)
2
So it seems the authors want the federal government to adjust its tax rates to accommodate what individual states choose to do which includes continuing to allow those who live in high real estate markets with high taxes to take from those who do not live in those areas to help them with where they have chosen to live. Sorry, not my problem that people decided to live around New York City and the states nearby or in California and can no longer claim their big tax deduction nor should it be the problem of the federal government.
2
@DC --
And it's not MY problem - as a resident of NJ, a state that received about $0.50 in federal money for projects and programs for every $1 its citizens paid in federal income taxes even when we could deduct 100% of our state and local tax payments -- that the governments of many states have chosen to undertax THEIR citizens. Citizens who then get MY money from the federal government to fund projects and programs that the states can't pay.
1
@DC
Agreed—the loss of the SALT applies to all states. Those states that have an issue need to lower their taxes. Problem solved.
1
In simple terms, America cannot afford its upper class. We should dismiss them from our service and engage a new upper class which is less costly.
3
There is a big difference between the US and say Denmark. In Denmark, if I pay high taxes I have a pretty good idea of how they will be spent and how I will benefit from them. For example, I know that my taxes are not going to be used to start a coup in Guatemala. I know that my roads will be repaired, my schools will be fully funded, and so on. This is a communal thing - I know my community and I agree with other members on how to spend our taxes. The US is totally different - I get nothing here in Berkeley for my taxes. My roads to not get repaired, schools are terrible, we have power outages, homeless people are treated better than local residents, local politicians are using taxes to increase their political visibility, the police is non-existent unless for ticketing, and so on. That is why I would prefer more money to be left in my pocket to make my own decision and the local community or lack thereof to be more decentralized. The large government the US-style is totally inefficient.
13
@DL Also, Denmark is a capitalist country, albeit with high rates of income tax to provide high levels of socialised provision. By capitalist, I mean that capital is taxed properly - they have significant property taxes and any land by a Danish citizen, in Denmark or abroad, is subject to taxation.
This is in stark contrast to the feudal system of America where the rich can own as much property as they can accumulate, with no penalty or fiscal amelioration.
2
The idea of "Punishing" people at the upper end of the income spectrum will solve the widening wage gap is incredibly naive. Or the idea that it is even driven by US policy.
The widening wage gap is a real issue and a global concern, but it is incredibly complex. Whether you are a republican or democrat this is a concern.
Low interest rates, which do in fact stimulate the economy, but also inflate the values of assets. The global decline in rates has been creating increasingly problematic asset bubbles as global central banks try to keep the economies of the globe going.
Asset owners have made tremendous amounts of money, as opposed to those who are not asset owners. Not only have the non asset owners not participated in the upswing but they have seen their ability to buy things like homes decline due to the inflated values.
Tech have been creating efficiencies that has kept incomes at many of the lower skilled jobs flat. This discrepancy where asset owners like baby boomers, or 401k millionaires have had tremendous wealth growth vs millennials who largely haven't participated is what is driving the current waves of populism.
There isn't an easy fix for this and creating punitive tax rates will not help.
4
@Justin
The idea that taxes are a "punishment" is ridiculous.
The rich benefit from society more than the poor, even the poor who rely on government services. Yet they pay proportionately less? That makes no sense.
1
I wonder if these guys ever leave their offices on campus.
If they were to walk down to one of the less genteel neighborhoods in their fair city of Berkeley they would discover folks who are living in taxpayer-funded housing, signed up for taxpayer-funded health insurance (Medicaid), receiving taxpayer-funded food stamps, and using a taxpayer-funded smartphone.
Unless you're going to turn all of these noncash welfare programs into some kind of cash income equivalent, there is no meaningful way to calculate the tax rate paid for an American on welfare. Given that 71 million of us are on Medicaid, for example, the numbers presented in this article cannot possibly be correct. The economists have the "bottom 50%" with an average annual income of $18,500. The income limit for welfare in the writers' native Bay Area is at least $117,400/year (see https://www.mercurynews.com/2018/06/25/the-eye-popping-definition-of-what-is-low-income-in-the-bay-area-increases-again/ ).
Maybe they found some people with a cash income of $18,500, but that isn't their spending power. If it were, these folks could not afford to live in the U.S. at all (since, if they have a kid or two, health insurance would consume 100% of their income, leaving nothing for food or shelter).
8
@Philip Greenspun
"The income limit for welfare in the writers' native Bay Area is at least $117,400/year"
No. That's the income that is considered "low income".. FOR FOUR PEOPLE. It is not the "income limit for welfare". In fact, the article points out that the federal income levels aren't keeping pace with the area, where cost of living is much higher than other places.
Maybe that's why your math conflicts with the article?
3
@K Looks like a "family" of 1 person would be eligible for housing welfare in Berkeley at $69,000/year or below. See https://www.cityofberkeley.info/BHA/Home/Payment_Standards,_Income_Limits,_and_Utility_Allowance.aspx
2
A good analysis, but I don’t think payroll tax should be part of it. “Payroll tax” is really forced savings on which contributors will get a reasonable return if they become disabled and when they retire. I realize it’s a burden, especially on the lower income, but an absolutely necessary one, and shouldn’t be part of the tax fairness discussion.
5
@Jerry And when you die early in life as my Father and some friends have, this forced savings amounts to a $255 death "benefit".
1
And Big Tech pays the lowest taxes of all.
Aaaahhhhhh, the algorithms. AI, all for profit, is taking over the world.
Time to get off the train before it goes over the cliff. Taxing wealth so nobody can keep more than most dreams of avarice might get rid of useless luxury markets and help with climate change/global warming as well.
5
It would also be good if the IRS allowed for anonymous reporting of fraud, whether it is labor or sales related. I have tried to report things over the years, but have always been told I cannot remain anonymous -which would blacklist me in my field, if I was named in the investigation. I've also been told that these infractions would only cause minor fines.
The IRS has no teeth.
We need to demand a bigger budget so they can actually go after businesses and individuals who are committing the worst offenses.
3
@Ian
Norway put everyone's taxes on the Internet.
@Ian
Norway puts everyone's taxes on the internet.
Just sayin'
We have become a something for nothing society.
The enterprueneur desires to become the monopolist on the back of public research and built infrastructure.
The Libertarian desires to pursue their "Liberties" and "Freedoms" on everyone else's back.
Avarice has usurped grace and run roughshod over the Common Good. Indeed, the notion of the Common Good is held in disdain.
America was great because it had the taxpayer built infrastructure and research capability to enable a more level playing field than the rest of the world that allowed the disempowered and disenfranchised to prosper.
Now, as basically a failing nation, we invest in nothing but our own selfishness.
As a nation we should fairly tax the citizen to provide the built infrastructure and research capability to meet the demands of our very uncertain future, yet we let a narrow school of neoclassical economists rule our public policy.
We need a tax code that adequately secures our Nation's citizens needs and our future while allowing exceptionalism to pay the individual fairly for the merits of their effort.
We need common sense, grace, kindness, moderation, and a focus on the Common Good. Currently we demonstrate very little of any these elements that are needed to build and maintain a decent, secure, truly just society.
MB
5
Every society is exceptional. The USA's particular exceptional is that it is run by billionaires for billionaires..
1
Can someone explain the 12.3% "consumption" tax for the bottom 10%? Sales taxes are not levied on food (AFAIK) and many states don't have them at all. My understanding is that for those states that do, they're typically under 10%. How on earth does this end up blending to 12%? Because poor people spend more than their entire incomes on taxable goods?
3
@Perfect Commenter
"Sales taxes are not levied on food (AFAIK)"
That's only true in some areas. When I lived in Wisconsin, for example, I worked at an ice cream store that both served ice cream for consumption there and also sold our ice cream by the pint and gallon to take home. The served ice cream was taxed; the take-homes were not. Where I live in Illinois now, you pay tax on both. And depending on the area (different cities have different tax rates), it can be over 10%. Also certain things may have a higher tax rate (like gasoline, cigarettes, alcohol, etc) or have a special tax (like plastic bags).
"Because poor people spend more than their entire incomes on taxable goods?"
Quite possibly. The fact that the economy rests on massive amounts of debt is not exactly a secret.
What happened? Republicans.
3
Thank you for this
2
It's good to own the Congress!
2
thank you GOP and donald trump who bragged: (to his fellow 1%ers on passage of thisbill: " see i got you more money, see?"
to the fools who aren't 1%ers still supporting him: your tough luck suckers
3
Right on !
Thank you trump voters for you totally uninformed vote.
You got your tax cut.
If you were in the 1% that is.
How many of you trumpers are in that category?
You guys in Michigan who are out of work.
How do you like trump now?
3
@J. Prufrock
They love him. Which is so sad.
We are approaching a $1T deficit. If Trump gets a second term, and things continue the way they're going, we'll have surpassed anything Obama did... but he bailed out banks and the auto makers, saving those industries, and reduced the number of people who were uninsured. And then he cut the deficit in half, back to what it was when he started, but with a MUCH improved economy to show for it.
What is Trump's increased deficit getting us? We're running up the credit cards with nothing to show for it.
In 1960, corporate America's share of the federal govt's total income tax revenues was over 23%. By 2019, through repeated applications of voodoo, trickle-up tax "reform" by (R) administrations,the Corporatocracy had finagled to slash their share by more than 2/3, to 7%!
The Spankies project 2019 Federal tax revenues at $3.4 Trillion (also projecting expenses @ $4.5 Trillion, for a record deficit of $1.1 Trillion, BTW). If the corporate share remained at 23%, they would contribute $791 Billion in taxes - $550 Billion more the piddling $241 Billion they are reluctantly coughing up!!
FWIW, the so-called "unaffordable" Medicare-for-all proposals from so-called "socialist" (D)s are projected to cost around $332 Billion/year. If corporate America continued to pay their fair tax share, we could fund health care for all citizens PLUS have enough left over to fund TANF/MOE (the so-called "welfare" the soulless (R)s whine about endlessly) @ $31 Billion/year (less than 1% of our federal budget, BTW) and also fund SNAP (food stamps) @ $65 Billion and STILL have $122 Billion (!!) left over for pocket change for their wholly-owned Congress Critters.
It is time to return to Sane Tax Policies!
2
Is it time to hit the streets YET!?
3
Please reprint this article every Friday. Offer it as a single reprint to each high school and college.
4
Thank the Republican Criminal Organization for this disgraceful state of affairs on November 3, 2020.
3
Your findings are grotesque, keep up the good work!
1
I miss Obama.
3
Surprised? Anyone?
2
TEA. Cut expenses.
@William
There are no small government, low tax advanced nations.
Does not work in the real world.
2
I initially read the chart on the proposed tax increases for the wealthiest Americans as applying to MARGINAL tax rates. But I read the article again and I think it’s actually a proposal to increase the TOTAL tax rate. The authors focus on total tax burden by income cohort (without accounting for transfer payments and in-kind benefits, which distorts the analysis), and the chart showing the proposed tax increases is calibrated against the TOTAL burden for each cohort, so the increase must also be for the total tax burden. So for someone earning the average income of the 1% in any year ($1.5 million), the authors are proposing to take away ~$1 million in tax. That would require marginal tax rates approaching 100% on some income (albeit quite high).
Apart from the impact on people who receive a windfall income in any year (e.g. from the sale of even a small business), such tax rates will definitely affect behavior, both in terms of incentives to create businesses and incentives to avoid taxation. Before embarking on radical proposals like this, it would help to see analysis on the possible changes in behavior.
6
I guess I am missing something. According to the authors, the bottom 50% of Americans are 50% better off than they were in 1962, and the next 49% are 350% better off, but everyone should be upset that the top 1% are doing even better? It sounds like the system is doing pretty well for all Americans. If I am 50% richer, why does it affect me if someone else is even better off than I am?
Furthermore, these figures are very misleading. Poorer people pay a higher percentage of their income in taxes because of payroll taxes, from which all Americans benefit equally. An argument could be made that these should be more progressive. But, the fact remains, the the bottom 60% of Americans pay only 16% of all taxes. I worry about a country where the majority of the citizens vote for programs which are largely paid for by the few. Its nice to have free college education or healthcare for all, if one doesn't have to pay for it.
Nonetheless, I think its time that we did raise marginal taxes on people earning over, say, a million dollars per year. While this would do little to add revenue, it would raise the perception of fairness. Lowering the estate tax exemption to a million dollars would also add fairness to the system. Does anyone really need to inherit more than a million dollars tax free?
10
@chip
Wrong way. the bottom 60% pay 16% of all taxes is worrisome because they make so little, they cannot afford to pay taxes. And they cannot afford any discretionary spending that drives the economy. The low wages are a definite hamper on our economy, and we see that harm through the taxes.
3
@gratis
I am afraid you are incorrect here. The bottom 60% of taxpayers earn 25% of national income and pay 16% of taxes. The top 20% earn 52% of national income and pay 65% of all taxes. This does not include transfer payments like medicaid, welfare and food stamps. According the the CBO, the people in the lowest quintile actually are net recipients of government money and benefits, receiving substantially more from the government than they pay in.
Furthermore, the quintiles are not static. People tend to move up the income ladder as they gain experience and education, and back down again when they retire. Only about half of the people in the lowest quintile remain there after 6 years.
5
What about the other "taxes" Americans must pay: Health insurance premiums, deductibles, pharmacy co-pays, child care, school tuition, 401(k) contributions, etc.? It would look even worse.
Forget the heyday of the 1930s. Today there are dozens of developed countries that make every effort to support their citizens' pursuit of happiness. America, sadly, does not.
5
Nonetheless, Conservatives still actually believe that tax-cuts pay for themselves and cause a mountain of growth. And, the road to full employment and prosperity for all is paved via tax cuts for the rich .. “the job creators”.
Moreover, it's viewed as axiomatic that business owners don't try to employ the right number of people to meet demand .. and they don't hire people when there are customers to buy what they produce… rather, they hire because taxes are lowered and they have more in the bank.
And so it goes … the tapped-out middle and lower income folks don't need dramatically increased purchasing power to buy things. Rather, they need to shoulder the burden of further enrichment of the wealthy “job creators” .. who need even more tax cuts, which history shows they automatically invest in their business. Can you say chimera?
When are we going to summarily deposit this nonsense on history's junkyard of failed ideas?
3
It's quite easy to begin reversing this trend quickly. Vote Democratic every chance you get.
5
Absurd to have the richest at lower tax burdens than the poor? C'mon, this is America in the Reagan Restoration!
(A restoration of plutocracy and kleptocracy that incidentally was enabled and maintained through the complicity of centrist "Democrats." They were also "doing God's work.")
1
The only way to achieve such reforms is mass public protest -- gilets jaunes, for America.
This, in a country where tens of millions have been persuaded that they're temporarily embarrassed millionaires?
Grotesque. I hope we will one day look back on the Trump administration as the time when we all woke up and decided to take our country back.
3
Make payroll taxes progressive. It's not that complicated.
2
I’m old enough to remember Reaganomics and “trickle-down economics”. “Let’s deregulate big business. If the ‘job-creators’ are free to operate as they want, we’ll all be better off,” they said. Well, look at what we got. The only stuff that trickled down looks about the same as the stuff that trickles down into the sewer. Capitalism is fine IF it’s regulated by laws to protect people from greed and corruption.
1
Capital gains needs to be taxed at the same rate as us normal mortals are taxed for wages. 
The word no is not acceptable.
2
The laissez faire attitude about horrendous tax injustice is not accidental, it's been carefully designed and implemented through decades so successfully, that now it's literally in a nation's DNA...at least in France Yellow Wests protest, but we're pretty quiet here, just accepting it as inevitable.
Remember Thomas Piketty book, huhe bestseller
The Economics of Inequality
Capital in the Twenty-First Century
https://www.amazon.com/Thomas-Piketty/e/B004MZ9VCW?ref=sr_ntt_srch_lnk_2&qid=1570812426&sr=8-2
We're so beyond the pale in the ranking of economic inequality that sometimes you think that nothing could be done, but if was artificially created through many decades, it could be as well gradually dismantle.
Somehow in this country we're worshipping obscenely rich people, my grandkids already obsessed with what money can buy, the pervasive culture of what's valuable is completely warp.
We do need a revolution and complete transformation of every branch of taxation, it could be gradually and peacefully done...
I would trust Elizabeth Warren to do it the right way.
She's been talking about massive financial fraud as long as I remember
She was always a pioneer on that issue, headed Consumer Protection Bureau...
but first let's vote this rich cats out
of government offices.
I love Warren!!! Will vote for her in a heart beat.
She is a real populist not a fake occupant of the Oval Office.
3
Ah yes this is the dream of the corporate welfare state.
2
Nothing will fix our problems until Citizens United is history.
4
"For the first time in the past hundred years, the working class — the 50 percent of Americans with the lowest incomes — today pays higher tax rates than billionaires."
Worth Repeating....YES... I think so
"For the first time in the past hundred years, the working class — the 50 percent of Americans with the lowest incomes — today pays higher tax rates than billionaires."
WHY?
Does it matter? YES. Then why not change it to be the other way around...?
If the economy of the 1950's was so wonderful, why was Kennedy's 1960 campaign slogan "Get America Moving Again"? (Sound familiar?)
4
@Connecticut Yankee
You are measuring economic performance by a campaign slogan?
As an attorney who has seen a lot of other peoples financials Leona was right
“Only the little people pay taxes”
1
So 70% federal rate for making 1.5mm plus ny state rate of 8.82% plus ny city rate of 3.876. so 82.7% ..... this is almost comical. This op ed is so far out of reality, even bloomberg news came out to dispute it and they lean left also.
https://www.bloomberg.com/opinion/articles/2019-10-10/the-rich-really-do-pay-higher-taxes-than-you
7
America's low income whites will never force the wealthy to pay their fair share of taxes because they're holding out for the day when they, too, become wealthy.
1
Please do not give Independents another reason to vote for Trump.
1
More excellent work from these two scholars. Facts and more facts that dispel the propaganda peddled for many decades by the representatives of the highest income individuals in the country.
1
Piketty is not in the favor of the NYT . Nor the statistics of US violence and incarceration .Ideology...
2
We have a Major Possible Breakthrough at Our Fingertips,
Finally, a “Trust Buster” in the spirit of Teddy Roosevelt is at the top of the Democratic Party pyramid; Senator Warren, & she has the oligarchs all scared beyond wetting their pants.
What the top 400 shows is the consolidation of the wealth, what it does not show is the concentration of the power, that list has just about 50-75 people on it & that is where the rubber really meets the road. The power to move waves of thought is the province of the real oligarchs of 2012- on. The minds that YouTube and the Facebook cos can affect & change overnight is the power to change any country practically instantly. Their algorithms have each one of us accounted for and if you use their portals, they know what you are going to think in the next 5 minutes BECAUSE they will program you in that short time span with the choices that they give you.
Faux Noise was the old power broker of choice for the GOP & still is for the heart & soul of the Trumpers but it is lost on the new thinkers, only the Cambridge Analytics approach that new phonecentric Facebook controlled sphere. Trump is mightily frightened of losing Faux Noise sometime thinkers so Barr was sent by Trump to Rupert to stem this last night.
Senator Warren & the 2020 Blue Tsunami will end this cozy tribal bonding.
Yes my husband and I won’t be voting for Trump, Putin and Velenchy in the 2020 election. Oops wrong candidates?? Maybe?? Well we aren’t Russian and we don’t understand our crazed president so maybe we will vote for Biden or Warren if we aren’t watching TV. Isn’t that the American way?
3
You know how to blame for this abomination of common sense, fairness, and logic?
It is not the president, whoever it is, on this they are all in cahoots with the rich anyway. It is not the Congress or Senate, in all their swampy mightiness.
It is the stupid American voter! A light-headed, TV-enchanted, thought-free voter who cares about the super-rich taxes as much as his or her own, concerned about fairness or something to that effect.
The endless stupidity. They deserve all those plots and histograms.
1
If you want a fairer tax system-vote Democratic!! Reagan started this regressive mess and Trump’s tax cut scam has “perfected” it!!
3
It is grossly misleading to lump FICA and federal income taxes together. Although every worker pays an identical proportion of their wages (up to an annual ceiling) in FICA taxes, Social Security and Medicare have very progressive benefit formulas. For example, someone who earned an average annual income of $10K will receive around $9K per year in Social Security retirement benefits. Someone else who earned an average annual income of $100K (and therefore paid ten times as much FICA tax), will receive around $30K per year in Social Security retirement benefits. Because low income workers get such a high return on their FICA taxes, middle and high income workers get back less than they otherwise would. In other words, Social Security and Medicare redistribute income downward in a cleverly concealed fashion. The poor can hardly claim to be leveling the field through their FICA contributions when they benefit disproportionately from them.
3
Money is a useful servant but a terrible master. There is a term that has gone out of fashion, but deserves to be restored to its original meaning: commonwealth.
“ Commonwealth is a traditional English term for a political community founded for the common good. Historically it has sometimes been synonymous with "republic". The noun "commonwealth", meaning "public welfare general good or advantage", dates from the 15th century. Originally a phrase (the common-wealth or the common weal – echoed in the modern synonym "public weal") it comes from the old meaning of "wealth", which is "well-being", and is itself a loose translation of the Latin res publica (republic). The term literally meant "common well-being". In the 17th century, the definition of "commonwealth" expanded from its original sense of "public welfare" or "commonweal" to mean "a state in which the supreme power is vested in the people; a republic or democratic state".”
https://en.m.wikipedia.org/wiki/Commonwealth
1
The best way to negate all the loopholes that the rich employ and to ensure that ALL Americans pay their fair share lets have a flat-tax. Also eliminate many of the business deductions and tricks so you don't have "business" trips to Hawaii being deducted and then everyone will have skin in the game.
And if you have few skills because you didn't value getting an education and are making minimum wage all I can say is that you made your bed now lie in it.
Tax justice is certainly in the eye of the beholder. There are some who believe it is fair to confiscate up to 80% if someone's income ( is that including state and local taxes) . On the other hand some think it's immoral to take that kind of a percentage away.
Simple solution: Make it the law that so individual must pay taxes higher the the richest. This will cause tax reform. Otherwise government will go broke.
The super-rich, with their army of accountants, will never pay the higher taxes. They will find strategies and loopholes.
The professional wealthy (doctors, lawyers, etc.) will end up paying the most.
4
@JQGALT
That depends on the legislation. Which has not been written.
The authors of this piece are ignoring the fact that most people in the bottom 50% get more than what they pay in taxes back in the form of Earned Income Tax Credit, Medicaid, SNAP and other transfer programs.
7
@Martin
Perhaps. All those are subsidies for the rich.
A tax on the rich would be to pay those workers so they would not need any of that stuff.
7
Taxation should be based upon consumption and pollution, rather than labour. As Adam Smith averred, the taxation of labour means those on a low income are paid less and taxed more. Tax the rich on their consumption of space; of air, of resources. Tax them on their acquisitions and their accumulation of property. Trump removed the tax on private jets. Restore it, and quadruple it, if not more. Likewise on any luxury items of the rich, super-yachts, supercars and the like. Tax corporations on their emissions and for any environmental degradation their actions cause, whether as investors or directly. And yes, as Elizabeth Warren has suggested, as a remedy to the skewed tax policies of the last 40 years, impose a one-off wealth tax on US billionaires.
1
What happened to the reverse income tax thing? Was it discontinued? Also, a major reason that the wealthy pay so little in taxes is that they can afford to hire lawyers, whose only job is to firure out how their employers can pay as little as possible & still stay within the letter of the law. obviously, only the wealthy can afford this service.
3
Sorry but your tax rate for the top 9% is not even close for those that live in CA , NY or other high tax rate. In CA the tax rate is north of 40%
4
There is a moral dimension to the graduated income/corporate tax rates that these authors do not mention: to whom much fortune has accrued, much more should be expected. This belief system was shared by most elected leaders and policy makers over several decades, from 1913 when the graduated income tax was first instituted during the Woodrow Wilson Presidency until the seeds of the radical right-wing libertarian revolution were first sewn by the Young Republicans and Young Americans for Freedom at Barry Goldwater’s Republican National Convention at San Francisco’s Cow Palace in July 1964, when Goldwater bellowed that “The most virtuous thing a person could do in life was make a profit.” The great American consensus on various policy fronts, including graduated income taxes, was beginning to crumble, with the full-bore attack on government as the arbiter of tax and Constitutional justice under unremitting assault as Ronald Reagan took office on January 20, 1981. The revolution has been consummated with Donald Trump and Moscow Mitch!
2
@DCH
IMO, more than morality, there is the practical. A successful society maintains itself and passes itself down from generation to generation.
The USA is not maintaining itself. It is being hollowed out.
It is not about fair, or rewards. It is about maintenance, not even betterment.
2
Elizabeth Warren for President. Because she really has a plan to address this tax issue which is creating the ever widening inequality between the haves and have-nots. I will never be rich but at least I do not want to be one of the 1,308,440 supporting the richest 400. And Warren is no socialist. She supports capitalism albeit with a tax rate that the rich won't even notice.
3
Aristotle: "He who is a citizen in a democracy will often not be a citizen in an oligarchy."
Socrates: "As the rich grow richer and richer, the more they think of making a fortune and the less they think of virtue."
4
@Eric Treanor
and so we find once again that we cannot escape the inexorable failings of human nature.
The mechanisms may have changed/updated, but we are dealing with the same problems thousands of years later.
Economic activity even those around taxation are not based on stone tablets handed down from the mountain.
They are the result of choices usually made in conference rooms by government and lobbyists.
Its high time for voters choose representatives who will set up fair rules and a progressive system of taxation for in country entities. For the stateless actors we call Multinationals - the suggestion of the authors is a significant step in the right direction. Governments need to stop rewarding companies when they try to arbitrage around different tax jurisdictions.
3
A Top tax rate of 70% makes sense. Tax capital gains the same as ordinary income. Get rid of all deductions since nearly 90% of taxpayers now take the standard deduction anyway.
Simple, fair, progressive.
9
And we should keep in mind that by having all that wealth, given the current state of campaign finance laws, the wealthy have profound more political and social influence than any other citizen group or demographic.
Additionally, when the wealthy donate to charity, they get buildings named after them, are lauded at dinners and special presentations. None of this happens if they are simply paying their share in terms of taxes. They also get to decide what charitable organizations they donate to, such as non-profits that are anything but charitable to the causes they publicly purport to serve. They get to decide where the money goes, not the citizens of the country, nor our elected representatives.
The whole thing is rotten and our campaign donation situation in any other time and place would be called what it is - Open Bribery of Public Officials. Off-shore tax shelters for individuals and corporations should be illegal.
The Wealthy, the Corporations MUST pay their share !
3
The idea that corporations pay taxes is a fraud. The idea that you will necessarily help lower income people by raising corporate taxes is a fraud. Before you go crazy let me explain. Suppose you rent your house. You don't pay property tax; your landlord pays the property tax right? Wrong. Just ask yourself what happens if the property tax on the house you rent goes up. Of course, your rent will go up. If the landlord's cost of their rental business increases they have no choice but to pass the additional cost on to the renters. Corporations and corporate taxes work exactly the same way.
2
@W.A. Spitzer There it is. The far right old fearmongering again. "If the wealthy pay a proportionate amount of their income in taxes they'll just make poor people poorer!" It's a stupid argument that's also baseless and false.
You'd think the ultra-wealthy and the big corporations would be proud to help support the nation that helped make them successful, but I guess they don't care.
5
We just don't get enough of these articles. Instead, all we hear is how the Dems are overreaching and too liberal.
Income disparity and unfair taxation is a tragedy for many and it should be treated and approached as such.
I wish the media was fully on board. Liberal bias, not quite.
3
@Susan
I would like to see an article on the state of the democratic socialist countries. So many stories, would like a little clarity.
1
Leona Helmsley considered it ideal if “ only the little people” paid taxes.
And today, it is even worse.
1
The regressive nature of state and local taxation is a tremendous burden on those in the lower 50% of income earners. This is particularly true in states like Texas and the old south that pride themselves on being "low tax" states. People still need highways, schools, hospitals and services, so the tax burden is moved onto lower income earners in the form of sales taxes, fees and fines.
Why is the tax burden moved downward? Because it can be. Because it is easier to pass taxes on those who have less power and a weaker voice in government. Sales taxes hit those with lower income harder because they represent a high proportion of their available funds. They are a nuisance to the rich but a burden on the poor, a big burden.
This is mainly a story of political power, the wealthy have it and the rest of the population doesn't. It is an issue not widely addressed or considered but is a major factor in helping to keep the poor in poverty.
It is natural for someone just getting by to ask, "Why do I have to pay all these taxes?" This anger is then channeled by politicians to get lower taxes for those who pay their campaign bills, the rich. A genuine concern is corrupted and misdirected and the cycle continues decade after decade.
3
Capitalism is a beautiful system, that works best and for the most people, in an environment of progressive tax rates (steeply so in the stratospheric margins), and strictly enforced regulation against business malfeasance.
3
The rich have always paid less than ordinary Americans in terms of tax rates. This is America where business rules. No, it is not just but it is normal; those wanting change could only get it at the price of bloodly revolution -- and even then the revolutionaries would get tax breaks more than ordinary people. Utopian ideas always lead to bloodshed and death.
2
The article literally contradicts this in the second graph where it show the tax rates of the 1950s.
1
“In the 1930s, American policymakers invented — and then for almost half a century applied — top marginal income tax rates of close to 90 percent on the highest earners. Corporate profits were taxed at 50 percent, large estates at close to 80 percent.”
That is just the kind of economy we want - the economy of the Great Depression. Leave it to some liberal professors to reach that conclusion.
2
@SJW51 Leave it to a Republican to not know history. Those policies were put in place after Hoover and the Republicans drove the US into the Great Depression, and in response FDR and the Democrats won in a landslide.
3
@SJW51
The policies of the 1930's were brought about by the policies of the 1920's.
3
@SJW51
The policies of the 1930's were brought about by the policies of the 1920's.
Oh, and the GDP during a lot of the 1930's was about positive 8% per year (huge), indicating how really bad the policies of the 1920's were.
2
Or you could try equal protection and liberty...meaning that we could tax transactions at a fixed rate without exemptions, and use collected taxes to provide benefits to those who really need a leg up (social safety net for those who cannot provide for themselves).
But that would mean politicians would have nothing to be corrupt over; lobbyists would disappear; tax planners and cheats would be put out of business; liberty and equality would rule. Ergo, no chance at all...
1
I agree with the author's basic points. But as a retired middle classer who depends on savings rather than a defined benefit pension I don't understand the push to raise corporate tax rates. When a corporation is taxed it seems that every share holder is in effect taxed the same rate in the form of lower dividends or a lower stock value, regardless of their income. Alternatively, the tax is passed on to employees (lower pay) or consumers (high prices), again without regard to personal income. Why not instead raise personal income tax rates to reasonable levels in a progressive way?
1
@Chris Blair : Do you understand that employee wages and benefits are among the items subtracted from a company's revenues *before* taxes are computed?
If a company takes in $1 million and spends $900,000 on costs of doing business, then it pays taxes on $100,000, not on $1 million.
Furthermore, raising prices to compensate for taxes would be silly, since it would only raise the company's taxable income unless it was offset by a rise in the costs of doing business, such as higher prices for raw materials or transport.
3
Corporations create unique needs for the government. They should pay for them, don’t you think?
But for corporations, we’d have no need of most federal agencies. The EPA, FDA, FCC, FTC, and SEC come to mind immediately. Beyond that, explain why our navy guards shipping lanes and we have troops in the Middle East but for the need to protect corporate profits.
By taxing corporations for these government services, we ensure the full price of their goods reflects their social and economic and environmental cost. Would you prefer anything less?
1
@Pdxtran
I actually did not know that. Thank you.
Now, some 2020 candidates are showing new attitudes on taxes and the public interest. Ideas bashed in the US as 'leftist', are slowly becoming more centrist. This may start a more positive cycle that will change our distorted norms.
The younger generation is less easily manipulated than the older. They want to restore influence of the citizen majority on their govt. That's been a radical idea in a corporate run state that we have today.
During GOP Ike’s presidency, we had much higher tax rates -- a 91% top marginal rate on highest incomes. Ike financed our biggest infrastructure project, the interstate highway system--a great economic stimulus for the whole nation. And tax supported, low cost state college tuition helped create the middle class. Ike would be labeled left wing today.
Our elected officials think up excuses for not representing the citizen majority. Our free media avoids fearlessly informing voters on issues affecting their lives. It’s time for both to show courage and independence. And not let FOX News GOP state media and the corporate right wing define terms for us on what's left wing or centrist in our lawmaking.
2
@Özdal Barkan from California
The issue of Justice is a little more complicated.
John Rawls wrote “A Theory of Justice” in 1971. In my opinion it is the best work in political philosophy of the past century. You basically should be able to go to sleep every night being indifferent to who you will wake up as.
Maximizing the welfare of the least fortunate before maximizing the welfare of the rest of society is the aim.
Taxation should be done to achieve the aims above. Set rates in such a way that Rawlsian Justice is achieved.
Mathematical economists such as John Roemer of Yale could cooperate with the authors and Professor Piketty un coming out with a proposal. Bernie Sanders and Liz Warren as presidents could try to implement it.
Unfortunately American governments have done the best they can to go in a different direction. Giving the minimum they can get away with to the masses so there won’t be a revolution a la 1789 or 1917.
2
What most Americans don't understand, either purposely or because they don't have the interest in understanding it is this: most of us will not be rich. Therefore the increase in taxes on the rich will not affect us. Second, the rich are not going to get up and move to another country. Third, the rich are NOT job creators. Give them a tax break and, if they have more money than they need they'll invest the extra money rather than spend it. Fourth, someone like Bill Gates who founded a company and made a ton of money on something doesn't know in advance if the idea, project, etc., will succeed to the point where s/he earns billions. Like most projects or ideas, it took a ton of work for it to succeed the way it did. It took luck too. If the time hadn't been right and the proper conditions available, Microsoft would be one of the many failures we see each year.
Last of all, taxes are the price we pay for a civilized country, a functioning government, and services all of us take for granted. The richest need them as badly as the rest of us and they, whether corporation or person or family ought to contribute their fair share.
507
@hen3ry
I disagree with the last statement. The rich don’t use SS and all the social programs. That is why they fight against them as they know the only way to pay for them is for them to pair their fair share.
Also such programs undermine their power in people’s lives. It takes control away from the “aristocracy” and puts it into the commons. If Trump is an example of corrupt wealthy it’s about power just as much as wealth.
Most people want to be rich to be free from society. The wealthy who were born into it want it for power.
17
@Mathias
I'm sorry, but you are wrong. If I am wealthy and I pay into social security for my entire adult life I am just as entitled to get money out of that program as anyone else. What's more, I've contributed a lot more to the program over time than I will ever get out of it.
33
I agree with you completely.
I will share here what I sent as a comment earlier.
The issue of Justice is a little more complicated.
John Rawls wrote “A Theory of Justice” in 1971. In my opinion it is the best work in political philosophy of the past century. You basically should be able to go to sleep every night being indifferent to who you will wake up as.
Maximizing the welfare of the least fortunate before maximizing the welfare of the rest of society is the aim.
Taxation should be done to achieve the aims above. Set rates in such a way that Rawlsian Justice is achieved.
Mathematical economists such as John Roemer of Yale could cooperate with the authors and Professor Piketty un coming out with a proposal. Bernie Sanders and Liz Warren as presidents could try to implement it.
Unfortunately American governments have done the best they can to go in a different direction. Giving the minimum they can get away with to the masses so there won’t be a revolution a la 1789 or 1917.
14
So, the argument of the right is that the global capitalist explosion that has given rise to an ultra wealthy class has also allowed more people than ever in history to rise out of poverty. It is really hard to counter this: it is true.
Inequality, even if staggering in proportion, they maintain, is fine, as long as the wealth lifts enough people. Yes, Jeff Bezos makes $100,000 a minute, but his employees can eat and have a home.
So commentators: tell us why this reasoning is invalid. I’d say it has something to do with the question of why anyone needs to make $100,000 a minute, and what the world might look like if they could agree to make, say, $20,000 a minute: not substantially different for them; but wildly different for everyone else.
1
@Mr. Little
1. More people haven't risen out of poverty. That is only true for "developing" nations, where "rising out of poverty" means having basic access to sanitation, indoor plumbing and paved roads.
More people have fallen into poverty. Double income households are now a necessity to cover the basics of living.
It's common to borrow money even to buy a cell phone, not to mention things like used cars. Why? Because people have no savings. And they have no savings because most of their paycheck goes towards the basics; never mind such "luxuries" as dental care.
This is not a question of morality, or the ethics of making $100K/minute.
It's a fact that worker productivity has increased by several factors and their wages have not. That's not "free market" at work. That's as anti-free market as you can get.
It's a fact that velocity of money is what drives consumption. It's a fact that velocity of money for rich people is significantly lower than the velocity of money for those poor people.
Why are "emerging markets" hot investment hubs? Because they have a rising middle class that actually spends money on consumer goods - a rising middle class that is absent in G7 economies.
This is not about "being nice" or "ethical" to poor people. It's about the fact that equity investment returns for most public companies are at all time lows because fewer and fewer people are buying their products.
2
@Mr. Little And Amazon.com, Inc. reported nearly $12 billion in net income in 2018.
So why does Amazon.com, Inc. need $2.5 billion in tax breaks from Virginia taxpayers to build a new facility there?
3
I can feel the tide turning ever so slightly in favor of policies supporting the working class. But it will take the youth voting in large numbers to overpower the wealthy and corporate interests now controlling our government. I have never been rich enough to vote Republican. I hope young voters understand that Republicans have used and continue to use emotional issues such as abortion, race, guns and religion to trick middle class voters into voting against their own interests. It is absurd that the wealthy pay less in taxes than I do. Thank you for this analysis!
352
@Bunny
Running a candidate they back would go a long way to getting out their vote. We all need to compromise some.
7
@Bunny As a young person, I prefer Sanders. I will vote for Warren too. However, Biden gives me nothing and no inspiration to vote. Yes we get Trump out but that's barely enough.
6
@Ray I think that getting Trump out is a lot more than "barely enough."
That said, I don't know for whom I will cast my vote in our state's primary 5 months from now.
4
I’m a retired public school teacher and a home owner. I’m so grateful for what I have but each quarter I pay approximately $2700.00 in real estate taxes. In addition I pay $465.00 every month for my granddaughters after school program. Before she entered public school the cost of preschool and day care was even higher. I never go out to eat, I never go to the movies, I certainly never travel. As I say, I’m grateful for what I have but when I read about people like trump and bezos, when I see my tax dollars funding horrific wars, when I read about tax cuts for the very rich and for industries that support endless wars, ak 47s, and escalating deterioration of the only environment we have, I wonder what kind of society I’m living in. I just hope with all my heart that Bernie and/or Elizabeth will win.
469
@LoveNOtWar,
.
Also WORK w/ all your heart for Bernie & Eliz.
I think she's gona be pres.
Trump is finished now...he's gona force the GOP to do the dirty work of "forcing" him out of headline politics, and disowning him.
Soon he'l be in his mid-70s.
I think the GOP are starting to think DT served his purpose,
but that was then;
Now being linked to DT is a negative for the GOP
.
7
@LoveNOtWar My colleague and I were literally just talking about this at lunch, about how we two college-educated professionals were feeling squeezed between college costs for our kids, escalating housing costs and stagnant wages. People are angry out there, but they're angry at the wrong people. This has been orchestrated by the oligarchs and the policies they've paid for since Reagan. I'm voting for Warren for president 2020.
34
What puzzles is with Gates and others who fund meaningful and important efforts far away never do anything in the United States and the tragedy that even those who worked all their lives and built some security are nearly poor in this economy of super money be the young or the old in the US
14
The essence of democracy, however it is implemented, is that power is shared as widely and evenly as possible among all the citizens. Concentrated wealth, wealth beyond any person's ability to create, is a form of power; we are seeing the resultant corruption Lord Acton warned against.
Democracy cannot survive either concentrated wealth or widespread ignorance about how wealth is actually created.
257
@Michael No, democracy is mob rule and was rejected for the USA. Democracy has to do with power of the state over the individual and has nothing to do with non-governmental issues. The less liberty you create, the less equal protection you demand, the more you will suffer the well known fate of the past.
4
@Michael yet the solution proposed in this article is an even greater concentration of power in the form of higher taxes to support a larger government.
4
@jkl The main proposal in this article is to rebalance the tax rates to change *who* is paying which percentage of taxes collected by the government. In this proposal, many people will see lower tax rates, but people who are wealthier would see an increase.
9
As every informed person knows, the 50s was the best decade for corporate growth and stocks in the past century. Yet CEOs back then earned only 30 times what their average workers earned, and they paid many times as much in taxes as they do now, when Bob Iger of Disney makes 1,400 times what the average Disney employee makes. Our whole plutocratic system is absolutely nuts, and far beyond merely unfair. Exit polls in the Rust Belt proved incontrovertibly that Bernie would have defeated Trump there, and thus nationally, if he, rather than Wall St.'s hated darling Hillary, had been facing him. Let's hope that either Bernie or Warren is supported by most workers this time around, so we can finally bring some economic/tax justice to our system, and move as rapidly away from plutocracy as Trump and Putin have moved it further into it.
4
@Fred White
The 50s were also great for America because we were the only industrialized country who's industrial base wasn't devestated by WWII.
5
Let's put this situation in perspective.
We initiated an experiment in radical inequality in 1980, with election of Ronald Reagan.
That experiment will be going on 40 years in 2020.
And what precisely is the State of our Union today?
Are we stronger now, with inequality at record levels, and the wealthy able to buy just about any legislation they choose?
Are we stronger now with the 'Southern Strategy', which, lest we forget, was the vehicle that the GOP rode to lower taxes, having nearly torn asunder the bonds that cemented our Union?
Are the furious populist waves spreading on both the political right and left not all the evidence we should need to recognize that Reagan's experiment has spectacularly failed?
3
So why is it our warped tax situation hasn't gotten enough attention so far? It's hardly discussed in the media! Congrats to the Times for this op ed.
The media avoids it because of how the GOP/rw defines what's 'left wing'--- any policies in the public interest that oppose the corporate wealthy from calling the shots for increased profits. That dominance stems from turning our elections over to our mega donor wealthy for financing.
No tax reform is possible unless we overturn Citizens United, which voter majorities want.
The media fears looking ‘left wing’ by discussing our economic inequality. Those candidates pushing reform are slapped with the labels "left wing radical big govt socialists."
What we have is big govt socialism to support the wealthy. And small weak govt to support the citizen majority. Sounds unAmerican?
That's why the US still lacks medical care for all---a crucial, basic right in other world democracies. Even our political center shies away from the left wing label. That blocks it.
Ironic—we’re taught that the US is the greatest democracy, with a free press and freedom of speech, yet our politicians and the news media have been cautious and restricted, acceding to the warped standards of our corporate politics.
We the People lose.
Of course, the media gets profits from campaign ads paid by the wealthy mega donors who call the shots on taxes in their favor. Btw, those paid political ads are banned in other democracies. That tells it.
2
There are 2 related questions:
1) How much tax do the rich and the poor pay? (Not the rate. The actual amount in $$.)
2) How much of the tax collected is spent by the government on the rich and the poor. (Social Security, Welfare, Subsidies, Earned income tax credit, police, security, roads, ....)
It might be hard to figure out how to calculate the second question since it will be based on assumptions on who benefits from the tax spending. (e.g. money spent on the military.) But at least we should discuss these two questions since "Justice" in taxation should include these considerations. It is not obvious why tax rate is the only consideration for justice.
3
The issue of Justice is a little more complicated.
John Rawls wrote “A Theory of Justice” in 1971. In my opinion it is the best work in political philosophy of the past century. You basically should be able to go to sleep every night being indifferent to who you will wake up as.
Maximizing the welfare of the least fortunate before maximizing the welfare of the rest of society is the aim.
Taxation should be done to achieve the aims above. Set rates in such a way that Rawlsian Justice is achieved.
Mathematical economists such as John Roemer of Yale could cooperate with the authors and Professor Piketty un coming out with a proposal. Bernie Sanders and Liz Warren as presidents could try to implement it.
Unfortunately American governments have done the best they can to go in a different direction. Giving the minimum they can get away with to the masses so there won’t be a revolution a la 1789 or 1917.
1
Why don't we just have a federal consumption tax on all non-food items? The wealthiest spend more, by far, so this would easily bring back needed progressivity. A consumption tax would also get around dealing with constant issues of fairness regarding income from earnings vs capital gains, etc. The really wealthy don't work, but they do spend.
1
About one in ten workers will reach the maximum cap of $132,400.00 on Social Security tax this year. The employer pays 6.2% and employees pay 6.2% up to the cap. After that cap is reached no tax is collected from the employee. This has to do with the way the law is written and the maximum benefit available to recipients. So, to about 90% of workers it is a tax on 100% of earnings and to 10% of the workers the cap effectively lowers their tax rate , no matter how high their income. Somehow this seems unjust.
4
@Lyle Jokela Why? Those who hit the income cap are also limited to what they'll collect from Social
Security. As you said the cap is tied to the maximum benefits. That seems completely proper. While SS was meant to be generationally redistributive, it wasn't meant to be income redistribution. What you pay was relative to what you collect eventually. Getting rid of the cap changes that.
Of course SS has turned into nothing more than a goverment enforced Ponzi scheme which will likely collapse soon anyway.
4
@Lyle Jokela
Beyond lifetime average income of about $60,000 there is little increase in SS benefit.
1
@BBMW I didn't say it was unfair, I said it seems unjiust.
I draw a different conclusion from the graph: for 99.9% of the population, taxation is roughly progressive. It becomes markedly regressive only for a very tiny percentage of individuals (400!) at the very top.
3
These authors apparently never learned what happens when you squeeze Jello.
If they impose big taxes on corporations, they'll move abroad, shut down their owned corporate entities in the US, set up separate but captive import and distribution companies, and sell their products through them. They'll "negotiate" prices that have the effect of moving the bulk of the profits to the offshore manufacturing operation, and the on shore import company will break even. Of course, the government could levy tariffs on the goods, but this will just drive up costs to the consumers. So in the end, the consumers will end up paying the bill, and the profits and jobs will stay offshore.
2
@BBMW-Did you read the article? It talks specifically about how that scenario could be avoided.
1
You have to be fair when you look at effective tax rates. As such, you have to consider tax paid and credits. This analysis curiously leaves out tax credits. In particular, the earned credit income:
"For those with three or more children, the maximum earned income tax credit for 2018 is $6,431. Families with two qualifying children have a $5,716 maximum credit amount, while those with one qualifying child face a limit of $3,461. The credit for those with no children is much smaller, maxing out at just $519."
Moreover, it's important to note that it's not that Fed income tax is not progressive, it is. Rather that sales taxes are regressive, which drives the effect. For all those EU envoy, check out VAT over there (in France 20% and Sweden 25%).
The story then is as much about VAT regressive tax, as it is about income taxes.
4
A few thoughts on this. I put the following into a tax program. 35 k of income, 2 kids. The tax program showed a federal refund of $3,500 (presumably the earned income credit). The payroll taxes would be approximately $2,500. Let’s say $15,000 is subject to a 6% sales tax, $900. Net, -100. I am hence suspect of the numbers presented. This is not to say that I think tax rates at the top are correct, I think they should increase. But, I do question the math in this piece. A second thought is the reason the top pay a smaller percentage is charitables. Let’s say a pro athlete makes a 100 million. State taxes are essentially not deductible. In a high tax state the rate would be 45%, or so. The reason they may pay much less is substantial charitables. We could elimate this deductibility and the tax paid would greatly increase.
2
I'd be interested in seeing the taxes paid (on average) for each group in dollars instead of relative percents. That would most certainly reveal that the higher earners pay A LOT in taxes. This might at least balance the arguments made here, noting that the overall income inequality picture that remains undeniably unkind to most working Americans is deeply troubling and in need of remedy.
3
@JN
What does "group in dollars" actually mean? Do you even know how income tax brackets work?
Taxes can be excessive and reduce the ability of individuals to buy what is not provided from the commons, but generally that has not happened in this country’s history for long. Under-taxing is what we are experiencing, the common needs are being funded by borrowing and a lot of them are being neglected. The tax structure sucks wealth from being used to create wealth. It sequesters it among a small proportion of the population whose interest is to avoid losing it because they have plenty of it and would risk not having it with unlucky risky uses of it.
3
Good job writing a whole piece on income inequality , the US's broken tax system and not mentioning Bernie Sander's name once. Your corporate masters are proud.
1
OMG the next thing we know these economists from Berkeley that hotbed of...) will propose that workers should be given a stake in the ownership of the company for which they work. (I haven't gotten around to reading "Capital" yet... so who knows what Marx actually says.)
Perhaps Kennedy was the guy who first got rid of the luxury tax.?? I want to know. It existed in the 50's. GHBush put it back; Clinton banished it permanently it seems... and U-turns are often a good way to get back to the main highway.
But I will be dead if not with in the next 12, then definitely within the next 20 or so years, so children make up your minds... whether you think it's moral/ethical even if it's legal (deontology) to make your neighbor eat beans and peanut butter and life without electricity in some cases so that someone else can have an even more expensive luxury yacht!
Leona Helmsley -- "Only the little people pay taxes."
Nancy Reagan -- "Just say NO."
3
What do you expect when you have rich people make laws for other rich people.
4
@FV
FDR was really rich. So was JFK. Buffet and Gates argue for higher rates for themselves. So, it is more about one's own morality, the money just magnifies it.
3
Another misguided attempt by narrow focused economics "experts" to make the obsolete income tax....work.
The income tax system is outdated. Designed in 1914 to effectively fund a government facing a World War, to tax the large salaried industrial work base. The introductory income tax was set very low and, as the two economists state, rose progressively to tax the wealthy more. In addition, since the USA was about to go to war, the Tax imposed a "War Tax" of 50% on the wealthy.
I am certain that these economics professors can explain the definition of "capital" as tangible, value added goods.....things such as factories, products, roads, telephones, computers, desks, chairs, etc....
Incomes are falling.....why try to exact more tax revenue from a shrinking source???
MEanwhile, the Internet grows exponentially......UNtaxed.
(HINT)
And it is the Internet that has created fantastic wealth(untaxed) and allowed Robber Barons to avoid "capital gains"(as they dont have any actual "capital").
BTW.....the TAx Code isnt meant to address some ludicrous nonsensical goal of "social justice".
The Tax Code was meant to fund the Government.
(Read the Constitution whydoncha?)
You two professors are stuck in a 1968SDS universe....while the rest of us have to deal with reality.
3
What happened? Republicans happened.
5
The 400 are a crime against humanity.
2
When we have Grifters in power who are grabbing everything for themselves while throwing crumbs to their ripped-off, Fox News fed subjects at MAGA Rallies, what does one expect?
4
Forever outrageous.
Can never be justified.
Medieval.
2
The authors accurately describe reality, but then come to all the wrong conclusions. They say, for example, that state and local taxes are the principal sources of tax regressivity, but then list actions that the federal government can take to correct it. If we follow all the authors' suggestions about federal tax, we will STILL have regressive local taxes. If the problems are state government taxes, federal tax changes will not remove them.
Furthermore, the authors begin by accurately stating that shareholders pay corporate taxes, but then state that a cure for tax regressivity is more effective corporate taxes. I am not in the one percent. But I am a shareholder. If you want to tax the one percent, target taxes at the one percent. Corporations are owned by many people from many classes. Therefore, taxing corporations will NOT solve regressivity.
All that said, the authors' principal argument is correct: America's tax system is regressive, and the cause are state and local governments. But if the authors truly wish to solve that problem, we should be speaking to state governments, not to the fed. Unless, of course, the object is not to solve that problem...
3
Envy is ugly; and America neither is nor ever will be a democracy.
America is a Republic based upon the founding belief that government was created here, by some of the greatest men to ever walk the earth, the protect the God given liberty of the individual.
Government was never intended to be a means for those without talent, drive and/or patriotism to extort money from the successful (by way of voting in mass) to pay for the basic needs the slothful refuse to provide to themselves. What kind of monster would allow such oppression of a minority? To allow a large group to bully those who succeed? Not I, nor any Founding Father.
Income inequality is not a bad thing. It is an incentive for those with needs to work harder and smarter to provide for the needs and wants of daily life. Incomes are not equal because talent is rewarded. As it should be so.
I know Democrats want to rally those who have free time (we know they are not working) to vote for Robin Hood candidates who absolve the unsuccessful of their slothful habits and demonize those who succeed of the merit of their efforts. The votes of the coveting provide power to Democrat candidates and unearned monies to their constituents, who comfort each other when micro aggressions, white privilege and other invented nonsense fail to alleviate the agony that reality eventually imposes upon them.
Costco rewards those who buy in bulk; the government should similarly reward those who pay the most tax. Lower the top rates
2
@EWG
I disagree that the purpose of government is to reward the rich.
The purpose of government should be to build a framework by which all can benefit. A stable society founded on the Rule of Law. Security. An educated and healthy society. A secure physical structure that aids movement of people, goods, services. Utilities, power, communication, water. When all have equal access to all these things, the most talented can use their talent to benefit society, make money instead of being sick, uneducated, or fighting for basic survival.
Examining real world results, it is much easier to argue the higher the taxes, the better off the society as a whole is, including both economic growth and welfare of the citiens, than the opposite.
This is why baby boomers will go down as the worst generation in history. Selfish me-first voting has allowed this preposterous result. Baby boomers allowed millionaires to escape millions of tax dollars just so they could save $100. In the meantime, they mortgaged the economy and have the gall to blame the generation they shortchanged.
1
Yet, many of those same people who are paying higher tax rates and making a much lower wage will continue to vote for Republicans, making their predicament worse after more tax cuts benefitting only the wealthiest. It's a testament to just how effective conservative propaganda outlets like Fox News are at misinforming them.
3
The super-wealthy donors who financed the corrupted election of 2016 were happy to see Trump in the Oval Office because he would massively slash taxes for these same billionaires who helped to put him there.
The incomprehensible part of this story is the willing subjugation of white working poor families across the nation to the incompetent, ignorant destroyer of our government Donald Trump who is taking money from their pockets to enrich the uber-rich.
The implication is racism, anti-immigrant hatred, contempt for the "libs" and defeating Roe v. Wade is far more important to these people than economic justice.
3
Easily fixed: Americans need to VOTE and keep voting in every local, state and national election.
At some point, the corrupt criminals will be voted out and the corrosive, anti-American 2010 Roberts' SCOTUS decision Citizens United will be repealed. But not without the smart, sane pragmatist center hauling itself to the polls at every chance in order to clean out the sewer pipes at all levels, then rebuild the path that benefits all.
1
they voted for it, the working class.
Instead of opening their eyes and seeing that the rich have historically pitted the poor against one another. So that they over identify with the rich instead of seeing that they are being ripped off left right and center.
So you can say to yourself, " at least I'm better than my neighbor!"
It;s very expensive to be poor.
In today's climate of tax ignorance it's not even possible to have a valid conversation about policy.
Do the lawmakers know what national debt is (including the President)? No. They think it's a credit card or check book.
Do they even read the law before it's passed? As evidenced by how many errors were in the last "reform" bill, the answer to that is an emphatic no.
Do they have a study to justify the tax rates that are picked?
In the last debate tax rates were pulled out of a hat. It's as if our representatives get in a room and pronounce, "Oooooh, that number sounds good. Let's go with it".
Then, after that voodoo number is selected, they act as if then number is sacrosanct and any change to it, by even 1% point would ruin the economy.
Earth to our representatives. It's a phony number to start with!
This isn't tax reform. It's a sham. It's killing the country.
1
Do you have a link to you work? Also where is the capital gains tax in all of this? How do you include the corporate income tax when we are talking about people and not corporations? The explanation is not clear enough for me.
1
As long as the scandalous decision"United Ciutizens" is allowed to stand, nothing will change. The super rich and the multibillionaires will continue to "buy" our supposed 3 Powers, Executive, Legiskative and Judicial.
Not even the supposed Fourth power, the Press, can stand up to the only real Powers, GREED and MONEY.
Since no one is in for a real revolution as were our fore fathers fighting for Independance , we will keep being complacent about this situation.
Parole, parole will fly, but that will be all
Gentlemen congratulations and thank you from the depths of my heart.
I hope you share the Nobel Prize on Monday with Professor Piketty. It will be the mist justified Economics Prize ever.
1
>The full extent of this situation is not visible in official statistics, which is perhaps why it has not received more attention so far.<
No, this situation has not received more attention because the only people who care about it are liberal intellectuals like yourselves. Economics in general and income inequality in particular are of little interest outside of university economics departments. That is one of the lessons of 200 years of human history. The Elizabeth Warren‘s of this world will never defeat a Donald Trump.
To paraphrase Karl Kraus, economists are the problem they pretend to solve.
“The energy that actually shapes the world springs from emotions – racial pride, leader-worship, religious belief, love of war – which liberal intellectuals mechanically write off as anachronisms, and which they have usually destroyed so completely in themselves as to have lost all power of action.” George Orwell, 1941
Right on.
Tax racketeering has to be smashed. No deductions, no loopholes, no offshoring. It all has to go. Tax lawyers, accountants, consultants and all the other parasites associated with the global business of tax avoidance need to be retired. Every last one. Politicians who sell tax concessions for votes or donations need to be kicked out.
It is way past time people started to talk about this. Props to Saez and Zucman for starting.
The NY Times said little to criticize Obama for failing to follow through on the recommendations of his hand-picked bipartisan Commission on Fiscal Responsible & Reform.
Shortly after the Commission's release, the White House Office summarized his thoughts on the Commission's report (April 13, 2011). Personally I believe that Harry Reid deep-sixed Obama's personal objectives. And Obama never had the courage to fight for America.
At the end of the day, most members of Congress put their priorities in this order:
1) Self
2) Party, and
3) America
That's why the average American hates Washington and their cadre of self-absorbed political hacks.
President Franklin Roosevelt wanted a just society for us. That progressive tax that used to be was fought tooth and nail by America's wealthy. Then came wealthy Republican Ronald Reagan. His scamming of the American people was particularly egregious with the voodoo economics TAX CUT REVOLUTION. It also began the very successful but false philosophy that government is bad for us.
And you want to tell me over and over again, my friend, you don't think it's time for revolution. Elizabeth Warren is our Joan of Arc. But even Joan needed an army behind her.
Fight with words. Fight with bullets. This is not a fight we can lose. Now, we have to save the world, literally from these fools.
REPUBSUCK!
1
There is a low-wage worker sitting next to a disabled person at a table with a box of a dozen donuts. A billionaire walks in and takes 11 donuts and says to the worker, "Watch out that guy doesn't steal your donut."
1
"The richest 400 adults pay a lower rate than all other groups."
Brought to you by,...Money in politics! Any questions?
Oh, one more thing, Corporations are people.
1
This is great reportage, but whether or not a fair tax rate is implemented is directly related to the issue of super-delegates, which is still a big, albeit hidden, problem for the Democrats.
Those super-delegates are no doubt being reserved for that one Democratic candidate that the left-leaning deca-millionaires- billionaires can count on to preserve this gross disparity of wealth - Joe Biden.
So, pay attention as the votes are being taken in the first wave of Democratic primaries, and be on the look out for those super-delegates going to Joe, under the false pretenses that he is the only candidate who can beat Trump. The truth is, these tycoons would rather suffer along with another 4 years of Trump than to risk a real reformer like Elizabeth Warren, Kamala Harris, or Bernie Sanders in the White House.
1
Excellent analysis and an exciting message. I agree that this is completely feasible, and even necessary. It's a matter of political will, not natural law.
However, I take issue with the headline. In a country founded on slavery (see #1619Project for excellent coverage!), where only white, male, property owners originally had the franchise, its not like the USA was ever at a place called "Justice." So it's not a matter of going "back" to justice, but rather, forward toward Justice.
3
One of the reasons economic growth has been flat is hoarding of wealth among a narrow group of people/institutions.
A progressive tax system is a simple way to redistribute wealth where it would have more economic "velocity" since, as the authors noted, the middle and lower classes are more likely to spend the dollars than the wealthy, who tend to hoard it.
You might even make the case that the reason we are seeing a greater degree of negative interest rates on savings is the wealthy have so much excess capital that they have to pay banks to hold it for them since they've run out of normal uses for it. That's inefficient.
Trump and Republican tax strategies have been making these problems worse.
2
I'm sorry, but this looks like plain old bad math to me, and I was a math teacher. You are lumping two entirely different things into one lump: Federal Income Tax, and local sales tax.
Consumptive taxes are, for the most part, sales taxes. Unlike Europe, we do not have a VAT. States and cities control those taxes, and yes they will be a higher percentage of total income for more impoverished people. But they are not an income tax. By your reasoning, the wealthy could up their tax percentage by insane conspicuous spending (rather than say investing in companies and strengthening the economy).
But the Federal rolls are paid almost solely by the wealthy. You just need to look at our budget compared to the income of the poor. It's impossible for the poor to be contributing significantly to the US budget. That means the money is coming from somewhere else; it's coming from debt and the taxes on the wealthy. Maybe we need less debt and more from the wealthy, but that is not what this article is about. It's really just another bad-faith attempt to argue for socialism.
I'm fine with increasing the rate. We do not need lower taxes during a huge economic boom, but don't bend stats to argue a manifest falsehood.
9
Much higher taxes on the extremely wealthy would mean much less money for them to throw at politicians and political propaganda mills. If we want to fight corruption and lies, this is the place to start. The first key step is to find politicians who want to serve the country more than they want to enrich themselves by ingratiating themselves with the rich.
2
I think the authors need to stop confusing effective versus marginal tax rates. No one paid 90% in taxes during the 50s. Remember the AMT that came after? It was a direct answer to widespread deductions and credits. The amount of income tax paid in the upper tax brackets (federal) has varied, but rarely is above 30%. Deductions and credits will help this. ironically, the Trump tax cut actually stripped and limited deductions that are primarily used by the wealthy (SALT) to avoid federal taxes.
For those who keep arguing for higher tax rates on the wealthy to make things more progressive need only look at Europe which now has highly regressive VAT at all levels of the economy. The bottom line is that the wealthy don't have enough money to fund the things Sanders and Warren are proposing. If they did, Europe would not need the VAT. The income tax started as a tax on only high income and then worked all the way down to the lowest income bracket. The same will be true as the upper tax rates go up, projection revenues don't materialize, and the money is still needed to pay for the entitlement increase. I believe the elimination of loop holes and deductions will make the tax code fairer, but the idea that the 1% can pay for all the stuff people want has been proven wrong in country after country in Europe.
Lastly, the idea of tax deficit collection is a race to the bottom. If a country can just say unilaterally that money is owed, the international system will be upended.
8
THAT THE RICH PAY LESS TAXES DOES NOT MEAN THEY PAY LESS TO THE GOVERNMENT
They may, for example invest in the bonds your city issues to fix the water supply. The income from those are exempt from State and Federal Taxes. It is for this very reason that they pay less interest than corporate bonds (the income of which is taxed). The difference is payment to your local government - in effect a tax
Not all tax loopholes are so constructed, for example the carried interest loophole has no such benefits to society.
But some are.
2
The Saez and Zucman analysis has been refuted by any number of economists, including those at the Congressional Budget Office. It's not clear where they get their data since the IRS hasn't released any 2018 data. Here are a few obvious flaws with their data:
1. Saez and Zucman say the top 400 pay a total of 23% in ALL taxes. But the CBO says the richest Americans pay 33% in JUST Federal Income Taxes. I'm willing to trust the CBO data.
2. By their own admission, the authors treat the earned income tax credit as a welfare payment rather than as a negative income tax. That's fine, but it certainly distorts the actual level of income inequality.
3. According to OECD data the US has the most progressive tax structure for households among all developed countries. That's because many other countries rely heavily on value added (i.e. consumption) taxes that hit the poor harder than the rich. So if the US is bad, the rest of the world is worse.
4. Both the Tax Policy Center and the Joint Committee on Taxation stated that the 2017 tax law would have little effect on the progressivity of the US tax system. That's probably because the lower rates were offset by the elimination of some deductions that overwhelmingly benefitted the rich.
I recommend that everyone wait until someone has replicated the authors' conclusions, which I doubt will ever happen.
10
It's about time! To coin a phrase, this analysis really is "on the money." Very few members of the public understand how extremely regressive both sales taxes and property taxes have become. We complain about tax assessments on our homes, and we know that our cash inflows don't often keep up with what we pay for school and town taxes -- talk about taxes on"wealth!" We know that the cost of clothing or a car takes a much higher proportion of our income than does that cost for a billionaire -- even if she's got a Lamborghini and we drive a Camry -- but we rarely recognize that the state and local tax on the purchase is a much higher percentage of our cash inflow than it is for the billionaire. Saez and Zucman readdress the issue in terms any middle-income American can understand. Well done.
1
I'm a Trump supporter all the way.
Or almost all the way.
Our president's biggest mistake so far (aside from Javanka), was lowering the top tax rate. Steve Bannon was right, the top rate needs to start with a 4 (i.e. 40% +). I'm thinking somewhere in the 42-45% range.
And the extra tax proceeds should go solely to deficit reduction.
3
Earned income, unearned income, or wealth. The first two can be and are taxed, not so much the third, except as property or estate taxes. Property taxes are usually paid when sold, less Trump-style real estate roll-overs. Estate taxes are paid by the very wealthy about once every 80 years.
Why is unearned income taxed differently from earned income? ('The best Congress money can buy?') The 16th Amendment allows "taxes on incomes, from whatever source derived ...", while the 14th requires "Equal protection of the laws ...". Likewise, so long as courts hold that 'corporations are people', then all 'people' deserve to be taxed for all incomes on the same rate schedules.
But the idea that wealth, not income, is the great untaxed reserve is bizarre. Amazon used accounting tricks to show losses its first 58 post-IPO quarters as it amassed enormous wealth. Likewise APPL, FB, etc. People rarely pay estate tax, corporations never do. Lets see how a 2% wealth tax works.
Side note: My friend who consulted in China pays 30% income tax to China. Then the 'Last Resort' IRS taxed him an additional 15%. This is an example of what can be done when we decide to.
3
Dear Authors and/or Mr Leohardt, I'm going to use this in class (I teach American Govt in college and we are discussing tax policy) and I'm sure my students will ask me the income levels that mark the shift to each decile (not just the average for the bottom 50% etc). Could you post that as a reply here? Thanks for your work, it's important.
Michelle
@Michelle Remember to distinguish between SALT (state and local taxes) and federal income taxes.
"Each of these richest 400 adults has, on average, the same wealth as 1,308,440 average adults in the working class (the bottom 50%)"
Each of the 400 has an average of $6.7 billion in wealth.
Warren's proposal of a 2% wealth tax, if you do the arithmetic, would give about $100 to each member of the working class.
This helps??
1
I appreciate the final chart with the results of the proposed tax changes but one thing missing I think would help frame the context of this: what does that chart do to net tax revenue? Does it increase it (thus helping with closing the deficit gap and/or increasing some social spending), decrease it (forcing more hard choices), or stay the same (also still forcing a hard choices discussion)?
Overall this is a great piece, but I still think it gets to one half of the equation and it's hard to talk about one side without the other.
Thanks.
A first step would be to tax capital gains at ordinary income tax rates. That would move the richest Americans into the top tax brackets and return them to paying the highest rates. Get this done before attempting a wealth tax which is likely to be very difficult to pass and may be unconstitutional as well.
With respect to corporate taxes why not incentivize companies to be better social partners. Raise the corporate rate to 35% but if companies provide fully funded defined benefit plans and health care plans they would pay a reduced rate maybe as low as 5%. Restoring retirement and medical security for millions of Americans would go a long way to reducing the fear and insecurity workers have in this changing environment. The government sharing this burden with the private sector would seem to be a win for all.
3
@Mark
To make it truly progressive, capital gains could be subject to a means test.
Keep the lower rates for W2 earners who fall under certain income levels and are trying to save for their future.
2
@Jules
Current Captal Gain tax rates
0% if personal income is under $39,375
15% if personal income is above $39,375, and under $434,550
20% if personal income is above $434,551
@Jules
One could just treat cap gains as labor. No cap gain tax for the first $10K or whatever it is. Marginal rate increases at the same amount as for labor. Top rate 35% or whatever it is. Simple to explain. Better than what we get now.
1
I fear that any alteration in the tax structure to make it more progressive may be too late.
It is ironic that the great disparity in wealth brought about, in large part, by moving away from a progressive tax structure, has been accompanied by a diminution in the attractiveness of the US as a place to want to be.
So that, if the highest earners are once again taxed at higher rates, they will consider just renouncing their citizenship and deprive this country of their contributions.
Not that I don't agree that this is a fundamental problem with our country.
@David
I know what you mean -- to make do on 900 million, instead of a Billion, would certainly send me scurrying.
2
@Jules well, that "minor" difference has been enough for the plutocrats to sell out this country so, yeah, it'd be enough to cause them to rethink their citizenship.
The numbers for the rich are too kind. Missing are the massive amounts of income and wealth generated in the dark that is never reported- hidden offshore like my former boss and wage thief who lives it up in Monaco (of course) in is listed in the Paradise Papers of tax scofflaws (of course) When one includes the non-reported amounts, the tax rate of the ultra wealthy is even lower.
The US should use its military to take over tax havens and take back evaded taxes made off of the American society. Regardless of the solutions proposed in this compelling story, the wealthy will continue to steal from their wealth generators like me and evade taxes that I am stuck with paying.
2
It's class warfare, as the conservatives used to rightly howl, and the working class lost. I'd like to see the wealthy taxed as they were in Eisenhower's time.
8
While this is an excellent article, to collect the full corporate tax rate Congress should also end all business tax credits and incentives. Tax deductions for drilling oil means American citizens pay for the destruction of the planet. Help desirable industries that have trouble competing in the marketplace, such as a domestic solar panel industry, by protecting them with tariffs until they mature.
1
Having read through this, there appears to be a sleight of hand trick going on in order to buttress the authors' claim that "the rich" pay less than anyone. If you read the piece and look at the graphs, their discussion of tax rates (which is admittedly based on the authors' "estimates") jumps back and forth between income and wealth -- except when they portray the so-called "top 400," at which point all the references are to wealth. Omitting this "so-called data point would actually indicate that the tax system is mildly progressive. An average reader probably doesn't readily distinguish between these two numbers and is probably saying, "yeah, that right!" This is all purposely deceptive and the authors clearly appear to be doing it to support their thesis.
If I were asked to peer review this piece for an economics journal, I would strongly recommend against publishing it. But it's not economic research, but political advocacy, so the Times happily publishes it.
11
You have to realize that buying the government was a business decision that is really paying off.
It’s too bad that every Republican, especially since Reagan, was willing to sell it along with their souls.
2
Ever since Ronald Ray-gun, the middle class has been economically hammered while the ultra-rich have been outrageously pampered. And the poor have just been a market for the rich to exploit via housing, food, essential goods, etc. Absent from this article is the critical factor that trickle-down economics has been effectively sold as the rationale for this economic insanity--that fattening the rich somehow benefits all of us. Of course it does not and never will. But now with the super-rich firmly in control of our society, things will never change. This is a political issue, not an economic one. And the Trumps, Kochs,, Devoses, Mellons, etc. have seen to it that it will never change. One of them is even the President right now--A Plutocrat unabashedly running the country for his own benefit and that of his plutocrat friends. Welcome to the New World Order in America. Tragic.
3
"It is absurd that the working class is now paying higher tax rates than the richest people in America"
I agree. Equal protection under the law mandates a flat tax. Everyone pays that same rate. That way rich people will pay the same rate, AND they will pay a lot more dollars in absolute terms. I oppose Democrat efforts to punish "the rich" and EVERYONE should pay their fair share. Believe it - in Europe everyone pays.
4
The numbers for the rich are too kind. Missing are the massive amounts of income and wealth generated in the dark that is never reported- hidden offshore like my former boss and wage thief who lives it up in Monaco (of course) in is listed in the Paradise Papers of tax scofflaws (of course) When one includes the non-reported amounts, the tax rate of the ultra wealthy is even lower.
The US should use its military to take over tax havens and take back evaded taxes made off of the American society. Regardless of the solutions proposed in this compelling story, the wealthy will continue to steal from their wealth generators like me and evade taxes that I am stuck with paying.
The right-wing uses two deceptive lines to advocate low taxes for the super-rich.
1. One is "No one should lose 92% of their income to taxes." This assumes, correctly, I'm afraid, that most people don't understand marginal rates. No one ever paid 92% of their income in taxes. Instead, they paid 92% of the amount over what would be several million in today's dollars and less on lower amounts. Ever heard of tax brackets?
2. The other is, "Rich people are the ones who do the hiring." Well, maybe rich people hire a couple of groundskeepers, a driver, and some household help, maybe a personal trainer and a personal assistant, but they do not hire factory employees or retail sales people or warehouse workers with their personal wealth. Jeff Bezos does not dip into his own pocket to pay the wages of Amazon's overworked warehouse workers.
The major corporations that pay zero income taxes are taking advantage of the numerous loopholes that were created especially for companies like theirs.
Even businesses that are not eligible for these perks can reduce their tax burden by hiring more people, paying them better, upgrading their buildings and equipment, advertising, buying supplies from other businesses, or providing training for their employees. All of these and other costs of doing business are subtracted from a company's revenue before taxes are computed, and not incidentally, all of them create jobs, either directly or at other companies.
8
It’s time for a grand bargain.
Remove all taxes on corporations while also removing their ability to contribute to political campaigns.
This removes corporations’ primary reason for buying political representation, which is what created this tax mess to begin with. Let those companies compete in the marketplace rather than the halls of congress. Make up the revenue difference by increasing taxes on the top 25% and accomplish a progressive scale this article describes through higher rates and new wealth taxes.
In short, the only entities that pay taxes and fund politics should be individuals. This will greatly simplify and cleanup our current mess.
3
Sounds good. While we're at it, we should repeal the deceptively-named Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). That Act wiped out the "fresh start" formerly granted to insolvent debtors and requires them to enter years-long payment plans and court monitoring. The two biggest reasons people declare bankruptcy are: medical bills and credit card debt. Guess who benefited the most from this Act, insolvent debtors or credit card companies?
Moral hazard, you cry! Those debtors got in over their heads! Their fault! But, oh, by the way, can my bank have another 60 billion for the 2007 financial crisis that it aided and abetted? Credit card companies charge annual percentage rates well above 25 percent, but can borrow at 2.5%; there seems to be a little wiggle room there.
Repeal BAPCA and allow everyday insolvent Americans to free themselves from crippling, years-long debt payment plans. Sure, large financial companies will make a little less profit, but the court system will be freed from monthly monitoring hundreds of thousands of payment plans and the middle and lower classes will have a fresh start.
3
The playing field is completely unleveled.
Asking the uber-rich (more than 50 million) to pay a lousy 2% or 3% flat tax, respectively, is a start. Warren is on the right track.
Malcolm Forces has been saying for years that he should be paying more taxes as a billionaire.
Some socially-responsible wealthy are willing to pay their fair share to remove the unfair burden on the middle class.
However, Wall Street has already threatened to vote for Trump, if Warren is the nominee. Meaning, they will do anything not to pay their fair share; even if that means selling America out to Trump and his ilk.
Time to close the tax loopholes and elect a President that will focus on Main Street and eradicate the unfair taxing of the middle class.
My vote is for Warren.
3
@Gus Malcolm Forbes has been dead for nearly 30 years Gus.
2
The only way even a whiff of these proposals can get past the House, the Senate, and the President's signature pen is for virtually every Republican to lose. Donald Trump may yet do some good for the country.
2
Certain lower income people (and others) will see the "socialism" flag being waved by their conservative pundits and heroes, panic and vote for politicians who are (surprise!) bought and paid for by the ultra rich. Politicians who will do noting to reform taxes as suggested in this article. Meanwhile, the same lower income people will continue to struggle into oblivion. The cycle continues.
1
What is tax justice? Rates or amounts individuals pay?
Focusing on rates makes the Big Dogs look like rapacious wolves, but focusing on amounts, like St. Bernards.
I'm a poor retiree, so it's in my best interests to soak the rich even more, but is that fair? I wish the super-rich would donate the lion's share of their hoard to charity, but that ain't happening: human nature.
Nonetheless, is it fair that Warren Buffett pays millions in taxes to live here while I pay hundreds? Maybe it is, times demand it, but I'm just asking what is fair?
My opinion: Fairness resides with amount paid, not rates.
3
@Jim Muncy
Sorry, Jim, fairness is determined by rates, not by amounts. Think about it.
@Jim Muncy you are a very wise man Jim. To the majority of commentators on this article, a "fair" tax for the wealthy means the "people" take nearly all of the 'wealthy's' income and wealth, simply because the "people" need it more. You don't share that view, because you were not raised to be a thief.
1
@Richard
Thanks for your comment. I'm a Democrat because I think that the government can be an efficient tool for helping those who need help and can't find it anywhere else.
But, again, as you understood, I'm just questioning the fairness, not the compassion or patriotism or anything else about progressive tax rates.
Progressive tax rates are unfair, as, for example, is a military draft: Healthy males of a certain age are forced to fight, kill, and die simply because of their status. Others get a reprieve. That's smart, of course, but it's nonetheless unfair.
If we could admit the unfairness in life, I think that we'd be a step ahead. Yes, it's unfair that rich people have to pay more because we can't squeeze it out of anybody else. (But we won't cut enough government projects to pay for poverty relief.)
Just be upfront about it. We're adults; we can take it.
Is it any wonder that folks in my income percentile (85th) feel they're struggling despite being 'well off' by most people's standards? According tot his chart we pay almost 30% in taxes, the third highest out of anyone, yet we make far less than those in the top 10%.
Another note from this chart, we often hear a lot of politicians (including Trump) complain about the estate tax or 'death taxes'. Yet, take a look: only the 1% and above pays it and even for them it's just a slim line; a drop in the bucket. Anyone who argues against this tax in future has officially lost any credibility as a representative of 'the people'. They're just representing the rich.
1
Tax debates like this come down more to belief, than reason. At a basic level, if you believe all wealth belongs to the state, then you also believe the state has complete discretion to distribute as it sees fit (less to the 'rich' and more to the 'deserving'). If you don't share this belief, if you instead believe all wealth originates in the private sector, then you believe the government should face strict limits on how much wealth it can confiscate from whom. The less well-off will always greatly outnumber the well-off, so tax policy can easily degenerate into gang warfare (i.e. the less well-off ganging up on the well-off to steal the latter's wealth at the ballot box).
2
This is incredibly misleading.
The rich aren't paying a lower rate of taxes but they are paying less in taxes as a percentage of their income.
The rich save more so a smaller percentage of thier income is taken in consumption taxes.
Sales tax don't differ based on income. There is no indication here that tax RATES are lower for the rich.
Those are two VASTLY different things. There isn't a regressive tax at all.
Nothing in this article speaks to the rates of taxation. Poor people don't pay a higer payroll tax rate, or consumption tax rate, or property tax rate, and they don't have certain taxes that the rich tend to have to pay like estate tax.
Which isn't to say that the reality is ideal - far from it. But the article is misleading.
16
There is no tax injustice if you consider the contribution the very rich make to our society. Few very rich people have markedly improved my daily life: Bill Gates, Steve Jobs, Jeff Bezos, Mark Zuckerberg, Sergey Brin, Elon Musk to name a few. They made a world a better place for all of us. They have disproportionately contributed to the society and they are entitled to disproportionally take.
A much larger group of people, the poor, have done nothing to improve my life. Worse, I am told that I am not contributing enough, and must take better care of the poor through social safety net and income tax accommodation.
I am a modest upper 10%er who worked hard. In real dollar terms I pay more income tax in a few years than a median US household over a lifetime.
Yet I am told daily by Elizabeth Warren and alike, with the help from the opinion article authors, that I am delinquent on the amount of my tax contribution. Not fair!
This whole argument of tax injustice is driven by a class envy gone amok.
8
Sir, Jeff Bezos never did a thing for you personally. He came up with an idea, and many people implemented this, and built upon it. Let's not forget the collateral damage that was done, as regular tax paying retailers continued to collect sales tax while Amazon was exempted-- many of whom eventually collapsed, as consumers chose to avoid sales tax by helping Amazon grow. Today your life may be positively affected by the daily deliveries made to your home, by delivery contractors who are mostly very low income. So please thank a poor person for the convenience you mistakenly attribute to a tax avoiding vulture capitalist.
2
Those rich people are good merchandisers not life transforming geniuses.
1
@karen "... come up with an idea.."? Anyone could deliver a package, even I. Very few could " come up with the idea"! Give daily thanks to Sergey Brin to be able to "Google" information faster and better, to Steve Jobs to answer your iPhone or use iPad, to Zuckerberg to share news with friends and family etc, etc, etc.
I continue to be as saddened as I am amazed at how well Republican rhetoric has worked to hoodwink most of the population into believing our present tax code is somehow fair. So many Republican-voting poor and middle class people are more than willing to accept the fact that they pay more in taxes as a percentage of their income than the richest 1% as their necessary sacrifice for the greater good of capitalism. My appeals to such people are often met with a condescending laugh and statements like "go ask a poor person to give you a job."
Corporations now hold all the power they need to demand tax exemptions from state and local government by dangling jobs which are now underwritten by citizens and the workers themselves. Two billion-dollar LNG corporations located in Cameron Parish, LA, are not paying a single penny in corporate or property taxes for the next ten years, depriving the parish of billions of dollars in revenue; this is justified by the local government saying the employees of the company will pay their own sales and property taxes living near their jobs; these employees are literally paying out of their own salaries to prop up the very corporations they work for, while the millionaire shareholders and CEOs enjoy a virtual tax-free existence. The real problem is that these workers happily accept this. This Republican-bred plantation mentality needs to end.
2
And because they could get taxed less they then paid themselves even more because they could keep it. And the cycle fed on itself and here we are. This also encouraged the CEOs to pay their workers less as well be cause they could keep that too and could justify it by citing the law (the flimsy morality) that they were only responsible to maximize profits and investor interests.
2
When academics and politicians advocate for free trade with low wage countries, that don't have the same environmental & labor laws as the US, we lose manufacturing industry and the high paying middle class jobs.
When we have a stream of unchecked immigration of impoverished people, supply & demand says jobs & wages will come under pressure.
The 1950s growth came out of the 10 year 1030s depression and 1940s WWII, with significant under consumption by people, and an explosion of new technologies by corporations from the war effort. By the 1970s, the higher taxes helped to wear down the economy.
In the late 1970s and into the 1980s, the tax reductions led to an explosion of investment in new technologies. Business founders became famously wealthy. Where did all this envy come from that liberals want to take away their gains.
My vote is for continual unleashing animal spirits.
And don't forget, many wealthy families place their fortunes into charitable foundations, which benefits society at large.
1
I'm unclear why the authors of this piece don't point to the simple answer.
The wealthy make money on capital gains (investments), not income, and capital gains are taxed at much lower rates than income.
It's not more complicated than that.
It would also be substantially more informative to indicate the total taxes paid by each group rather than percentage because even if we tax the richest 400 at exceedingly high rates, it won't even come close to closing the deficit or paying for additional public services (free college, etc.).
These failures in analysis makes this feel like propaganda, not information.
9
@OneView
How your comment isn't a NYTimes pick is a wonder to me. It's definitely worthy.
Citizens of the United States should insist on and support any changes to the tax system that benefit the working class. Such a change as this would require the people to vote for people who support such a change and to watch what they are doing once they are elected.
I am sure those who are benefited by the current tax policy would fight such laws tooth and nail.
The voters would have to learn that current tax system is overtaxing them and to fight to change that policy. Currently billionaires like the Koch brothers and numerous others have convinced a significant number of the working class that the solution to their being stuck by a corrupt tax system is to abolish government.
If workers could be made to see that they could change the rules of the tax system, they could do it.
Cutting back the government only helps the wealthy because the less government we have, the fewer regulators will be employed in keeping the wealthy in line with the law. There is a reason why billionaires fight government regulation.
If we want a system that doesn't tax the workers at a higher rate than the wealthy, we will have to change the current tax laws and hire lots of regulators to enforce the endless efforts of the wealthy to keep the system the way it is now.
2
Less controversial than a tax on wealth are several ways to change the income and estate tax codes:
1. Tax interest and dividends and capital gains at the same rate as earned income.
2. Collect capital gains on received inheritances, instead of forgiving lifetime capital gains on estates.
3. Reduce ways to avoid capital gains tax by deferring it until death, where currently it is not taxed at all.
4. Rather than a tax on total real wealth, part of which may be economically productive, or transferable to overseas, tax residential real estate. After all, residential real estate is a consumption, not a productive asset.
5. Collect social security and medicare taxes on all salaries and on the current value of stock options when issued.
These simple easy to understand changes should be easier to enact, especially the first three, for which we have precedence.
1
A very simple suggestion that would fix a large part of the problem: Start income tax at income $132,000. This is where payroll tax tops out. Payroll tax is a form of income tax. So folks making less than $132,000 per year do pay two forms of income tax. When the 16th Amendment authorizing income tax was passed in 1909, the intent was to tax the top 10%; not the top 80% of workers. We should get rid of the lower capital gains rate too.
1
Let's not forget that military spending accounts for about $0.54 of every tax dollar. If we spent a good chunk of this on the social welfare -- e.g., health care, child care, education -- wage earners would not be as poor as they are today, even without changing the tax code.
3
The other significant monthly payment Americans make is the cost of our health insurance. I'm lucky in that I work for a corporation that provides good benefits at reasonable rates compared to other American workers. I've lived for years at a time in France and the UK, and I experienced first hand the difference the difference in take-home pay from these "high tax" countries. It felt like I had more cash flow there than here - especially because one major health bill couldn't knock your cash reserves back as they have the potential to do in the USA. I'd like to see an analysis that includes what these authors have done plus the added cost of healthcare. For example, while my taxes in France were higher, my family's health insurance was included in that rate (btw, had wonderful coverage and access to good doctors), plus the deductions I was allowed for childcare because I paid all the taxes on my caregivers, certainly put me ahead at the end of the month vs where I am here. And, that's from an upper middle class corporate type; I can't imagine how tough it is on our fellow Americans who have to work an hour (take home pay) to purchase a bottle of Baby Tylenol for their children. (Oh, and btw, children's medication such as these are free to all children under 16 with a script in those countries.) All of this is included in that 'high' tax rate.
1
Not only is this situation absurd, but for those like me who appreciate all the freedom, power and dignity which capitalism can - for all its warts - give individuals, this situation is dangerous.
In all systems, whether capitalist or explicitly anti-capitalist, power naturally concentrates if left unchecked. If we don't recognize this law of nature and put checks and balances on capitalism by means of fair taxation and other means, that is when the torches and pitchforks come out. It's how real socialism - not that of the happy Northern European kind that we're told to be terrified of - but the bloody, class cleansing kind of socialism, occurs.
2
One fact overlooked in the argument about the top 400 taxpayers is that 70+% each year are there for only a single year. The reason for this is that these taxpayers have a one-time "liquidity event" such as realizing capital gains, an IPO, or a big lottery win. Obviously some of the die as well. Since the charts in this piece show that the top 1% are paying well above the rates of the other groups, the argument about the top 400 is a straw man argument.
1
I’m surprised that the Top 1% still pays more than 30 percent in total taxes. Given all the heated talk, I thought it would have been less. The chart offers a solution itself. We should dramatically reduce consumption tax and treat investment income and capital gains as ordinary income. This makes a lot of sense. The chart shows that it’s the state, county, and local governments that are most responsible for the nation’s regressive tax system owing to increases in sales and property taxes. It is impossible to have a progressive tax system when Culver City (suburb of Los Angeles), for instance, levies 10.25 percent sales tax. This hurts the poor the most since daily essentials take up the greatest share of their expenditures. In the city of Berkeley, where Saez and Zucman teach, the rate is 9.25 percent. As for the top 400, the only way to get any meaningful taxes from them will be to levy a wealth tax and increase the maximum estate tax to 50 percent and lower the cap that now stand at more than $10 million. A progressive estate tax that begins at 10 percent from $500 thousand to 35 percent from more than $5 million would place the U.S. between U.K. and Spain.
2
It’s about time! I’ve been saying that top income earners should pay more tax since Dubya. They should pay 80 or 90% like they did in the 50s and the revenue should be allocated to pay for everybody’s healthcare and college. Isn’t that what most other industrial nations do? We’re in the Dark Ages here in the US of A. We need Enlightenment and lighten the burden of the everyday people!
2
@Momo Why should they pay 80 or 90%?
@Momo Nobody paid those rates. Loop holes and deductions ensured that effective rates were far lower.
In a truly competitive economy, total wealth would be held fixed (and the same as in 1765), by redistribution from the wealthy to the poor.
This is a lot of interesting analysis - however, all the rate ballyhoo aside, the top 20% of income earners pay 87% of all tax revenue collected. Hmmmm
7
We need to go back to the old system the republicans destroyed starting with reagan. Tax rates were high but people didn't pay super high rates because they took advantage of deductions for keeping their money in the economy building things and researching for new things and products but mostly keeping their employees employed and creating new jobs.
At a certain point more money won't buy you more than you already have. Further accumulation of property etc is sim[ply vanity.
It is a point about greed and the whining complaint that paying taxes to help keep the society that made you so wealthy running well and improving is somehow a burden on you or asking you to pay for poor people yada yada yada.
You don't like it leave
BTW you leave your money here that is another of the rules we need to put back in place, not being able to take your money out of the country easily. A big part of our problems is foreign "investment" that takes the profits out of the country without spending it here. That has been an extraction industry here since the republicans destroyed our regulatory and tax system to be able to create that particular kind of extraction industry.
1
This is very well illustrated, thank you. All it lacks is an illustration of a guillotine. (Kidding! I hope!)
I would like to see these tax rates also shown as fraction of all income and fraction of all wealth compared to fraction of all taxes paid.
That would show our inequality really starkly: the top 20% pay about 35% of all taxes but control 80% of all wealth.
This is sham economic analysis. The top 1% of American earners may pay a lower tax rate than the bottom 50%, but look at the real numbers. If the top 1% average $1.5 million in earnings, their effective 23% total tax rate results in $345,000 in taxes. Meanwhile, if the bottom 50% average $18,500 in earnings, their stated 25% tax rate results in just $4625 in total taxes. $345,000 vs. $4625. Which would you rather pay? And remember this fact: the top 10% of earners in America pay more than 80% of all federal, state and local taxes collected. Who has more personal skin in the game of taxes paid? It's obvious that the top 10% do.
12
@paul
You say this as if it is a bad thing. Top earners benefit more from the things we all pay for (schools to educate their workers, roads to ship their goods, monetary policy to keep the currency stable, courts to enforce their contracts, etc.) and therefore should pay a greater amount.
You have also overlooked basic human justice: why should people go hungry while others buy larger palaces?
2
I would rather pay the $345k and have $1.2m left over to buy a third house, yacht or college acceptance for my child rather than $4k a choose between medical care or food for my family. Your position of personal greed is why the Republicans have destroyed the American dream since Ronald Reagan.
8
@paul:
Let's see,
$1.5 million -$345,000 = $1,155,000
and
$18,500 - $4625 = $13,875
Which would you rather have?
Do you see the problem with your question?
And we haven't even mentioned the 20% top rate on capital gains... Owned overwhelmingly by the top 10% of the population.
5
I see another Bernie Sanders/Elizabeth Warren sensible long overdue policy coming to the forefront AGAIN. You won't see this coming out of the mouths of corporate/establishment democrats, some of whom voted for Trump's TRILLION AND A HALF dollar tax cut last year, a policy that in polls was highly rejected by the voter.
2
Here we go again...He forgot to mention that the top 1% pay almost 40% of all tax revenues and the top 25% pay almost 85% of all Fed revenues.
How is that unfair when 75% of the taxpayers pay only 15% of revenues?
7
Very curiously in the entire article there is no mention that 42% of adults don't actually pay any Federal income taxes.
I'd love to see the same analysis not a percentage of income but on actual dollar paid basis which would show that the middle and upper middle class is pretty much carrying those 42%.
This is little more than cooked socialist dribble designed to make us all poorer by discouraging investment and growth through massive increased taxation on middle and upper middle class alongside debt forgiveness and socialized medicine.
11
@Robert Very astute Robert. 42% of adults and climbing. It is disturbing to think of what could happen if the number goes to 50% or higher. The choice between voting R or D in the 2020 elections comes down to personal responsibility, or the lack of it. When I look at cities that are dominated by elected Democrats, I see rampant homelessness. The fruit of the intellectual proposition that adults cannot be expected to provide for themselves. Capitalism may be harsh and may be unfair but Socialism fails consistently.
8
@Robert Agree - and the end game is to increase the dependent class.
3
@JR You fail to take into account the fact that technology is eliminating jobs! Your view is so shortsighted and basically is the attitude that as long as you have a job, all is right with the world. This is so naive and uninformed. What happens when your job gets eliminated? Do you think that capitalism will automatically provide another job and that it will pay as well as the job that was eliminated? Perhaps there isn't a perfect system, but capitalism without a heart is pretty ugly. Why is it that those of you who extoll the attributes of capitalism and complain about helping the disadvantaged, are ok with churches remaining tax exempt even though they are clearly involved in politics now, have no problem with corporations not paying any taxes whatsoever, have no problems with corporate welfare. Instead you malign the little guy who can only stretch a dollar so far. If an American puts in an 8 hour day at a job, any job, they should be able to pay for housing, food for their children, not to mention the ever-increasing cost of healthcare (which at one time used to be a benefit provided by employers). I'm tired of people who have admonishing those have nots for being lazy. This is just too simplistic of an argument and really doesn't hold water. Personal responsibility is great if you are educated, have come from a home with two parents, don't live in abject poverty surrounded by violence and drugs. Easier to always blame those less fortunate of being lazy.
1
There is one tax reform that will eventually fix this and many other problems: a $250 tax credit per adult for (submitting proof of) voting in even-year November elections.
3
I am glad that the charts here specified the separate category of consumption tax by income groups.
I am not sure how that portion of the tax rate would change, unless food not taxed at the state level.
The poor have the least discretionary income left over after check to check expenses each month. So of course a bigger chunk of their income will go to consumption tax.
As for income taxes: of course the low income groups should. Of have a higher tax rate than the ultra wealthy,
2
Federal tax laws must be strengthened to provide more incentives for corporations to create jobs, promote job training and to invest more capital in America. Merely reducing tax rates for the wealthy and corporations without incentives is sheer folly.
2
As someone has alluded to here, the crux of the problem rests with a Supreme Court wielding the power of judicial review to nefarious ends. As long as it maintains that private spending in politics is protected by the 1st amendment, it'll throttle any effort to clean up American politics. The personal finances and business interests of Supreme Court justices and their families are never talked about, nor ever scrutinized as far as I'm aware, and that's simply intolerable given the power they actually possess.
2
The current tax situation, coddling the wealthy, is not absurd, it's an outrage. It's the end result of 40 years of sadistic, greedy, Trickle Down politics which sabotages and extracts all it can from the working of our government and our society for the benefit of a minuscule, insatiably greedy percentage of the population. It can't continue. It won't.
Not only do we need to stop voting for Republicans at every level, we need to stop voting for Democrats who view "bipartsanship" and "half a loaf" policies as their ultimate goal. We need bold, unapologetic progressive policies and public servants who will enact long overdue systemic change that finally moves our country toward equality, fairness, and justice after 40 disastrous years.
3
What is absurd is the number of middle- and lower-class people who support this regressive tax regime, because they actually think the rich want to help them and it's going to "make America great again." Either that, or they simply deny that any of these numbers are real.
Stupidity comes with a huge cost, and it's not just in taxes.
7
It may be hard to make the 500 pound gorilla in the room sexy, but the dissolution of the progressive tax structure of FDR’s New Deal is the lead story of the last 50 years of Republican control and Democrat’s’ acquiescence. What those taxes paid for is exactly what’s missing, what drives the real anger of Trump’ base. It’s also what mopped up all the excess money that sloshes around our economy and creates the bubbles that makes it crash when they go pop. We would be so much better off if that money was simply taxed away into building infrastructure and put into research and education etc, instead of burned up when markets go bust.
4
Perhaps the largest obstacle to surmount to accomplish these goals is to 're-program' the large chunk of the American populace who have been brainwashed for literally decades, largely by the GOP and their think tanks funded by billionaires, to believe that loopholes are a law of nature and that taxing the 'job creators' will lead to economic collapse.
The second largest is to bleed our democracy of the dirty money that has flooded it like a cancer.
4
Bluntly - we who pay a high percentage of our income in taxes - and who are going to be need Social Security, Medicare, and possibly Medicaid ( targets for funding cuts) in our oldest days, are under assault. We're the Kurds. Useful for some purposes, anything that the wealthy do not deign to do, but expendable when no longer needed. An annoying burden to the wealthy. Better that we should die early and stop bothering them.
Not surprising, the giant tax attack was accomplished under our home grown oligarch in the making Trump, and all the Republicans who worship wealth. And, the biggest real barrier to any reform at the moment, Mitch McConnell, already qualifies, through marriage.
5
Not only do the rich ostensibly pay less of a tax rate than the rest of us they often pay no taxes at all! Look at Trump! Trump paid no taxes for 20 years even though he lived like a king because of some bogus business write off. The rich have always found loop holes in the tax code to avoid their fair share of taxes. These people are leaches on society, the real welfare queens. They enjoy the benefits of living in the US without paying a dime for those benefits.
1
Such garbage how this is described. Investment gains are typically taxed two times, once at the corporate level and once at the individual level. The corporation is a fiction. When you tax it you are effectively taxing the shareholders that own it, thus looking exclusively at the shareholders return without regard to other layers of taxation and claiming he pays less than a menial worker is disingenuous.
5
Most state tax corporate profits. As far back as the 1960's, California and along with a few other states developed unitary combined reporting aka worldwide formulary apportionment aka unitary taxation. The unitary business principle was approved by the US Supreme Court in their 1980 Mobil v. Vermont and Wisconsin v. Exxon decisions. The unitary combined reporting method which treated a parent and all of domestic and foreign subsidiaries as if a single taxable entity was approved by the US Supreme Court in their 1983 Container v. California decision.
Most states and possibly other countries would be utilizing this method today if not for the foreign influence from British Prime Minister Margaret Thatcher. She with Reagan's help effectively overturned the Court's Container decision and pressured the worldwide states to restrict unitary taxation to the water's edge which excludes rather than includes the profits of foreign affiliates from state taxation.
The water's edge method defeats the original purpose of the unitary combined reporting method - negating the profit shifting from the US to foreign tax haven subsidiaries. The biggest beneficiaries are foreign based corporations operating in the US (therefore not subject to repatriation) and Britain's many tax havens which feed The City, London's Financial Center.
Watch The Spider's Web - Britain's Second Empire and The UK Gold aka Offshore Incorporated. Britain is no friend of the US and other countries seeking justice.
1
Dignifying behemoths like Google, Apple, and Amazon "American" is a quaint pretense they'd like to maintain. What makes a company "American"? Just because they are headquartered here, their CEO's all own several luxurious properties here, and they reap the benefits of our educational, infrastructure, and legal systems counts for nothing if they refuse to paying the taxes required to maintain them. They are quite simply parasites.
2
@stan continople
So Google, Amazon, and possibly Apple have not brought enormous positive change to your life, as well as to most Americans?
With parasites like this, who needs friends?
The defenses written defending tax discrepancy possess the same thought process as the those poorly educated Trump supporters who shoot themselves in the foot everytime they vote. Even when you tell them the Republicans want to cut Social Security, Medicare and disability they repeat Repubican propaganda, their is no money despite the trillion dollars deficit their Representatives created. Mention Trump withholding his own tax returns or lying to the public the response is they all do it, he is a victim of the press and the Democrats. This is all related to education and the public perception all politicians lie and are corrupt, which many have proven to be. The public schools lack the time, funds, resources or structure to expose students to become independent thinkers, to learn opposing opinions and form their own. Understanding issues and who they vote for directly effects their lives. A simple question such as what can you buy for $10.? What is the minimum wage? Maybe they could educate their parents on income inequality because it is surely needed. Trump representing the Republican party has plenty in common with Jim Jones convincing the cult to drink their Kool Aid.
Justice and tax is a myth.
Economics and science is a myth.
The federal income tax code is a monument to robbing the poor on behalf of and for the benefit of the rich.
The code provides for deductions, credits, subsidies and lower tax rates. But only for certain industries, persons, sources of income, business entity structures, transactions, contracts and securities favored by special interests lobbyists buying legislative, executive and judicial complicity, conspiracy and collaboration in their private scams and schemes.
Economics is not a science. Economists are not scientists.
There are too many unknowns and variables to craft the double-blind controlled experimental tests that provide predictable repeatable results. Economics is incapable of even fashioning randomized tests that have universal economic human application.
There is no Nobel Prize in Economics. There is the Swedish National Bank Prize in memory of Alfred Nobel.
Economists are akin to charlatans, fortune tellers, oracles, pundits and soothsayers.
Saul of Tarsus was a tax collector when he claimed that the resurrected Christ appeared to him on the road to Damascus. St. Paul never knew the living Christ. But his redemption began with ceasing to be a tax collector in the Roman Empire.
Assessing and collecting taxes is an amoral business. And the heirs of African apes craving fat, salt, sugar, kin and sex by any means necessary including conflict and cooperation are incapable of justice.
2
America has become exactly what its founders revolted against during the American Revolution: an immoral, abusive and exploitative plutocracy. History may have to repeat itself to erase this injustice.
1
Every rational economist for the past 40 years has been raising the alarm about income inequality bought and paid for (bribes - oops - I mean "campaign contributions") by ultra wealthy individuals from pliant congresspeople. What else do you need to know?
We need an FDR Democrat!
Who most embodies that ethos?
2
Hey guys, get your pencils out again! It's not the rates that are our biggest worry. It's the total amount of money paid.
I'd worry more about the debt our government is generating for our grandchildren and their future. Both parties!
4
Reelect Trump and McConnell and see what happens next. They are only getting warmed up.
1
From filthy rich to obscenely rich to grotesquely rich to putridly rich.
It just keeps snowballing to make the putridly rich swell more.
It’s not just the tax rates— its the mechanics of the economy too.
Putting US workers on the global labor auction block, while remaining mute about the inhumane working conditions of workers abroad who compete with US workers for the same job.
The investment and finance systems — which make “ownership” of companies so sterile and unaccountable.
The education system.
The health care system.
The legal system.
They are all rigged.
The rich own them all.
The rich hijacked the government, and now the rich uses the government itself as a weapon against the people.
It’s no longer Government of the people, by the people, for the people...
That perished from the Earth decades ago.
Now it’s Government taken from the people, used against the people and wielded over the people.
2
Next, expect to see the NYT breathlessly report that poor people pay a higher percentage of their incomes when they cross the Mario Cuomo bridge than do the rich.
Payroll, state and local taxes tend to be based more on what you take out than your income. Which is great. The goal of any system should be to ensure that people pay fo the things they want rather than try to send the bills to other people.
The graph would be exactly the same if it measured the percentage of income spent on food, on housing, etc. Because the rich spend a smaller percentage of their income on every necessity than do the poor.
So what?
And, please, stop with the outright lies. No, the corporate income tax is NOT paid by shareholders – exclusively. It is also paid by customers in higher prices and employees in the form of lower wages.
Taxes should be based upon benefit received. The fairest form of taxation is a capitation, with all contributing the same. After all, the freedom of a poor man costs just as much to defend as the freedom of his wealthy neighbor.
This is nothing more than unbridled envy. Nothing stops states like CA from doing precisely what the authors suggest. They understand, though, that people, left to their own devices, will abandon confiscatory jurisdictions, so the authors would deprive those people of the freedom to do so.
In short, freedom and “fairness” are mutually exclusive, so the left sacrifices freedom. What a surprise.
7
@Michael
No. The goal for any system is to make sure it works.
Not to reward anyone. Not to punish. Not some definition of fairness. To maintain the society and pass it on to the next generation. To make it better, if possible.
Ah! Myths. So useful when you need to steer those huddled masses yearning to be right...
Here's a tax problem - the Dems establish huge municipal bureaucracies and gouge the middle classes with taxes to support them. Their corruption is choking our cities. Their cup runneth over with garbage.
The Reps have no ideas and the Dems have bad ideas. Third party now. Or parliamentary system now.
5
@Liz
So true! "The Reps have no ideas and the Dems have bad ideas."
1
@Liz
Certainly, no system run by humans is perfect. Every system can be made better. So, do what you can to make it better, knowing perfection is beyond reach.
There is a relation from tax regression to political expression or censorship.
Those who pay en masse the most tax are those who are politically refreigned to express themselves .
And that goes also for the US college electoral system.
The poor who work in the urban areas on the 2 coasts have their votes count as much as 50 times less than the people in the fly over states who pay less taxes and benefit from the taxes of the coastal urban areas paid by workers whose votes count 50 times less.
From California to Wyoming it is 1/ 57 ratio.
The American political situation...
https://observer.com/2019/02/electoral-college-explanation-popular-vote-loses/
Couple of thoughts..
Before this country was at 3.6% unemployment, Fox News would regularly use the term "Job Creators" to refer to the nations wealthy. Now that all the jobs are theoretically created-why do they continue to need lower taxes?
How many hundreds of millions tax dollars are sucked up by systematic fraud and abuse within our social security and medicare system? In California alone, workmen's compensation and disability payouts are laden with thousands of false claims.
We can blame the rich for not paying enough, but the middle class does their fair share by exploiting and abusing a system meant to protect all of us.. Both sides have dirty laundry.
1
@Aaron
An inherently dishonest system, perhaps epitomized by having a President who has not paid federal income taxes for stretches of time( Some day we may know), encourages citizens to follow that model. [One of the problems in Greece, I'd read, was that the wealthy= anyone with a bit of money - essentially escaped paying taxes at all.] One of the unusual things about the US has been that, in general, people do pay the taxed owed.( and no one is going to volunteer to pay more that is required).
But like obeying other laws, this is very much voluntary - - and cooperation is related to enforcement, but underlied by belief that the system is fair and evenly enforced.
1
@Aaron
Oh please. Now us honest middle class taxpayers have to get lumped in with or accused with "exploiting the system"? Suddenly that's the problem. Crime is crime. Leave me out of it. Back to the subject.
1
@Aaron
Is there any perfect system run by humans? Any big system has all kinds of inefficiencies, including all sorts of corruption and theft. Private business is no better. There is no big system that does not. That is just the way it is.
1
As a resident of an ultra "blue" state with a Democrat governor and a Democrat super-majority in the legislature....this is what CT has done recently:
"They voted for a blue wave of progressive policies. They got a Democratic governor resisting the call for higher taxes on the rich."
https://www.courant.com/politics/hc-pol-progressive-unease-over-lamont-budget-20190224-adbbyvelubhkle2oeablmq7lci-story.html
Thanks to this "Democratic" leadership, 99% of CT residents were rewarded with a laundry list of new or expanded regressive taxes.
The authors of this piece conclude with:
"there is a bright future for tax justice"
The facts say otherwise.
1
Remove taxes on Social Security benefits.
2
Always delightful to play fun-with-numbers with economists.
What matters is the answer to the question: who is actually paying the real-life income taxes collected in - you know - real life.
Here is a snapshot provided via the IRS for the most recent year reported on:
The richest 1,409 taxpayers pay more income tax than bottom 70,000,000 [70 million] Americans in 2016.
...or if your prefer: the top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
...and because I know you are really curious: the bottom 50 percent of 'taxpayers' paid a total of 3 percent of the income taxes collected.
So - sure - let's tax the rich because they are not paying their 'fair' share
.
Source: https://www.irs.gov/statistics
9
@SteveRR -- First, this article is not about payment of federal income taxes. It's about total taxation - sales/consumption, payroll, property, etc. - at all levels - federal, state, and local.
Second, what's "fair" for the rich isn't determined by their total dollar contributions, but by their share of contributions in relation to their share of income. The top 1% may pay 37.3% of federal income tax, but if they make more than 37.3% of the national income, then yes, it is unfair.
1
@Michael
If you are making a claim about tax 'fairness' then you have to include Federal Income tax as part of that claim - that is what I chose to address.
Income earned should equal income transferred?
If you believe that fairly earned income should be unfairly transferred to those who have not earned it then - yes - that is a reasonable thesis
How to justice our way back to tax ?
Let's not talk about Thomas Piketty new book : " Capital and ideology " .
The Republican Party built this American oligarchy through decades of voter suppression, scare-and-fear-mongering, moneyed-speech, Grand Old Propaganda TV and hate radio and utter contempt for the American common good.
The Republican Party is the 0.1% Welfare Queen party where greedy billionaires demand Grand Old Poverty for America while they toast each other with Grand Oligarch Party champagne.
If you think the Republican Party has any interest in the common good, you have been duped by a gun fetish, a 'God' fetish, a pigmentation fetish or an irrational hatred of scientific evidence.
There are two defining principles of modern Grand Oligarch Party Republicanism as follows:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness." - John Kenneth Galbraith
"If conservatives become convinced that they can not win democratically, they will not abandon conservatism. The will reject democracy.” - David Frum
The rejection of the non-rich and the rejection of democracy is Republicanism in 2019.
You'have to be greedy, foolish or unAmerican to support these 3rd-world oligarchs posing as the Republican party.
Reject them and their radical, right-wing unAmerican misanthropy on November 3 2020.
4
Here in New York, senior citizens are taxed out do their homes in droves. Where’s the press? Where’s the outrage? Your work your whole life. Pay your taxes. Build your dream home. And then are taxed out of it. That is what America has become.
3
The work of Zucman and Saez has already debunked, see https://www.wsj.com/articles/new-problems-with-elizabeth-warrens-inequality-math-11570573868?mod=searchresults&page=1&pos=1
Their work is flawed and the conclusions are wrong. But at a liberal university rigor is second to reaching the desired outcome.
6
I am unimpressed and, certainly, unmoved by your citation of an opinion piece from the WSJ.
You know the old saw, "Opinions are like the opening at the end of the alimentary canal through which solid waste matter leaves the body; everybody has one."
Lord, help the rich; the poor can beg.
Nice try - now show what's really happening:
1. Show earned income credit phase-in/out
2. Show taxes in absolute dollars
3. Show cost of transitioning from free Medicaid to subsidized Obamacare Bronze to unsubsidized Obamacare Bronze
4. Show costs of child care, where spouse takes a job
4
In the NYT you cannot write that the highest violent crime rate of the USA in the industrialized world, by 8 times superior to Europe, per capita, is related to the US tax system.
And of course, the highest incarceration rate, by 8 times also superior to Europe, is not related to the US wealth distribution of 10/90 = 70/30 .
What happened?
Citizens United.
3
What a wonderful idea!
Pretty tough to get the horse back after you left the barn door open overnight.
1
This might be the most deceptive article the NYT has ever produced. By using percentages, as opposed to dollars, it takes advantage of basic truisms in our tax regime to produce a distorted picture of the tax burden. As an initial matter, the average tax on person in their lowest bracket was $4625, while the tax on the top one percent was $375,000 and likely several times that amount for the wealthiest 400. That sounds pretty progressive to me.
Three factors, THAT EVERYONE KNOWS, explain these not surprising results. State vice taxes (gasoline.cigarettes and alcohol) are very high, such that a relatively poor person, who drives, smokes and drinks, will pay high percentage of their income on consumption taxes. Second, payroll taxes are progressive, but tend to be capped at a certain point, ostensibly because these taxes are designed to finance benefits that don't grow with wealth. And finally, capital gains (investment income) are taxed at a lower rate than ordinary income.
We know that progressives are stoking a "hate-the-rich" narative in support of the their vision of a wealth tax, taxing investment income at ordinary rates and a confiscatory inheritance tax. It would be more honest to do so by simply saying they need money to finance their fantasy climate policies and a cradle to grave welfare state. But trying to deceive people into believing that the wealthy are not the people already paying the costs for our society is an outright lie.
Honest please!
9
This article is potentially insightful and important, but the charts are difficult to understand and the author's recommendations are buried in long paragraphs. I think the Times is prone to getting too cute with its charting and graphics, defeating the purpose of trying to simplify the dissemination and meaning of complex data sets.
I'm sorry but the charts are confusing
and we paupers will be paying for $5's tax cuts forever
but not after we lose SS & medicare...
i fully expect internment camps for the homeless and poor are next
1
These two professors from UC, Berkley seem more interested in pursuing a pointless political manifesto than explaining a solution to the ineffective tax code.
#1..They start off with a completely unsupported statement....straight out of the 1968 SDS slogan playbook......"soaring inequality"......that is to say UC-Berkely professors make an incredibly large amount of money, while poor people down the street in Oakland dont have enough to pay the exhorbitant rent.
....
The reason why US seems to suffer from "soaring inequality".....is the Internet. And the Robber Baron Culture of Silicon Valley/Hollywood/Wall Street/DC Beltway.......where nobody pays any taxes at all...
...
These professors stick with an obsolete tax structure.....Income Tax.
I suggest these two investigate the following Proposals:
1. Tax Political Campaign Contributions(THAT my friends is how you "Reform Politics")
2. TAx the INternet.....packet by packet. Tax it.
3. Make Offshore Banking Illegal......the Internet has already made it obsolete.....Interent Robber Barons use Ireland to avoid US taxation.
4. Drastically LOWER income tax and everybody.
5. Create a special 50% WAR TAX on incomes over 1million.
1
This is a marxist and communist article.
You are not allowed to say that in the USA , 10 % of the population own 70 % of the wealth of the country.
And the other 90 % must share the remaining 30 % of the wealth to survive .
With, on top of paying more tax than the 10 % richest, no health insurance, no retirement, no paid vacation .
This system produces the highest violent crime rate in the industrialized world . 8 times superior to Europe, per capita.
And the corresponding 8 times as well superior to European average, the highest incarceration rate per capita.
Almost 1 % of the US population is in jail at all times .
It is called : freedom .
1
Republicans.
You asked how this happened.
3
The first sentence is inaccurate: America's soaring inequality has a new engine: conservative media and FOX news.
1
Corruption from the top
Tax cutting may increase capital concentration but it withers economic growth by reducing the mass market consumption capacity. Those rich people are not making money from trading with rich people but by trading with the great mass of the people and small businesses and the public through government who buy what generates the need for the capital. The problem is that capital does not create any demand for the means to create wealth, it helps to enable the satisfaction of the need for it.
1
Pre-Reagan tax rates protected the country for decades, by recirculating money back to the general economy. All that's needed is to reinstate them.
1
This op-ed makes a good case against the billionaires, but then spins a tax increase for those making much, much less. That's how we get Warren's proposed 14.8% tax increase for over $250,000. At least in New York, that's not rich. And that's why I don't trust this kind of thinking.
2
I don't understand why the people who earn between $75,000 and $220,000 are ignored. Where do they fit into this plan?
2
I sincerely believe that the skyrocketing inequality within much of the Western World is the foundational element in the populist instability that is causing so many problems. Even mass migration would probably be more warmly received if there was a sense of a rising tide lifting all boats, instead of a shrinking platform over stormy waters. Globalism. Our price coming due for winning the Cold War with communism. Inequality between nations shrinks, inequality within nations soars. But this can't be sustainable. Yet we're already so deeply in bed with this mess that we can't extricate ourselves, like a climate change of economics. The result is a disaster for liberalism and democracy, strangled under the weight of capitalist greed.
1
I am no economist, but why should someone making 150,000 pay more in taxes than someone making 45,000? I am talking about salaries, not about gains from businesses or capital gains etc.
People who make 150,000 have usually invested far more in their education and training that someone making 45,000. The higher earners usally have to contend with higher expenses too. So why not have a flat tax which is fair to everyone?
2
@Vaz Dubey I agree with you, up to a point. 45 vs 150K is still chump change compared to the uber wealthy.
Firstly, taxing capital gains at W2 rates would be a start.
However for income from salary, I think someone being paid 600K per year can pay a few percentage points more than someone making 30K.
@Vaz Dubey
Another point of view is that the higher salaried person benefitted more from the services that society provided. They benefitted more from the fact that society provided a better environment, or educational opportunities, or better healthcare, for example. As they benefitted more, they owe society more so that society can pass those same benefits to the next generation.
@gratis I think that's untrue. I think perhaps what you mean is that the higher earner had better education, better healthcare because their parents were able to afford that. That person should certainly not be penalized for that.
The author's data is skewed to make their "the rich should pay more" argument. They are very inclusive in what they count as taxes paid by various individuals yet completely omit transfers to lower income groups. Add in EITC, housing subsidy, health insurance subsidy, child care subsist, food subsidy, utility subsidy, etc. Those programs substantially raise the effective income of the lowest earning groups. Also, clothing and food are non-taxable. So sales taxes are elective to a certain extent. Other taxes are progressive, e.g. the excise tax in my state.
4
Thanks to republican efforts to create a 'sheep class' that will do anything he wants, politicians can now continue to offer those "middle class tax cuts" until the end of time, and their constituents will continue to vote for them until the end of time, while paying more taxes than the wealthy until the end of time.
Clothing is taxed in some states, Ohio, for example.
The tax system got distorted by the
rich exercising control through
donations to the congress and the
president. Congress happily obliged.
The fact is 90% paying higher tax rate
also have 90% votes. They have the
power to with hold their votes from
congressmen(mostly republicans)
who push for tax cut for the wealthy.
Unfortunately there is very little
awareness at least among the 50%
voters. They are too happy if they
get small refund. An NGO like Tax
Justice need to educate the voters
about the playing field being
rigged. Hopefully people will stop
voting against their own interest.
Excellent piece and excellent info. I hope this is shared widely.
1
In "Wealth and Democracy," Kevin Phillips points out that there is a feedback in economic distribution because as the rich get richer, they use their wealth to get more power. They then use their power to get more wealth and so on. In the olden days they hired gangs of thugs called knights to extort money from the peasants and merchants. Today they hire politicians to pass laws that benefit them financially.
There seems to be a tipping point where this process becomes impossible to reverse. When inequality becomes bad enough, the country soon goes down the tubes. He gives several examples, e.g. the 18th century decline of the Dutch Republic. Chrystia Freeland used 14th century Venice to illustrate this process in a Times article, but history is replete with other examples.
According to Phillips, the great success of America has been that before the tipping point was reached, something has always happened that reverses the flow of money upwards, e.g. the rise of unions, FDR's reforms.
Will that happen this time?
This article is attempting to take attention away from what really matters - jobs and trade. What Americans really need are fair trade policies and corporate tax laws that keep and grow decent paying jobs in the US. The Republicans are actually doing this so the Democrats are trying to distract the average uninformed American to make them angry about taxes. In reality, increasing the wealthy's tax burden to close to 100% is NOT in anyway going to improve the lives of average Americans. Instead, the focus needs to be on policies and laws that support wage and job growth.
Besides the fact that the article is conflating wealth and income taxes. Another attempt to trick readers and from the comments, it appears it is working.
4
@M
You cannot run a society on a race to the lowest tax rate for businesses. That's how you wind up in with the mostly non-existent economic activity of countries who have chosen to be tax havens.
Outside of the vacation industry, the vast majority of people in tax havens lead very very poor lives. That's why nobody is tripping over themselves to move to Bermuda or Cyprus or Panama on a permanent basis.
1
Who buys the productivity? It’s those who are being painted as takers instead of both labor and consumers for what they produce. The Republicans have been promoting a model where capitalists are productive job creators while ignoring from where the demand for their productive endeavors comes.
1
This chart is quite odd. I’m not sure how they made these metrics but they’re definitely off. People making under $18,500 and property taxes? It’s unlikely that demographic owns property. Where is the federal bracket data, because the upper middle and upper class pay almost 50 percent of our taxes. The $18,000 bracket could potentially deduct their way into paying little to no federal taxes (if they own property) which is suspicious based on this chart. This wage class is really struggling and actually uses gvt services that their taxes cannot even cover. This chart is filled with holes flaws and doesn’t explain how they based this study and where these people lived because location is everything. 44 percent of Americans don’t pay federal taxes. Payroll taxes are paid by employer unless self employed so why is that even in this chart? I’d argue the self employed are the demographic that pays the most in this country and get the least as they don’t qualify for unemployment and put themselves at risk more than any other group. If they make over $50k they don’t qualify for any level of medical assistance and claw their way to stay in this group. They don’t have any real deductions and if they own property get hit with salt taxes. Do I think the top dodge taxes? YES! They live off of capital gains. However to say the poorest are taxed the most is factually incorrect everything depends on the metrics used. NYT start providing more transparency with the data metrics you provide.
2
@Location01 It is terrifying that so many posters seem to actually believe that the poor are paying anything in taxes. They barely pay anything. The wealthy pay the vast vast majority of taxes in this country.
The issue for the poor isn't that they are paying too much in taxes. The issue is that they don't have a decent paying job.
1
@Location01
Unless you live in public housing (or, in a tent) you pay property taxes. Yes, news flash, property tax (and all of the expenses of owning the property) are included in the rent.
The upper income pay 50% of the "Federal income" tax not of all "our taxes".
Employers pay half the Social Security tax.
Self employed individuals have plenty of deductions.
The article does not indicate the poorest are taxed "the most", it suggests they pay more taxes than commonly assumed.
@M
If that was the case, then you wouldn't have such vicious objection to eliminate payroll taxes and consumption taxes on those poor people.
Yet the fact is that the poor DO pay a disproportionate amount in taxes because the credits they get don't make up for what they're actually taxed initially.
This is especially true for those who are too "rich" to be eligible for stuff like food stamps and Medicaid, but too poor to actually afford paying the market rate for the basics they need.
The fact is that the tax burden has shifted from corporations to people. Since the 1960s, well over 50% of government tax revenue comes from individuals, not corporations. This is made doubly problematic as the rich have shifted their compensation from salaries to investments.
No CEO in 1960 was getting paid $1/year, with the rest of the compensation in various investments. Yet that practice is exceedingly common today. Why? You can't pay anybody else $1/year without running afoul of state minimum wage laws.
1
It seems rather disingenuous to lump payroll taxes together with other taxes. Paying payroll taxes finances one's pension and healthcare costs in old age. Social security benefits are based on contributions, heavily weighted towards those with lower lifetime earnings.
You could just as easily call IRA contributions a "tax" and calculate contributions from there.
7
@Allen Rebchook exactly. I don’t know who these economists are but this chart is laughable. It looks like they said to themselves: how do we prove the poor pay the most and found the only way that could be true, which is actually completely untrue! How many friends or family members that you know buy property while making that little, yet they have property taxes in here? What a joke.
1
@Location01
" how do we prove the poor pay the most"...
Curious, where in the article or data is that suggested?
Also, property taxes and maintenance are included in rent.
We need to get money out of politics at all levels. When the wealthy can give more money to a candidate than a common worker, the wealthy donor automatically wins by buying a politician who will work hard for wealthy interests. Is it really any wonder that tax laws favor the wealthy and hand the rest of us the bill?
4
As Saez and Zucman note, while the federal tax rates assume a large part of the story, state and local rates are also the hidden problem. In this state, the top income tax rate was reduced in 2012 to 5% on incomes over $8701 for single taxpayers and $15,001 for couples. That means that anyone over the federal poverty rate pays the highest marginal tax rate. And that rate places Oklahoma in the bottom half of all states.
Oklahoma makes up the revenue by assessing one of the highest sales tax rates in the country. The combined state and municipal rates in the 20 largest cities range from 8.25% to 9.75%, and some smaller cities have sales tax rates as high as 11%. The justification frequently heard — including by lower-income residents — is that sales tax is something everyone pays, while the rich evade income taxes.
This Op-Ed needs to be reprinted in every newspaper in the country, including Oklahoma’s two largest, the Daily Oklahoman and the Tulsa World. But since both are staunchly conservative media outlets that include broadcast as well as print, I don’t see much chance of that happening. And since Republicans in the state are largely low-tax, small government advocates, we won’t hear this in the political arena either. I’ve ordered a copy of Saez and Zucman’s new book, and would like to recommend it to my neighbors, but they don’t read much. It’s unclear how regressive tax policy will change with this dynamic.
4
There is a relatively simple solution to this entire mess. Complete and total tax simplification. One page. Broad base lower rates across the board. No deductions. No exemptions. No loopholes. Look up Japan’s tax system.
2
Labor should not be taxed at a higher rate than capital.
Having a progressive tax rate would actually begin to reverse the wrong direction wealth distribution has been going in for the past 30+ years.
Another thing that should happen is raising the minimum wage immediately. Had the federal minimum wage of 1970 kept pace with inflation, it would be $15 today. Add in productivity, it should be about $23.
There are 35 million Americans who get paid the minimum wage today. That means every working hour about a quarter billion of wealth transfer from the working poor to the owners of capital. ($7 per hour * 35 million = $245 million)
5
Where is the reform for capital gains tax? As long as the system is rewarding recipients of passive investment income there is no equality.
1
Equality?
The laws of economics require capital and talent be rewarded, far in excess of the reward given to mediocrity. Else the system fails.
Winners must win; and winners must be rewarded. Those with wealth earned it, or at least were given that wealth by someone who did earn it. No more fair system exists. If you believe government can manage an economy, ask the USSR how that went for them. China abandoned socialism, and now it is advancing. Government does some things well; create wealth is not one of them.
The Tax Scam 2017 made this even more prevalent! The Republicans made sure they stacked the deck in favor of corporations, the top 1%, and all their rich cronies. Remember that whatever minuscule tax break the lower and middle class received will expire beginning in 2025......
3
With link which can delay or preclude posting.
Enough of this fiction. The top 20% pay 84% of Federal income taxes and 67% of all Federal taxes. The top 1% pay 40% of Federal income taxes and 26% of all Federal taxes. The bottom 40% have a negative (thanks to EITC) Federal income tax rate and pay less that 5% of all Federal taxes. The most "even" group is the forth quintile (60 to 80%) who earn about 20% of the income pie and pay about 20% of all Federal Taxes. The 80 to 90% group is very close as well. Those who earn a higher share pay an even greater share. Those who earn a lower share pay a lower share, or nothing, or receive additional income. Our income tax system is progressive and also geared to favor certain behaviors, having children, owning a house.
https://www.taxpolicycenter.org/model-estimates/baseline-share-federal-taxes-march-2017/t17-0056-share-federal-taxes-all-tax-units
5
@Daphne
"those who earn a lower share pay a lower share, or nothing"...
With all due respect, the NYT article goes far beyond analyzing just Federal taxes alone. The entire tax structure and who's paying them is what's being discussed.
2
@Daphne thank you! Exactly! What kind of horrific journalism is this! It’s like my god if these are our future economists they’re clueless!
@Charles
Saez and Zucman deliberately omit the EITC from their data to skew the results. The rest is similarly twisted to reach the authors predetermined conclusion.
I fear we will be stuck in a plutocracy until the working class wakes up to the fact that economic liberals are their friends and economic conservatives are their enemies.
And I fear that is not going to happen until the working class switches off Fox News and rediscovers the value of an actual education and the liberating effect of intellectual zeal.
I find it so odd that the very people who live in mortal fear of something called "socialism!!" (something they know virtually nothing about) have no problem with the upward redistribution of wealth to the financially obese and politically reactive non-working wealthy.
5
Americans should read the new Thomas Piketty book about the history and culture of capitalism in the world..
It will be translated in English, for those who cannot read French.
" Capital et ideologie " or " Capital and ideology " .
Capital is the same word in French and English . Ideology is just a bit different...
3
America not only needs to restore its progressive tax laws we need to do the following:
1) Raise taxes. Yes. Overwhelmingly for the richest who have seen their wealth outstrip everyone else.
2) Pour much of this tax increase into the nation’s deteriorating infrastructure (roads, bridges, electrical grid, schools, etc.)
3) Pour more money into IRS to step up audits on tax fraud. Currently the IRS is disproportionately auditing the little guys because it is too resource-intensive to audit the big complex guys.
4) Pour more money into Justice Department and FBI for money laundering, shell corporations, corrupt foreign money, and other complex criminal activities. And give them all the technology they need to detect and prosecute these criminals.
5) Initiate program to optimize the efficiency and effectiveness of the federal agencies to guaranty that taxpayers are getting value for their tax dollars.
6) Initiate a “Moonshot Program” that pours money into federal research agencies and universities to develop alternative energy sources, battery storage technology, and sustainable climate-friendly energy sources for the future. I
8
All income should be taxed as ordinary income. With capital gains below those of ordinary income, It is now more lucrative to gamble than to open a business and you can write off all your losses. Greed has destroyed us.
At a minimum- all income should be taxed as ordinary income, subject to federal, state, SS and Medicare taxes. Just like workers.
Once we settle on tax rates, we need to do a better job of deciding what is taxable income. That's where the true complexity lies. Throw in transparent ownership of income-producing assets and an army of IRS analysts, and you might start collecting a fair share of tax from wealthy tax dodgers.
Did Company A really purchase a hundred thousand widgets from Company B, or are they both owned by Company C, and all that happened was a change to some names and numbers on a ledger? Did you truck all that stuff over the Sierra from California to Nevada in time for your annual inventory, then truck it back when the counting was done?
We need to put the kibosh to this kind of nonsense.
Of course you'd still have to ram the reform past an army of lobbyists and paid-for legislators. No one said it would be easy.
A terribly misleading presentation with cherry-picked numbers that ignores long-term effects of the disincentives created.
2
Great factual reporting - but one glaring mistake here:
"the richest Americans watched their tax rates collapse."
They didn't "watch" as it happened. The worked aggressively with their money to make it happen. (See: GOP congress, presidents, Supreme Court, Citizens United, etc)
2
Excuse me, the working class really don't know what to do with their money. Give them enough money they escape the center city where rents are too high and buy a house far out in the suburbs. Then they commute with their SUV's to center of town to work. They buy things, contributing to our carbon decline. It's the governments duty to keep them poor. Their carbon foot print is less when they are over taxed and have no money.
Look at this way California gasoline prices are 6 dollars a gallon now, electricity is 20 to 30 cents a kwh. How else do you force them into mass transit unless they can't afford to go to work? If they were smart they'd ride bicycles, eat out every night and not have children. Only the upper middle class and wealthy can appreciate the better things in life and those things can be only be bought. I say the more poor the better. Can you imagine a more perfect arrangement. I think not.
Houston, you have a problem. Gasoline does NOT cost six dollars a gallon. Please, get your facts straight.
@Lynn
Pardon me, four dollars. Must have seen 6 dollars on Drudge or Fox. I pay 2.19 and usually have a Kroger discount, no problem there. Was I spot on otherwise? My sarcasm about the Justice Democrats and Green elitist intersectionality with Republicans stir any emotions with you?
it's a 2% difference and for the wealthy 1% below the "top 400"(arbitrary) they pay for more. To hide these specifics under the rug is dishonest. Make more out of the money going in rather than blindly demanding more.
The argument here is not for fairness or equality in taxation but for steep progressivity to act as a corrective both to how markets allocate rewards and governments, federal, state, and local, have designed tax policy. The better off already pay far more in taxes than those in the lower economic classes so the assumption driving these arguments is simply redistribution rather than treating taxpayers fairly.
5
@Frunobulax
You cannot actually work-to-earn the kind of money a billionaire has. If you were to "earn" $5,000 a day, every day, since Columbus tripped over the Caribbean in 1492, you still would not be a billionaire.
The redistribution started a long time before a billionaire has to pay the IRS.
1
This is typical leftist/socialist ideology that is spewed to incite class warfare. top earners pay 37% to federal taxes, whereas the bottom pays between 10% and 12%. then tax on state and local taxes which disproportionately affect the top earners more, especially considering that many of them live in metropolitan areas (nyc, la, sf) that slam them with taxes in excess of 10%. I left socialist california for that very reason. i do in fact agree that our tax system should be modified - but not in the way this article suggests. we should turn towards a consumption tax system -- the more you spend, the higher % of taxes you pay. the rich will continue to spend frivolously to buy their jets and PH apartments, and they should be taxed at the highest level. low income earners on the other hand should not be taxed for any consumption under let's say [$40k]. then start to scale up.....
6
"In the 1930s, American policymakers invented — and then for almost half a century applied — top marginal income tax rates of close to 90 percent on the highest earners. Corporate profits were taxed at 50 percent, large estates at close to 80 percent."
Yet, the rich did not starve or die. They were doing fine. The rest of the middle and lower income were doing better as their income were increasing.
We made a U turn from that state to where we are today is because the rich who have the power were making the rules of taxation. We have the highest income and wealth inequality today in the country.
Corporations must be taxed where they are incorporated for their global income so that they do not have a tax haven to avoid paying taxes.
Individual tax rates must be made truly progressive going back to the top income tax rates that existed in the 30's.
The extreme greed of the rich is unsustainable in a peaceful society.
4
The main stream media, and Faux News, are telling people that the lower 60% of current income earners, the working poor, the "middle class") will pay much higher tax, which is NOT TRUE. What will happen, after we elect a Democratic government, is that the minimum wage will go up across the country; the rich will pay higher taxes (as they should,) and as people begin to prosper, and the wealth gap lessens, folks will pay more tax, the more money they earn, which is fair. My dad used to say he WANTED to pay a $million in taxes--think of what would be left! Furthermore, if we adopt Medicare for All, the new tax will be FAR LESS than the premiums, deductibles, and out-of-pocket costs we are currently paying. So with higher wages, our lower health care costs will help make us all more prosperous. NEVER listen to right-wingers who are owned by health care companies, and who believe our national life is a zero sum game, where WE get less, and THEY get more. Our country was at its MOST prosperous, for everyone, when the tax rate for the wealthy was in the 50-70% range. (Oh, BTW, the rich won't pay the lower tax rate anymore than they paid the higher one--so they will have to be monitored closely, and all their loopholes closed.) All we want to do is get these people to pay their fair share, which will be much more than most of us pay, because we earn so much less. They will still be filthy rich--nothing wrong with that. Nothing wrong with most of us being more financially secure.
4
No surprises here when we know that Chris Collins (R-NY) said this about the oxymoron-ish 'Tax Cuts and Jobs Act:'
"My donors are basically saying, 'Get it done or don't ever call me again.'"
The GOP has long sold a bill of goods to their voters--that the GOP actually cares about ordinary people. No wonder that the president 'loves the poorly educated.' It's unclear how we change things when so many people refuse to think.
1
The government has failed and only they are to blame. They’ve known about the growing income gap for decades and have effectively done nothing to change the growing concentration of wealth among the wealthy. The government has an obligation to protect a part of humanity from the greed of another… equitable taxation equates to social justice.
1
Even more than destroying unions, evading taxes seems to be the most sacred quest for most wealthy people.
They would gladly and often pay accountants and attorneys $500,000 to finagle ways to dodge $50,000 in taxes.
In the golf locker room, on the deck of the mega-yacht, at the GOP banquet; more than anything else, they would rather boast about all the taxes they should have paid -- but did not.
Then after a quick stop to use the tax-funded sewer system, they are driven through the tax-funded streets, under the tax-funded highway lights, through tax-funded traffic signals, across tax-funded bridges to tax-funded airports where they swagger past tax-funded security people, board their private jet and soar into the sky, their safety assured by tax-funded air-traffic control experts.
Happy landings....
3
I applaud the NYT for giving top space to Saez and Zucman; they represent the new generation of economists who recognize economic inequality as a problem and are pioneers in understanding its causes and solutions.
They have advised Warren on her wealth tax and, thanks to Warren's down to earth explanations and my reading of Saez and Zucman, I have a familiarity with the importance of taxing individual wealth.
The topic of this piece, corporate taxation, is still new to me. How about a follow up piece on getting the IRS to collect that 35% tax from overseas tax havens.
I do understand that political resolve is necessary and that our current politicians are not up to it (Republicans and Democrats alike). The only person in political office with that resolve that I see is Warren. And that resolve is absolutely firm because it comes from a deep understanding of where the injustices of our economy and tax system are rooted. Electing her president will go far towards economic justice. We may never know what "electability" means, but I can see Warren winning all the way to the White House before we can define that word.
1
Yes, we have an overall flat tax system in this country when considering all taxes. But overall, our tax rates are also the lowest in 40 years. And interestingly, we are running deficits, health care cost and college cost is exploding, the economic gains are increasingly skewed away from the working class and towards the 1%. This is a recipe for disaster.
Tax policy changes would help, such as taxing investment and wage income at the same rate, so we have more revenue coming in. That is not confiscatory, that is fair. But even more important, we need policies that redirect unearned income away from ultra wealthy and back towards wage earners that actually work. The whole job creator myth needs to be exposed for the lie that it is. This is a consumer economy, and people with money to spend and invest will grow the economy and create jobs, not a bunch of plutocrats.
3
I don’t believe that “economic justice” is a worthwhile goal. There is no reason for a high-school dropout to earn the same as a PhD. Our family was stripped of all their possessions by the socialist country where they lived. We came to this country with nothing. Why should I pay higher taxes, so that a junkie who was born here and had all the advantages but frittered it all away, feels better about himself? This said, the American tax system is incredibly complicated and full of ridiculous loopholes. I lived in high tax countries, such as Norway, but at least everybody paid. This is economic justice: if you get a dollar from the federal government, pay 10 cents back in taxes. If you want universal healthcare, institute a health tax paid by even the most indigent. Incidentally, hitting shareholders of major corporations will further impoverish the dwindling middle class who have stock investments.
1
@Mor "Economic justice" does not say that a high-school dropout should earn the same as a PhD.
"Economic justice" says that income from wealth (capital gains, interest, dividends) should be taxed at the same way as income from wages, salaries, and tips.
5
@Kevin Brock This is not what the article says. You are advocating a flat tax on personal income, such as exists in Norway (much higher incomes do have a surcharge but the overall tax rate has been going down). The article suggests progressive taxation with the explicit goal of raising more money from the wealthy but saying little about his this money is going to be spent except that it will reduce economic inequality. The way to reduce economic inequality is to offer people education and job opportunities. If they cannot take advantage of these opportunities, I don’t see why I should subsidize them.
@Mor I did not advocate a flat tax. I clearly stated that income from wealth should be seen by the tax man in the same way as income from wages, salaries, and tips.
But to clarify, we should have a simplified progressive personal income tax, on all income from all sources, with a standard deduction tied to the Federal annualized minimum wage.
This is obscene. Listening to people like my parents and rich libertarians, you'd think the tax rate is 50%. Looking at the chart, it's more like 25%. Moreover, given the wealth distribution, you'd think the tax rate ought to be an exponential curve going from 20% at the low end to 75% at the high end. This is reprehensible. This means that the wealthy have substantially more income than the rest of us to invest and turn into even more money. For them, not for us.
Why do we think that our situation will be concurrently improved if the 1% had two hundred bucks in my pocket right now? (Good Will Hunting reference) How on earth did we buy into the myth that tax cuts on the wealthy would trickle down to us and make us better off. After decades of trying that, clearly that's a con job. It just makes the rich richer.
Raise the 1%'s taxes. (In fact, raise the 10%'s taxes too.) At least triple the estate tax, raise their income tax to 80%, and be the corporate tax collector of last resort as the article suggest. That's still a very low tax rate on the wealthy. Tax it all! Tax every dime, every breath! Tax them in ways that would make AOC blush! No tax is too high!
I will only vote for politicians who promise to raise taxes.
3
America decided that corporate corruption is a form of freedom of expression. Until the rules around super PACs are changed, our political system will favor loopholes for the rich.
6
You forgot one other regressive tax: health care expenses. I am so tired of counting health insurance premiums, co-pays, prescription costs, etc as "benefits" given by an employer. We need to call them what they are: a tax on every man, woman and child in this country. True these "taxes" are not collected by the government but by giant, for-profit corporations, but this doesn't change the fact they are a regressive burden on most citizens. And it doesn't change the fact that the wealthy are not paying their fair share of these costs either. Including these costs as taxes would allow us to have a rational discussion about a fair, progressive way to pay for health care for all.
9
That’s what happens when you elect the rich and need millions just to run.
We should abolish political ads for campaigns, hold televised PBS debates, and get rid of Citizen’s United. Corporations are not people, they are organizations that are motivated by profits; and they have turned our democracy into an oligarchy.
10
The Times: "It is absurd that the working class is now paying higher tax rates than the richest people in America."
Well said.
Now, add this to the encyclopedic list of reasons to impeach Trump.
6
I'm a retired orthopedic surgeon, I guess a top 5% -er and one them liberals, as my mostly republican former associates would say. One of them always told me that there was a mechanism in which I could volunteer to pay more income taxes if I so desired. I never did.
I agree that we should have a more progressive income tax.However I would not want my tax dollars to go to the immoral, bloated, outrageous "Defense" i.e. war budget of almost $800 Billion to continue to support the military -industrial complex.
See America’s Indefensible Defense Budget
Jessica T. Mathews
"We are now at the point of allocating too large a portion of the federal budget to defense as compared to domestic needs, tolerating too much spending that doesn’t buy useful capability, accumulating too much federal debt, and yet not acquiring a forward-looking, twenty-first-century military built around new cyber and space technologies. We have become complacent and strategically flabby about adapting to a profoundly altered world. Major change will require a quality of leadership we haven’t seen in a long time, from men and women in the White House, Congress, and the Pentagon who are respected for their knowledge and national security experience and who are willing to pay a political price for what must be done. Even then the process will be tough, slow, and painful, but it is surely overdue."
4
Making the ultra wealthy great again!
I realize we have several other higher priority news stories going on at the moment, but the Democrats should pounce on this development and should be plastering the factoid "The ultra wealthy now pay a higher tax rate than working Americans" all over the airwaves throughout swing states 24/7, from now until election day.
2
The wealthiest 1% of Americans, annually earning no less that $750,000, can afford to pay a fairer share of taxes without impact to their livelihood. The proportional math is simple to understand.
Ten percent taxation for a person making $30,000 a year ($15/hour) is $3,000 which is a considerable portion of income.
Ten percent taxation for a person making $750,000 annually leaves them with $675,000. Thirty percent taxation leaves them with more than half a million which is still a lot of money.
The rich can, and should, patriotically pay a higher tax rate than lower and middle income Americans because they can afford to do so.
In a related side note, apparently the recent GOP's $1.5 TRILLION Tax legislation is awarding the wealthy with huge refunds and did not close loop holes allowing them to avoid paying even the small percentage they should. Plus it has not paid for itself and raised America's deficit by $2 TRILLION. Republicans are clearly not fiscally conservative.
5
Everyone talks all the time about the 1% and how they will fight any of these proposed changes to the death. I actually think there should be more focus on messaging to those in the 80th to 95th income percentile ranges. These are the everyday affluent people who live in two worlds. They think of themselves as just middle class, even though that's not really true. They live comfortably, and have a good stash in their 401K's, yet they may feel insecure because their affluence is based on current salary income rather than returns on capital. They feel like they are already being taxed a lot compared to others, and based on the data in the story, they are mostly right -- the total burdens for their income groups are among the highest.
These folks are numerous enough, and politically aware and active enough, that their votes matter -- a lot. They are the suburban voters you hear about in every national or statewide campaign. Because they are affluent but insecure, they are highly vulnerable to scaremongering that tax equity will target THEM, and knock them a rung or two down on the ladder.
However, the authors' analysis shows that under the proposed reforms, they are OK. The 80-90 percentile range sees a slight decrease in overall taxes, and the 95 percentile gets only a small 2.4% bump up. This needs to be shouted from the rooftops. These are the Montgomery County, PA or MD as you wish, kind of voters the Democrats need to win.
3
Our plutocratic corporations have gotten away more than paying token taxes. They also stopped pensions paid entirely by the company and they stopped paying for healthcare in retirement. These benefits could easily be worth $50k yearly for the pension and $20k annually for healthcare. When crafting an equitable tax
scheme, I hope the architects replace this $70k annually a professional worker once had, before their compensation was pocketed by the robber barons of this 2nd gilded age.
2
Supply side economics only works if supply is unlimited, but it is not. Our planet is quite obviously telling us so. We cannot continue to fuel growth or create real growth through consumer demand or capital investment. We need to shift the burden of taxation to capital and income from capital and away from work, and we need to encourage growth through local sustainable enterprises based on that most renewable of all energy forms, the human being.
1
If only this narrative was true. It’s not. A married couple filing jointly with $75,000 of taxable income (meaning their gross income is around $100,000 or so....) pays a top nominal rate of 12%. A couple with taxable income pays a top marginal rate of 24%. A couple earning more than $322,000 in taxable income - and there are many who do - pay a marginal rate of 32%. One in three of their dollars above this limit is confiscated by the government.
The authors frame their argument around the burden that the so-called payroll tax places on low income families vs upper income earners. But let’s be clear - the payroll tax isn’t a tax. It’s a premium paid into the Social Security & Medicare system to provide future benefits for people when they retire. Lowest income people need it the most too.
It’s true that the top marginal rates of the 1960’s were substantially higher. What’s not discussed is that the volume of deductions & loopholes was also substantially higher - nobody paid 70% rates in the 1960’s. In fact, the ability of ‘the rich’ to shelter income so well is why Congress created the alternative minimum tax (AMT).
This is a convoluted exercise to argue for transferring more capital from the productive private sector to the hands of feckless & inefficient government. It’s a very poor idea - shallow in thought and fraught with all kinds of unintended consequences.
5
@Once From Rome Let's indeed end confiscation of wealth by the government.
What then would be printed on the currency? Once from Rome's Bank Note?
The money doesn’t go to the feckless and inefficient government. Unless the government buried the money in the ground, it’s spent on things the government is already doing. On our behalf. Because we elected it to do that for us.
Raising taxes on the rich doesn’t change what the government does. It changes who pays for it. Let’s at least make that argument honestly, whether or not you think it’s wise or just.
3
@Once From Rome Sure. The fire department or the police would be much more efficient if they were private enterprises and if you had to call and pay 1000 $ for them to come extinguish the fire at your house or if someone was trying to burglarize .
That is about as efficient as your private health care system . The best in the world ...in cost !
2
Well, the authors need to write the article, so they need to talk about taxes. And the data is great.
But, I think it would be easier to raise wages through legislation. Minimum wage is a start, but higher paid workers need to get paid more as well. White collar unions, raising federal worker pay, contractor pay, tax law, lots of ways to do raise the wages of all Americans.
2
"It is absurd that the working class is now paying higher tax rates than the richest people in America."
If true that reads as a great reason to lower tax rates on the working class; so they too can benefit from lower overall tax rates.
1
Four decades of trickle-down supply-side voodoo economics have delivered incredible wealth to the wealthy, and little for working class Americans. According to one study, the wealth (measured by the value of assets) held by the top 1% of households in the US has grown from about 30% in 1989 to 40% in 2016, while the wealth of the bottom 90% has declined from 33% to 23% during the same period.
Tax policies that punish income derived from wages, salaries, and tips while rewarding income derived from assets (capital gains, interest, dividends) contribute significantly to the growing wealth gap.
That's why, in my opinion, any talk of tax reform should start from the basic premise that all income, from all sources, should be viewed equally in the eyes of the tax man.
3
Most revealing and not surprising as stated, but the facts and figures make the stark analysis here clear. Texas no state income tax and relies on the Legislature, in session every two years and very conservative, who have been stingy in past years to pay more for education and social services (in spite of insisting women not be allowed to choose their own reproductive rights), thus putting the burden on homeowners, where property tax in growing places like Austin have very high tax rates, pushing out many parents to seek housing where it is affordable. Democrats have to take the hit for the most recent tax cut pushed by Trump. How does anything change? Warren is often cited as the best at these arguments and I consider her an excellent choice with perhaps not the best to beat Trump. On the other hand, maybe Trump provides an opportunity to let the best woman win as he stumbles and falls toward November. Reform is needed. Four hundred taxpayers equal the lowest 50%! Incredible! Plutocracy and it ain't even a planet!
Excellent analysis; completely on point. However, what this Opinion piece does not address is the mass hypnosis of Americans. If you work all of your life, and manage to "save" $100 or $200 thousand, you may think you have more in common with a multimillionaire than someone who can be homeless at any moment. One family or medical emergency and the nest egg is wiped out. Add to this that most Americans try to live on meager savings and Social Security in retirement and you have a more accurate economic portrait of what it is to be an American.
4
"This mechanism can be applied tomorrow by any country, unilaterally. " Only the United States can do so unilaterally. If another country were to do this (see France and its tax on internet companies), the US would object, and being the world bully that it is, threaten the other country with increasing punishments until either the other country renounces or is in economic ruin.
America exports its love of inequality to other countries, and there's not much other countries can do about it.
1
I appreciate the difficulty of gathering data from a significant enough proportion of taxpayers to capture the real impact of our perverse, regressive tax system, but as a member of your 9% (earning, not passively collecting, through dividend, interest and capital gains, not much more than the average noted), I pay more than a third of my income in federal, state, local (real estate) and payroll taxes (not including sales or excise taxes). I'm not complaining about my share of our tax burden, though I'd prefer we use our tax revenues to help people rather than feed corrupt, incompetent, greedy defense contractors, subsidize big oil and big agra, allow big pharma to rip off the sick and allow billionaires to pay tax rates that are half the tax rates for earned income on money "paid" on their money. That's HOW the wealthy became so much wealthier over the past 50 years. BECAUSE of favorable tax rates and corporate welfare. But while I'm more than willing to pay my fair share, it is indeed disheartening, and infuriating, that someone who is admittedly more fortunate than 90% of the country, pays over a third of my earnings to fund our social contract while billionaires pay far, far less. They wouldn't be billionaires were it not for the opportunity, support and protection provided by this country and the government programs that we, the people, pay for. The rich should look to the fall of the Roman Empire and the French Revolution as instructive lessons to where this might end.
4
The top 1% of earners pay about 37% of all of our taxes. It's convenient to think of these earners as those who inherited their wealth. In fact, many of them succeeded at great personal cost, sacrifice, and risk.
I'm grateful to these people because, frankly, I'd prefer to play it safe. It's just a personality difference. But if these risk-takers didn't exist the country would have 37% less in taxes to put to use.
Numbers can be manipulated to support different claims. Read widely and to think critically.
4
@Think twice The top 1% of earners earned about 20% of the adjusted gross income. Just sayin.
3
@Kevin Brock
16% on my chart, and pay 40% income /26% all Federal.
https://www.taxpolicycenter.org/model-estimates/baseline-share-federal-taxes-march-2017/t17-0056-share-federal-taxes-all-tax-units
Thanks. This is the real issue in this campaign. Only Bernie pins it and nothing Warren says will touch it. But I’m for Biden. First we take the presidency, then we build toward tax reform. It’s a long haul issue. My fear is for the youth vote. I was in SDS from the beginning. Our naïveté is astonishing in retrospect; and today’s youth are even worse.
Once again the tax cuts given to the top 5% and even more detrimentally to corporations, have not trickled down. Trickle down economics was long ago debunked, but makes for great sound bites for those who don’t spend any time reading history or following economic policies. The rich simply invest more of their money in order to grow their wealth (and sometimes spend some of it to give their kids even more advantages, like gaining entrance into elite universities), while corporations buy back stock instead of increasing worker salaries or improving benefits. How many times are we going to have to go through this exercise in futility? Corporate welfare has become acceptable while helping struggling individuals is frowned upon in our society. We should be ashamed of ourselves as a country, when we tolerate the phrase "the working poor". Yet the economic policies of the Trump administration have only served to create a greater divide between the haves and the have nots. Kiss our democracy goodbye when we no longer have a thriving middle class.
3
"Redistribution" from the poor to the rich -- only in America, land of "trickle down" and making sure that our wealthy "job creators" are highly incentivized with low low taxes.
Republicans like to portray most taxes and government spending as "redistribution" and thereby scare voters into thinking their income is simply being taken from them, and given away to those of lesser means. This is far from the truth in so many ways: redistribution in our country mainly goes from the middle and working classes to the rich; the benefits of Social Security, Medicare, and education are a social safety net, not redistribution.
I'm glad this opinion piece did not use the term "redistribution" but we know that Republicans will, as part of their campaign against Dems and their "socialist" or "communist" policies.
2
Another form of taxation are fees. Not just fees from the government but fees required to be paid to corporations to access your own money or sit on plane or power your house or telephone and even, in some cases, drive your car. Some fees may be optional, and some are technically optional but realistically are difficult to avoid, but fees are a regressive reality the reduce the amount of money available for people to spend or save for themselves.
1
What does it mean that if each of the top 400 richest people have as much wealth as 1,308,440 of the bottom 50%, and we also know that the bottom 50% have virtually no wealth?
1
@Shend
If on average each of those 1,308,440 in the bottom 50% has even $1,000 of wealth (in other words, virtually none), that adds up to $1.3 billion dollars of wealth for the 1 person in the top 400.
It's called math.
We can’t tax our way to anything but utter ruin. Taxes have become pretty much a vehicle for politicians to fleece the people. Even the best intended measures wind up being a bottomless pit to pour our wealth into. Yes, some taxes may be necessary, but they should be handled very carefully and should not be seen as a cure-all for every problem.
3
Thank you for the truth, based on facts and not lies. Ronald Reagan began the Republican attack on our progressive tax code when he embraced trickle-down economics. Of course, he was a pitch man for "America's corporation" (General Electric) at the time. The attack on the progressive tax code caused our huge inequality today.
Unfortunately, the GOP bought in to regressive tax policy that confronts us today, where the top few percent have wealth equil to the total wealth of the bottom 50%. It has been said that we can have a government where the top few percent control the wealth and income or we can have a democracy, but we can't have both.
Our current tax policy is straining our democracy and the Republicans have to be voted out of office and we must re-install a progressive tax code.
I think I understand the methodology better now.
But it draws its bottom line conclusions about tax progressivity essentially from this “top 400” group, as the chart looks moderately progressive otherwise. So we need to be careful about what that means.
Are the “top 400” the top income earners of that year or the wealthiest individuals by net worth? The article seems to use both terms.
You would expect the top income earners in any given year to be from one-time windfalls from the sale of a valuable business. Hence why those folks are paying mostly long term capital gains in that year. But that would be a non-recurring event presumably.
The wealthiest 400 would be more static and many probably only see paper gains—hence why a wealth tax is considered a good idea by many.
This analysis would probably only be complete if it presented a dynamic picture over say 10 years or a longer snapshot of a person’s income over time.
And this isn’t to get into tax credits and transfer payments which muddle the whole thing.
4
@Mmm
“And this isn’t to get into tax credits and transfer payments which muddle the whole thing.”
If those elements were included, the authors might not get the conclusion they want to get to.....
If you are going to look at taxes this way you also need to include amounts given by the top 1% in charity, donations and foundations. If not the claim on income inequality is not represented appropriately. You also need to look at transfer payments which offset tax burden.
Irrelevant. Many poor and middle class people give post tax income to charities too.
1
@Pablo giving $5 at church is very different than giving $100M to a charity, university or foundation.
https://www.forbes.com/top-givers/#329f218a66ff
@Just 4 Play
Those charitable contributions were treated as a tax deduction. Those taxes then had to be paid by someone else like you. Did you want to contribute to their "causes" even if indirectly?
There are several problems with the recommendations. Income is not the same as wealth. While top 400 earners probably have a lot of accumulated wealth too but that’s not the case for those in the lower brackets.
One example is someone in their 60s who toiled all of their life to build a small business, barely making their ends meet, finally sells their business for say $1.2million. There should be a provision for them.
A $200,000 income in San Francisco or Manhattan is not the same as that in Hillsboro, Kansas. There should be adjustments for cost of living.
It doesn’t address inheritance. It also doesn’t address non-earned income adequately at all brackets.
1
@GV
“One example is someone in their 60s who toiled all of their life to build a small business, barely making their ends meet, finally sells their business for say $1.2million. There should be a provision for them.”
There is a provision for them: the long-term capital gains tax. The reason it’s lower than the top marginal tax rate is to provide some offset for the risk and belt tightening that most business owners endure.
The root of just about every problem we face today is money, specifically money in politics.
Getting money out of politics won't instantly solve all our problems - but until we get money out of politics, we may in a skirmish or two, but won't be able to make any serious headway on anything.
2
Short of nation-wide mass protests, coordinated mass strikes across industries, and coordinated mass non-payment of taxes as a protest measure, nothing will ever change. Most of us are too busy working and paying more taxes than the Uber-wealthy to have the time, energy, or will to protest. And that's just the way 'they' want it.
1
When we speak of taxes it is important to include state lotteries in the conversation.
Lotteries are a form of taxation and that type of tax falls most heavily upon poor people desperate for a big win that hardly ever comes. Lotteries are a tax on the poor and on people who don't understand the laws of probability and the concept of independence in chance events. As such, they are regressive taxes.
4
Strangely for the taxes to become less regressive, the poor must reduce consumption. Really poor people would be unable to afford cokes and other junk food that carry consumption taxes. They should instead choose to cook low-cost vegetables and legumes, like their immigrant ancestors. They may thus end up with some savings. At any rate, the lowest earners are less and less able to buy houses from now on. So the property tax will go away.
1
@Inveterate Really? So everyone in the 90% should buy legumes and quit Coca Cola as the solution to the gross inequality we now have?
Wow, talk about out of touch...
@Inveterate
Couldn't they be paid a living wage?
Any contributor to the NYT op ed page would rectify the "problem" by increasing only the taxes that the top 1% pay. Of course, any problem determined only by percentage rather than raw amounts is suspect statistically.
Reducing consumption taxes would go just as far. Take away sales tax on groceries, alcohol, and tobacco and the bottom 50% will do just fine. Or give a tax credit based on income for the same result.
4
I wish Democrats would organize more reasonable and less extreme tax increases on the wealthy. I don't view any potential tax increases as a punitive measure to punish the rich, but rather as a measure of fiscal responsibility and as a measure to ensure the promise to working households that a lifetime of hard work will result in a secure and stable retirement and not poverty. In essence, ensuring the solvency of Social Security, Medicare, and Medicaid.
Let's separate for a moment the productive rich who actually work for a living from the paper pushing rich who sit on trust funds and/or long term capital gains. The former is taxed under the regular tax code with rates up to 37% plus payroll taxes on top of it, while the latter enjoys tax rates of 15-20% via the capital gains tax code. How is that fair? We currently tax work and productivity at higher rates than capital gains.
The same goes for corporations. They're taxed at a max rate of 21%, while many small businesses are taxed at higher rates up to 37%, and even those who enjoy the Trump tax cut (not all small businesses) still pay rates over 29%. Why are we taxing small businesses at higher rates than large corporations?
How about taxing all income under the same tax code...i.e. apply the current earned income tax rates to capital gains, and make no distinction between the two? Note that retirement plans such as 401ks and IRAs would be unaffected since these are already taxed as earned income.
1
Food for thought. The proposed changes to cut down on inequality are easier said than done of course, as our stagnant wages attest, at times not even as living wages (demanding a second, even a third, job, to make ends meet). As it stands, the rich and powerful are paying less taxes, proportionately, than the poor, a sort of reversed Socialism. This, if not corrected, shall remain antithetical to democratic values (not that the corporate world is looking forward to sharing the social and economic pie more equitably, a death knell to solidarity, and to integration of each and all of us in this experiment of social justice). Incidentally, this urge to increase the GNP 'for ever' in the current global capitalism, and based on consumption, is very detrimental to austerity measures, vital to reverse the current trend to castigate mother Earth and accelerate the harm via man-made climate change. How much longer can we remain this shortsighted, perhaps when there is no cure but for the crying?
The upper 50% of people do pay all of the federal income tax. That is not the problem for the lower 50%. It is state and local taxes, property and the myriads of add on taxes in almost every expense we have. I agree with asking the top richest Americans to pay more but economists should look at what our communities do with all the regressive taxes they collect. In my community, they give us poor schools, incompetent public employees, awful roads...I could go on.
5
@Landy - The upper 50% of people do pay all of the federal income tax.
All? That's just not true. Even the charts show that.
I paid income taxes on minimum wage when I was young and many years later my daughter had to pay her income taxes and she was nowhere near topping the 50 barrier.
But wait, are you saying regressive taxes give you poor schools, incompetent public employees, awful roads. Is that an argument for progressive taxes? Or for not living in a red state (or wherever "east and west" is)?
1
Actually when compared to other countries, there are more people living in the United States in large homes with backyards and multiple cars.
I don't have statistics on it but would love to see some sort of comparison on that topic.
The European countries in particular, most people have more vacation time and healthcare obviously, but many are used to living in apartments and may or may not own one car.
How many colleges do we have that are operating at full capacity, how many sports events do we see totally sold out in huge stadiums both college and professional, and concerts in huge arenas. How much do Americans spend each year in online betting. How many resorts in the United States are sold out over the New Years holiday, at the peak time for prices, that includes Hawaii.
I know this article has to do with taxes, but there are really so many people doing well in this country, that I would like to see real numbers as to how many people are in the zone of being overtaxed and living hand to mouth.
@gratis Sweden and Norway are still small largely homogeneous countries. Can't compare to a physically large, populous, highly diverse nation with large scale free flowing immigration.
These countries have a more defined 'general welfare' so their social contract is much stronger. The U.S is always in constant flux.
We need to simplify the tax code and get rid of the loopholes.
3
@CNNNNC
These are not reasons. They are excuses.
I am not an economist, I am a data driven engineer. I know of no economic study that says population diversity is a negative contributor.
As for size, all of Western Europe has policies not so different from Scandinavia, and gets not so different results, including balanced budgets. Denmark exists in this real world. It has not been shown that this model cannot be scaled up. No evidence exists either way. Your point is speculation not supported by data.
Politico-economic system exist on a spectrum. We can look at data along the system and look for correlations. It is easier to argue a high tax country does better when measuring both growth and the welfare of the population than to argue high tax hinders it.
Lastly, "the problem with socialism is that sooner or later you run out of other people's money". High tax Scandinavia runs a balanced budget. Norway runs a surplus because of their socialized, by definition, oil. The US has a big National Debt. The problem with capitalism is that sooner or later only the rich have money.
3
As always this study ignores the 7.65% of FICA and the 5% or more for state industrial insurance and unemployment insurance which the government claims is paid for by your employer. As a former employer who did payroll, I paid all the employees federal income tax, FICA, unemployment insurance, and State Industrial Insurance on their behalf. It's strictly an accounting procedure as to whether the government claims I paid it or the employee. The form from Unemployment which I filed had the individuals name and SS number on it. If I paid it in their name, why isn't it considered when we add up how much tax was paid? When you add that 12% onto working peoples wages, it changes these numbers even more. This also ignores the costs of medical insurance which is now the most expensive it's ever been. Working people are being taxed at close to 50%, but no one wants to acknowledge that. Why can't we ever admit the truth when it comes to this topic?
4
@Jfiddle From the article: "Our data series include all taxes paid to the federal, state and local governments: the federal income tax, of course, but also state income taxes, myriad sales and excise taxes, the corporate income tax, business and residential property taxes and payroll taxes. In the end, all taxes are paid by people."
In addition, the huge graphic in the middle of the article states: "How combined federal, state and local taxes fall on American adults, by income percentile."
2
@Kevin Brock These studies all claim that your employer pays half of your SS and 90% of unemployment and state industrial. If you're employed, you're paying it the exact same way you pay the rest of the taxes deducted from your check. Wake up, you've been misled.
Why not just get rid of payroll and consumption taxes? Seriously, Payroll and consumption taxes make up more than half what the bottom 80% pay in taxes, and almost all of what the bottom 50% pay in total taxes. You pay for the loss of revenue in not collecting payroll and consumption taxes via highly progressive income, capital gains and corporate tax rates.
4
What I don't understand is why the tax rate on capital gains is much lower than the tax on wages? This was passed during Clinton time, of course initiated by Republicans. Hopefully this injustice will be corrected by Trump after next election which will solidify working class people to Republican party.
2
I agree that the highest earners (say, the top 10% - which includes me) should be paying more in taxes. The first "fixes" should be to eliminate the preferred tax rates on dividends and long-term capital gains (and I say this as someone who, in retirement, receives about half his income in this form) and to eliminate the "carried interest" loophole.
That said, I have a nit to pick with the professors' analysis. Treating the whole of payroll taxes, half of which is paid by the employer, as part of the employee's tax burden, strikes me as inappropriate. I assume the logic is that if the employer didn't have to pay its share of the payroll tax, it would increase employees' wages by that amount - but that strikes me as over-optimistic.
The employer's share of payroll taxes is not a tax on the employee, but a tax on the business and, as the authors point out, business taxes are really taxes on shareholders - who are, by-and-large, the wealthy.
Further, payroll taxes are paid to support specific government programs - mainly, Social Security and Medicare. And lower-income workers can expect to receive benefits from Social Security disproportionate to their contributions.
3
@Gary R When I saw the graph, the misleading numbers for payroll taxes struck me as well. The individual employee is not paying 10%+ of their income on payroll taxes. It is 7.65% max, and that includes medicare tax. It's also not clear if EIC is calculated into to the Fed Income tax rates. Most of the lowest paid workers actually have a negative fed tax rate when EIC is included.
All that said, the top 400 should pay more towards the funding of fed, state, and local governments. Some sort of wealth tax is warranted.
A piece in the NYT about a year ago contrasted the Average Tax Rate for businesses vs the Marginal Tax Rate of 35% before the Trump tax cuts. While the marginal rate of 35% is very high compared with other advanced countries, it turns out that the average business tax rate, before the tax cuts, was 18.1%; the average of advanced countries was about 19%. The phenomenon occurs because of the deductions and loopholes passed by congress over the years. At some point we will learn what the Average Tax Rate is for U.S. businesses after Trump tax cuts. I suspect it will not go up approaching the new marginal tax rate of 21%. How low will it go?
The question is why can't our elected leaders be guided by science, established facts and empirical data? A bigger question is why can't voters be guided by these same factors when electing candidates?
In the first case it's all about money and winning elections. The second case is more difficult but probably starts with a well informed, curious electorate. It is not in the best interests of the Republican party to spend money on education.
The primary goal of taxes is to support the society, not fairness. I look at our infrastructure, our National Debt, and they are wanting.
Adam Smith said that successful societies maintain and improve themselves so as to hand to the next generation a system as good or better than the one they received from their forefathers. That is his definition of successful, a society lasting multiple generations.
And that those who benefit disproportionately should be taxed disproportionately so as to be able to afford this maintenance and improvement, so the society can be successful.
History show us there are no successful small government, low tax successful societies. The rich just hollow them out.
4
Including payroll taxes (Social Security and Medicare) skews the results as people recover at least some of the money when they start collecting them (Social Security and Medicare) in their later years or when becoming disabled. How much of a difference would there be, if this was taken into account?
1
Majority of Government programs benefit the people be it education spending, medicare spending, infrastructure building or police protection. In this sense any tax money return to tax payers in one or another form. According to your logic we should not count any taxes as a taxes.
1
@Michael Houstle - people recover at least some of the money when they start collecting them
So when I get sick today and I am presented a bill I don't have to pay it with what I am left with in my check today but can tell the doctor's office "look, I'll recover some of the money I don't have now in a few decades and I'll pay you then with it, OK?"
@yulia
you are missing something impoertant ... you write " In this sense any tax money return to tax payers in one or another form." which is NOT TRUE ... it returns to the people, but lots of it goes to people who are not net taxpayers at all ..
i.e. welfare in all its nefarious forms.
1
Thank you for this illuminating editorial. It is about time this paper had an honest conversation about the gross inequality manufactured in this, the "wealthiest" country on earth.
Perhaps now the NY Times Editorial staff can reflect on how this editorial matches with their own expressly stated intention to attack, belittle, and marginalize the one presidential candidate who has actually put this issue at the front and center of his campaign, in 2016 and again in 2020. But, I doubt it. Because, ultimately, this paper is more than willing to run one honest editorial, so long as it returns to fighting the party line of the "mainstream" Democrats who have no problem whatsoever with the absolute devastation of the working class at the hands of the wealthiest sectors of our society. They just put a happier face on it.
4
Seems to me that what this analysis shows is that we're ALL paying higher rates than the 400 richest families in America.
There are, however, 2 ways to solve this problem. The first is the obvious one -- charge people at the top more. But what drives rates down for wealthier people is that consumption taxes tax up a rapidly decreasing percentage of income. They are already bearing a disproportionate share of income taxes.
So maybe it would be be effective to reexamine the effect of consumption taxes, which appear to be the largest tax burden on the bottom 50%. Ensuring that sales taxes are minimal on essential goods and services, with states stopping the use of sales taxes as a revenue grab. And we have to look at things like taxes on gasoline, which likely disproportionately impact people at the lower end of the scale.
People are going to look at the payroll tax for a "quick fix." But remember that the payroll "tax" was not sold as a tax. It was sold as a "contribution" to a retirement program that covers ALL Americans. If we want to admit that's not what it is and call it welfare for poor old people, fine. We just need to be careful that it doesn't become a "reward" for people who COULD have saved more, but chose not to. And we need to remember that if people are paying on their entire income, we're increasing what they will receive in retirement.
1
Actually, 'save' for retirement is not an easy task, because of thousands of uncertain factors including uncertainty of how long you live, what kind of health you will have, what inflation will do your saving, if you put your money in market, uncertainty of market. The today's system is actually better than 'saving' because it is automatically adjusted for inflation. And yes, that is system of contribution, but so any taxes are contribution. We contribute to police force, to protect us, we contribute to teachers to educate our children, we contribute to infrastructure to have decent road, we contribute to welfare, to make sure that when we will be out of luck, we will be able to survive.
@JM
Social Security is not a tax, it is an insurance premium which provides life and disability benefits while culminating in an annuity at the end. People don't save. Data shows most families do not have $400 to cover emergencies nor do they have sufficient (if any) life insurance. Thus, in the end, they become a burden on society. It's called Social Security for that reason.
The GOP will always continue to sell trickle down economics as a fix all when in reality it's been a failure from the start. They support welfare for the wealthy by making the poorest among us foot that bill. Citizens United, NRA, and the Heritage foundation spend millions and millions of dollars annually dedicated to ensuring they pay the least while receiving the most. Our system is broken largely in part due to them...
12
It is long past the time we jettison the paleolithic, republican way of governance. Trickle down doesn't work. We need to invest in the future...education and infrastructure, put people in charge who believe in good governance, who cap their careers with public service rather than using their position as a spring board and to line their pockets.
Trump and McConnell are 2 examples, redolent of a by-gone era in so many ways. Time for new blood and leadership.
3
That so many working class people still think Republican tax cuts are good for them just once again reinforces H.L, Mencken's old dictum that nobody ever went broke underestimating the intelligence of the American people.
I'd bet that not even a majority of Americans even know that there is a cap on earnings subject to Social Security tax as most never come close to the cap. Thus they fall for the "kindness" of Republicans who say they are willing to forgo paying SS to the wealthy but are never willing to lift the cap which would hurt them financially far more.
3
Only a wave election can bring about necessary reforms to correct the obscene inequality problem in this country. Even then I can envision the Supreme Court with it's Federalist Society majority finding first amendment reasons to protect businesses from paying their fair share of taxes.
1
@Al Singer
If there is a wave election, wages can be raised through legislation, redefinition of federal pay scales (which will affect the private sector) and other mundane means.
SCOTUS need not get involved.
@Al Singer
They can’t if the legislature actually legislates. To do this republicans most be voted out: We must also end the mob rule by minority from the electoral college to disproportionate representation in the senate.
The analysis is skewed. By including payroll taxes, which ultimately provide benefits back once you reach age 65 for medicare and when workers start collecting social security. Social Security wage based is capped when taxed as are the benefits. Medicare is not capped, yet high wage earners get the same benefits as low wage earners. Don't forget that payroll taxes are also matched and paid by employers, who do not receive benefits. I'd like to see this analysis with payroll taxes backed out, and I guarantee it doesn't achieve these liberal economists agenda.
4
Are you talking about a business or an individual?
@Jeff H Really ? Why in the end then, 10 % of the US population own more than 70 % of the wealth ?
A magic trick ?
@Jeff H
What's skewed is you concern. The rich are not screaming about the 1.5% Medicare tax. They know, without Medicare the burden of healthcare would just show up as another tax somewhere else. Probably a state or local one at that.
Why not just have the same tax rate for everyone -- no loopholes, no exceptions?
4
@John Jabo To those much is given, much is expected...a flat tax is unfair when those who started with the least and have the least pay the same rate as those with the most.
4
@Barbara The wealthy will always control the Congress and the laws governing taxation. Life is unfair and so are taxes. A flat tax might be the best we can hope for.
1
@Barbara
The least pay more for everything. Often people who can pay for a year of something pay less than those who can only afford month to month for example. So taxes aren’t the only aspect to this hurting the little guy aspect. When you're poor you are charged more for everything. It’s almost as if capital actively punished the poor by taking more of their money. This is no different than a shadow tax from government.
While a very important point, the biggest sham is in corporate taxes, where companies with hundreds of millions operate at zero tax liability. Companies like Verizon are allowed to "instantly deprecate" assets to avoid taxes. Nobody but corporations (and the ultra-rich, who can use a business to stash wealth) can do this.
4
Saez and Zucman have new data and antiquated notions of tax justice. Wealth, income, and consumption have tax properties that need to be blended to encourage family security, maximize GDP, and achieve the lowest tax rates.
The only wealth tax scheme worse than the 2019 Emmanuel Saes – Sen. Warren 2% wealth tax on the very rich, was the Donald Trump 14.25% wealth tax on the very rich that formed the central focus of his 2000 book The America We Deserve.
We need to think outside the box and imagine real tax justice with an inverse tax on wealth and income that offers lower payroll/income tax rates to those who elect to pay a higher wealth tax rate.
Analytical minds will quickly grasp how lower and modest wealth families, and successful high income to wealth entrepreneurs (perhaps 90% of the population) would elect to pay the highest wealth tax rate in exchange for the lowest payroll/income tax rates. Families with more wealth than necessary to sustain a modest retirement (over $1,000,000 outside an IRA/401k) might find even a 2% wealth tax to be too much and opt for a higher income tax rate – especially retirees on a modest fixed income. Tax justice demands that those with excess wealth and the lest productive (low income to wealth ratio) pay higher tax rates. The government should never subsidize failing business models and poor investors.
We also need a very low value added tax (perhaps 4%) to tax consumption and keep wealth and income tax rates to a minimum.
2
@Eugene Patrick Devany
Any rationalization of what you are suggesting? At the end, consumption should not be taxed but wealth should heavily be: it incentivizes to buy and thus create manufacturing / services job.
1
@FiX
A 4% VAT would be the lowest VAT rate in the world. When we add a wealth tax option there may be a counterproductive and perverse incentive to consume in order to reduce accumulated wealth. Thus a small VAT counters unnecessary consumption and encourages wealth accumulation.
I also invite you to consider modern credit cards that typically offer 2 to 5% cash back on purchases. The VAT captures this modest non-taxable income and enabled the wealth and income tax rates to be lower then they otherwise might be.
The numbers over time also suggest that the growing wealth gap and lack of family mobility over a work life is a more serious problem than consumer spending to stimulate the GDP.
1
"... imagine that the corporate tax rate in the United States was increased to 35 percent and that Apple found a way to book billions in profits in Ireland, taxed at 1 percent."
Actually we don't need to imagine that. Ireland is a tax haven that Apple and dozens of other large multi-nationals (primarily tech. firms) use right now.
3
@Mikeweb Yes . That is how the US economy cheats on Europe. All big US tech firms are in Europe, paying no taxes and invading the markets, collecting billions back to the US without 1 $ in tax. 20 % in US fiscal fraud in the EU annual budget.
2
@Mikeweb
Then be smarter. Do they operate and sell products here. We live in the computer age. It can be done. We track everything and all the income in those businesses is tracked to the penny.
They must start supporting society. There isn’t much time left and fascism is on the board. Would they rather be rich in a country that taxes them heavily and still have their life or live in a country where people like Trump can strip them of all wealth when they attain a lock on government?
If they believe they can control society post democracy they are fools. Our current society will not survive the current upward wealth distribution. It’s obviously not tenable when wealth is concentrated.
1
Let's take two people.
Person 1 makes $1,000,000 a year.
Person 2 makes $30,000 a year.
Person 1 and his group pay 70% of personal income taxes in America.
Person 2 and his group pay 0% of personal income taxes in America.
The economy drags on and on during 8 years of a federal government with their boot on the back of the American economy and American workers. We're told this is as good as it gets..and get use to it. It's the "New Normal" (1.5% GDP growth).
A new guy comes in...sees the malaise in the economy and decides we need a little gas in the tank...and economists largely agree that tax cuts put the gas back in the tank.
So we see a 5% reduction in taxes.
Person 1 ends up seeing a decent reduction in federal taxes, but because of the cap on State and Local Taxes, they end up paying about the same effective tax rate.
Person 2 gets a 5% cut in taxes too, but because they don't pay any federal income taxes..they get nothing from the tax cut...creating the illusion for Democrats that this is not fair.
When you cut taxes evenly for everyone, guess what?
People who pay more in taxes and make more in income see more in a tax cut.
Those who don't pay taxes don't get their taxes cut because they don't pay any taxes.
If Congress wants to increase taxes, Nancy Pelosi and her crew in the House are perfectly capable of passing legislation which changes the tax rates.
They've passed tons of other bills that have no hope of getting signed into law.
What's stopping them ?
2
@Erica Smythe
Such a bad argument. The ultra wealthy pays less as a % than the poor and that is what is called a regressive tax system. Analyzing just one piece of the puzzle is clearly not appropriate here.
10
@Erica Smythe
The lie: Everyone got, or got the same tax cut.
The other lie: Those other people don't pay taxes, or even work, only me and fellow Republicans work and pay taxes.
2
@Marie
Before commenting maybe you shoud revist the Times chart on the tax cut.
https://www.nytimes.com/2019/04/14/business/economy/income-tax-cut.html
and research who pays taxes.
https://www.taxpolicycenter.org/model-estimates/baseline-share-federal-taxes-march-2017/t17-0056-share-federal-taxes-all-tax-units
1
Americans keep voting for "tax cuts" rather than pragmatic tax policies. The avoidance of taxes has become a core value for many (isn't it great that the "smartest" don't pay any tax!?). In that sort of contest and values paradigm, the richest win every time and the middle class loses, again. Unless and until Americans shake this antipathy toward paying taxes and being part of an advanced society and economy (vs. a race to the bottom) this trend will continue.
19
Do not forget to restaff the IRS.
Republicans for years have been chipping away at staffers that specialize in high income and complex audits.
And aiming the IRS audits at the middle income - really! Talk to your senators about That!
11
@Anonymously
$1 increase in IRS budget yields $10 to the US Treasury.
That is why the GOP defunds them.
"Name one government agency that makes a profit...."
@Anonymously
Yep
Although I'm in favor, care must be taken as to a wealth tax because it moves easily between countries. It would be far better to tax stock and derivatives transactions which in reality is short term gambling. As for corporate taxes, tax revenues(sales) tax due to the infinite variety of write offs.
2
I'm over 70 so I can remember that there used to be 15 tax brackets (3 per income quintile). Even for my then teenage brain, it make sense. Everyone pays the same rate for the same number of dollars earned and the more you earn, the more you pay as your income gets larger. It was an eminently fair system.
Attempts to recalculate the brackets ended in the elimination of the top brackets which, over time, moved the wealthiest Americans into the same bracket as upper middle income people. That, led to any attempt to raise taxes on "The Rich" slamming middle income families (they are in the same bracket). All of this driven by the (largely Republican) cry that the system is too complicated and we need a single "Flat-Tax" that is, by definition, regressive given that the wealthy keep all their breaks and set-asides.
The problem is made worse by all of the misinformation about how a progressive system works and the threats that increasing taxes on the wealthy will eliminate your employment. (FWIW: Consumers are the real "Job Creators" without additional customers, no jobs are added regardless of tax breaks to the wealthy).
12
@George N. Wells
Yes but when such policy is implemented the wealthy few, much like a union, wink at each other and can economically assassinate the masses with layoffs.
Has there been a study done to show the layoff numbers when a liberal is in power compared to a republican. We must realize fighting the wealthy on taxes will have blowback. When a recession comes, much like Trump but sneakier, they will seek revenge against us little folks and lay off 100 people when they could of let go of a few or none.
Small businesses are the ones we should help. One way to do that is an even playing board for medical in single payer. This requires the ultra wealthy to fund it and participate in society instead of trying to rule it.
The French had the same situation prior to 1789 and it’ certainly didn’t work out very well for them.
Our current taxation structure is a recipe for disaster. However, in truth, neither a majority of Republican legislators nor a majority of Democratic legislators really want to change anything because neither party wants to offend their large donors.
3
The proposal to tax corporations for the difference between the US tax rate and that in their ‘tax haven’ is exactly how we American citizens living abroad are taxed on our foreign income in the US, even though we don’t live or even earn our taxable income in the US. It is unfathomable that this arrangement does not apply to corporations that do make profits in the US.
9
Our thanks to Mr. Saez and Mr. Zucman for their clear, simple explanation of our tax system. I did the math on the back of an envelope 30 years ago and quickly figured out that our tax system was essentially flat across income groups and it’s grown worse since then. While international economic forces are directing an ever greater share of income to the wealthy it’s insane to further rig tax rates in their favor. It’s like a parent saving all the richest food for their obese child and starving their other children.
4
@Richard
Actually for the wealthy the government has been “extracting” les, less and less. I have yet to see a billionaire's life destroyed by taxes or even seriously inconvenienced. I have seen people’s lives destroyed because they could not afford medical care.
4
First, the American public needs to recognize what other industrialized countries have known, the government really can spend the money better than you can. Americans need to focus on the citizens of other countries who have way better lives and make the same or less. Scandinavia, not Cuba.
4
@gratis
The best argument against the strange notion that government can spend more wisely than individuals is living in the White House.
2
@Alan - is living in the White House.
"can" is not the same as "will"
And the occupant living in the White House has said many times he is anti-government, his goal is to tear it down, and therefore he really can't represent government as referred to by Gratis even if he is currently elected to that position.
This is a very misleading article. First, a goodly portion of the lower level's taxation goes to areas that benefit them the most: social security, medicare, local government services. Secondly, yes Warren Buffett who pays himself 100k a year is going to pay less in income taxes than his secretary (who probably gets paid well) since his income or really take-home money comes from tax losses vs. gains; dividend income, capital gains. Thirdly, the vast majority of his wealth is on paper. If he was forced to sell his Berkshire Hathaway, it would drop in price by 50%. I guess that would decrease the wealth gap.
2
You did not read the article. The analysis deals not just with taxes on income, but also real estate taxes, state and local taxes, consumption taxes and the cost of health care.
6
@Gregory
This view of "all or nothing" is not realistic. The world does not work like that, I wish people would stop pretending it does.
4
This may be news because data now supports it, but it’s been obvious since I learned in the late 90s, based on publicly available data (such as those from politicians) that the rich pay less taxes - not just as a percentage of income, but in terms of total taxes paid! How could someone who earns several times my salary pay less tax ?
I pay the ‘single’ tax, had no mortgage with which to deduct taxes because I can’t afford to purchase a home; in fact I have no deductions other than the standard, while having little additional investment income, esp with low interest rates. Whereas the wealthy have access to higher returns from even the safest investments, not to mention other investment vehicles, while being able to profit from all kinds of loopholes and deductions.
4
@mm What's more if you rent, renters pay indirectly, property tax ( to cover landlord expenses).
The authors misleadingly lump in payroll taxes with other types of taxes. While people with lower incomes pay a higher effective tax rate for social security, they also receive a higher benefit (relative to their incomes). The system was never meant to be a “tax” alone. It is a separate system where you get back approximately what you put in, roughly speaking. But notice that removing the payroll tax from this analysis changes the outcome dramatically.
4
@Anonymous
The article does not make a tax / benefits ratio analysis. But even if you do, you'll be surprised to see that the richer you get the more you benefits from government services (not just money but also, infrastructure, regulation, etc)
Precisely why we need Elizabeth Warren as President. No one understands the tax system and finance and the economy like she does.
28
@Karnard Except for Sanders. Whose policies go much further than hers.
2
This analysis is highly flawed. You cannot compare the payroll tax to an income tax or consumption tax. Assuming social security and Medicare survive, the payroll tax is more like an investment with an eventual return. If you adjust the payroll tax for the expected return in social security and Medicare benefits the lower and middle income tax burdens decline significantly.
2
@Andrew The payroll tax (for Social Security and Medicare) is an insurance premium.
11
@Andrew
Yes. Most seem to neglect the fact that Social Security is also a life and disability insurance program. This is important since most families have insufficient (or no) life insurance.
3
@Andrew: “ Assuming Social Security and Medicare survive...”
If Agent Orange survives the Swamp he’s created, you will see just what he & the “ Compassionate Conservative” gang have in store for both programs . ( Hint: someone has to pay for that 2 TRILLION $ Deficit from that “ big, beautiful Tax Cut that was supposed to supercharge the economy.
Am I reading this correctly? The authors are suggesting putting the wealthy at a 60-70% tax rate? Warren has talked about a 2% hike for the wealthiest Americans. I have never heard of such a sharp increase as the final graphic in the article suggests and would never support that.
@Chele The authors suggest a top marginal Federal income tax rate of 60-70%, lower than when Reagan was elected.
6
@Chele Different taxes. Warren wants to confiscate 2% of the aggregate net worth of the wealthiest Americans, every year. In addition, the authors want the 'rich' to pay 60% to 70% income tax rates, basically doubling/tripling the top income/capital gains rates currently in effect. In the 100 or so years the US income tax has been in effect, there has never been as sharp an increase as this - nothing even comes close.
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@Richard The authors want the 'rich' to see a top marginal income tax rate to about where it was when Reagan was elected.
In the 100 years or so the US income tax has been in effect, there has never been as sharp a decrease as in the past 4 decades.
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The biggest change i have seen in the last 40 years of living in this country is the stagnant wages paid to workers, raises seldom keep up with inflation, and if you don't think there is inflation take a trip to the supermarket and see what 20 dollars buys you. While the workers are getting clipped the executives who run the company's are taking home salaries that run into the millions, with CEOs getting 25 million a year, all of it is unfair and greedy beyond words. Most families struggle with both Parents working full time. For many the American dream will simply become Unaffordable, with house prices out of reach. Soon a reckoning will come and interest rates will skyrocket like they did in the 1970s, then everyone will be stuck. All this and Warren Buffet is moving his money out of the stock market and into cash because he sees a crash coming. Homeless people are everywhere now, if this trend continues, they will have a lot of company soon. Unfair tax rates are bad, stagnant wages are worse. America seems headed for a reckoning with reality.
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@Lonnie
The tax I want to see is higher wages for every worker.
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It is nice to know, as a single tax payer, who helps fund married people with children, funds schools, fund everything else nuder then sun. because I have no deductions or credits, that I know pay higher tax rate Trump.
When I add up federal, state, sales and property taxes it comes to about 28% of my income. I am on Social Security, and have small IRA I live on. I am taxed on my Social Security if I dare to live above $25,000/year.
If that si not regressive, I do not know what is.
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@Nick Metrowsky there is absolutely NO way you are paying 28 percent of your income in taxes unless you make over $400k and then you would have deductions
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@M
Did you read the article? The percent includes federal and state income taxes. Property taxes. Sales taxes. And various government fees, which are also taxes.
Sales tax alone is 8.75% of anything that is purchased, except raw food. State income tax rate is 4.15%, Federal income tax rates is 10% (after $12000 standard deduction). Property tax comes to approximate 5%. That comes to 27.9%.
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@Nick Metrowsky
I do not believe you pay a higher rate under Trump.
Most Americans don't realize that tax payments to the IRS do not constitute "revenue." The moment your tax payment is made, that money is instantly destroyed. If you paid in cash (does anyone still do this?), your Benjamins were shredded. If you mailed a check, your bank account was debited that amount and the money simply disappeared. The U.S. Treasury never got your money because it doesn't need it. The U.S. gov't. spends dollars--created out of thin air--first and then claws most of it back in taxes (a "deficit" is what happens when the IRS doesn't collect it all), not because it needs the "revenue" but because it has an obligation to control inflation. So taxing the wealthy is fine, but the only way this is going to help the poorest among us is if Congress fights for a much larger budget that will help those most in need.
Eliminating egregious wealth inequality is a noble goal. Rather than destroying the money collected from the wealthy, wouldn't it be a better idea to see that it's spent? The IRS could designate, say, 100 charities nationwide of various types and give individuals and corporations the choice of which ones to favor with their legally mandated "charitable contribution in lieu of taxes." Such a program would ensure that the money is actually spent by worthy institutions engaged in enriching the lives of millions of Americans.
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No charity the United States government should use that money properly fix our schools roads infrastructure research. You know things that made America great
@WDG
Very interesting perspective.
@Jonathan I agree. Problem is, the IRS is where money goes to die. And clawing wealth back in taxes may not even create much "inflation space"--the wiggle room the gov't has for deficit spending before too much money causes prices to rise--because most of it is not currently being spent. A dollar saved is not a dollar chasing goods and services and thereby driving up prices.
Taxing wealthy folks' savings will only make that money disappear. Then you'll have to endure a monumental budget fight in Congress to get funding for the programs you want. So instead of "murdering" this wealth through taxation, why not keep it "alive" by allowing it to be spent by reputable charities? And there's another bonus here: rich folks may be less resistant to this idea if they know they have a say in how their money is being invested.
Let's not point the relation from the violence of the capital to violent crime occurrence as a statistic .
It is what some call ideology .
We desperately need a wealth tax to claw back the ill gotten gains of the billionaire class courtesy of the politicians they bought.
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@John R.
One could argue the skewed GOP tax structure are "ill gotten gains".
398 more super wealthy mega billionaires to go.
It is amazing that people who passionately resist the government if it tries to tell them, what they can say, what god they can worship (or not worship at all), who they can love and marry etc. ALSO support the government's power to seize their earnings. The power to tax is the power to destroy, and government is never, ever satisfied with the amount of taxes they have extracted from the population - they always want more and more and more.
@Richard
Having lived and worked in Sweden and Norway, I do not recognize your comment versus the results those countries get with their high taxes. And those countries have an 85% voting participation, indicating that the vast majority support those policies.
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@gratis
I think those days are numbered if not already over.
@Richard how do you propose to pay for the street in front of your house?
The number of Americans with average incomes far, far outnumber the plutocrats. If they suffer from unequal taxation, many of the average crowd are obviously voting against their own best interests. If they vote for politicians who favor the plutocrats, they are getting what they asked for.
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@Clark Landrum Identical logic: I am with my ten closest friends on a dark street, all young strong males sadly with little money in their pockets. A short wealthy woman who has just cashed her paycheck walks by. My friends wan to mug her, but I resist. They tell me I am "voting against my best interests - we outnumber her and it is in our best interests to take her money". At the ballot box or at the end of a knife, it is still theft.
Large public companies are not people, and many are not fixed targets for taxation.They do employ people and distribute money to people, and these distributions can be taxed.
I do not see why a company's profit above a hundred million (we do need a higher tax at the low end so that everyone does not have an incentive to incorporate themselves) needs to be taxed at higher than 1%.
Tax the distributions and capital gains more heavily, eliminate some loopholes and let the companies earn what they can without the distraction and bad PR of exploiting tax havens.
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@ Alan
"hey do employ people and distribute money"...
I'm not sure it is that simple. Mitt Romney said they were, in fact, people. To a certain extent he was right. Profits are calculated after deducting employee wages and benefits. There is a reason why corporations set up their physical facilities where they do. Corporations benefit from the educational system providing them with workers, the local and national infrastructure, the protections afforded by our military and legal system among other things all of which come at a price. Now, there are other reasons why corporations set up the "address" of their headquarters where they do.
I completely support re-configuring our tax rates, but my real concern is about income inequality and and social markers that are related to wealth. It would be helpful to know, in terms of absolute dollars, how much more the top 400 individuals would pay, and how that would affect tax revenue. Is it enough of a difference to make it worth fighting that fight? Also, how much would lower tax rates help the bottom 50%?
Taxes can help to redistribute wealth, but it comes with the kind of baggage that was implied by Mitt Romney's 47% remark. I would be happier to see income redistributed by fair wages and salaries that reward people fairly for their productivity, as opposed to allowing it to be appropriated by the ubber wealthy.
Andrew Yang also makes a good point, that as technology replaces jobs we need another way to distribute wealth that reflects all the values individuals contribute to society. i.e. it's not all about goods and services.
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The middle class has been shrinking since Reagan. He adopted the trickle down economics, which was called horse and sparrow in the19th century when it was first debunked. It found an audience with Republicans who felt hard work and American dream ensured wealth which they’d like to keep more of... it didn’t work for the average person as their’s was a dream. It did work for the wealthy and connected who benefitted disproportionately.
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@IM
Trickle Down sounds so much like Free Lunch to those who do not understand economics. Who votes against Free Lunch? Despite decades of poor results, they still vote for Free Lunch.
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The big picture is that societies are built with cooperation, a common vision, and lots of taxes. The governments that do best by the people are the governments that tax the most. One might say that the worst governments do the same, but that is not factual, as the worst governments do not tax the rich.
There are no successful low tax, low regulation governments. This hands all the power to the rich who hollow out the society for their own benefit.
Low tax, low regulation societies look like nomads.
Good high tax countries look like Denmark, Norway ... Happiest Countries on Earth.
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This is a massively flawed argument chock-full-of estimates and assumptions that are predetermined to suit the author's point of view. While it is reasonable, in my opinion, to find ways to tax the uber-wealthy more, the proposed tax return rates included here are incompatible with the reality that wealth is just as much dictated by where you live as it is by how much you make.
It is well known that the value of the almighty dollar varies considerably depending on where you live. The top 1% of earners in Alabama earn, on average $297,000 a year, whereas the top 1% in Massachusetts is about $583,000. That's because the cost of living, the cost of childcare, the cost of home ownership, etc is higher in Massachusetts than in Alabama.
Now, while earning $200,000 or $500,000 a year is a lot of money, it is not millions or billions. The folks earning that kind of money are doctors, lawyers, engineers, etc., essentially people who are highly educated and work for a living. They don't have trust funds, don't offshore assets or live off of dividends to avoid paying their fair share of income taxes. Yet the author's support upwards of a 24-40% increase in the tax burden on this group vs a 49% increase on the richest 400 people in the country, who all have hundreds of millions or billions? No way.
Fair taxation of those who have millions or billions is one thing. Chopping the legs off of high earners who work hard every day and already pay their fair share is nuts.
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We are all paying higher taxes than the billionaires...working class and the middle class. In the rush to make thing fairer let’s not destroy the middle class.
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@Justice Holmes
We are not rushing so much, the rich keep getting lower rates.
@Justice Holmes Too late.
According to Bloomberg (2018) The top 3% paid 51% of all income tax collected and the top 50% pay 97% of all income tax. For the bottom 50% the "tax" that takes the biggest bite is for Social Security which is really deferred compensation. I'm for rationalizing the tax code. But let's not forget who is paying the bill already. And now there is a push for greater entitlements, such as college tuition. Who will pay for this? If you think it should be the top 1 to 5%, say so but be honest ...that the bottom 50% are not contributing.
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@SP Social Security is NOT deferred compensation. The FICA tax is an insurance premium for an income benefit during retirement.
And while the top 50% paid 90% of all income tax, the top 50% also enjoyed 88.4% of the total adjusted gross income. (From the same Tax Foundation site at https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update/).
Finally, the Federal Income Tax is one tax where lower income households do get a break. They don't get a break on sales taxes, highway fuel taxes, property taxes (passed through landlords)....
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@SP
I have read this canned response so often that I don't why it strikes the commenter as a some kind of argument-winner. What you omit is the percentage of wealth the top 3 percent own and how you're defining "income" (wages, or including all sources of income such as capital gains? income, or wealth/assets?) If the 3 percent receive more than 51 percent of all true income, including both wages and capital gains—and I believe you will find that they do—then the number you cite actually indicates that they pay less than their fair share, even if you're an advocate of a flat tax rather than progressive taxation.
But please, continue to lie awake at night worrying only about those who are most comfortable and least vulnerable to the changing economy.
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@Kevin Brock
So? The bottom 40% earn 13 percent of ECI and receive additional income in the from of a negative Federal tax rate. These discussion are focussed on Federal taxes.
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Thanks. Finally a good article about where the anger (misdirected to the point of tragedy) comes from in this country.
Republicans have become the party of anger and fear, emotions that cause one to abandon logic and reason.
Until the bottom 50% start using logic, observe the world around them and stop voting for their oppressors it will not change.
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Couple questions I have, isn't this idea of the IRS directly collecting tax deficits from companies similar in spirit to what they do with individuals who have wealth/earnings overseas? The IRS taxes Individuals on their worldwide income. A person becomes a US citizen suddenly their overseas property/income etc is taxable. This wouldn't be a novel idea, just how it's presented.
Secondly, the regressive tax 30% to 23% roughly of tax rate disparity noted in article - is this solely because, in simple terms, the rich have so much that sales tax they pay is really really small % of their wealth while poor working class it's much larger hit? Taxing the needs instead of the wealth is a slight of hand - a fixed value tax in disguise. How about implementing a stiff luxury tax? That would help.
I would respectfully submit that payroll taxes should be excluded from this calculation because payroll taxes are paid in expectation of getting back future benefits (social security and Medicare) that exceed the taxes paid in. These programs reflect the notion that people should to the extent they can provide for their own retirement. Other taxes on the other hand are paid in to cover the cost of providing benefits mostly to other people. And of course eliminating the payroll taxes pretty much blows a rather big hole in this thesis.
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@Bob Richards
Also, payroll taxes are very progressive. For earnings over about $60,000, which are taxed up to to the maximum, there is little additional benefit.
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@Bob Richards
I would posit that it's more of a community infrastructure issue. This is about advantages of living in a community after all. When we all get really old we can't work or take care of ourselves. Benefits of a community are that we take care of our elderly. Other benefits are actual infrastructure, roads, courts, security etc. If we all lived in tribal enclaves with a handful of families then ok, but with cities/communities in millions, we have to have a larger pooling mechanism. I think it should be included in tax% calculation.
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The GOP has convinced millions of people hurt by their policies that their only chance to get ahead and become a millionaire (has anybody thought to examine financial hoarding as a mental disorder?) requires voting against their own interests and rejecting minimum wage, healthcare, unions, pensions, and government assistance...unless of course you’re farmers or live in a flyover state, there they take the money and vote against it...
People who vote against their own interests are why the billionaires continue to exist. It is worth noting that billionaires would NOT vote against their own interests-that’s how they became billionaires...
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Maybe it is not included in here but can we also not consider adding health insurance premiums and deductibles to this equation as after all the ACA penalty was considered a “tax” as that was the only way the ACA penalty survived SCOTUS scrutiny.
If health costs are added I would think the overall tax effect on many families is catastrophic and likely an even larger percentage of income taxed than even most European countries.
We could ask add federal student loan debt repayment into that equation on the same logic.
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I'm all for a wealth tax on the top 400. People can huff and puff about "fairness", but at the end of the day, a fair tax is a tax that someone else pays. I'm not among the top 400.
Consider reduced services, increased user fees and inadequate or deteriorating infrastructure which disproportionately impact the 97% that are not affluent.
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Many of the "flat tax" proposals from the right wing/libertarian perspective sound really good as a bumper sticker slogan. But most, if not all, fail to eliminate the distinction in the tax code between "earned" and "unearned" income. Structures that treat income from different sources differently in the eyes of the tax man lead to all kinds of fraud and abuse, as those with wealth and power find more and more creative ways to declare their income in the "tax favorable" category. So we end up with things like "carried interest," which is money that spends like wages, salaries, and tips, but which taxes like capital gains.
Eliminate the tax distinctions based on the source of income, and the growth in wealth inequality will slowly reverse.
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@Kevin Brock
Wouldn't a true flat tax apply to all income?
The Trump tax cuts were by design a benefit to the wealthy and another slap on the working class, no secret there, that's who and what he is. Folks at his rallies cheered their own demise. And the beat goes on, but a hard rains a gonna fall.
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@Larry Completely wrong. The limitation on home mortgage interest effects the wealthy not the working class. If you are one of these wealthy folks, your taxes went up. In the end, the tax laws are too complex with thousands of loop-holes that allow accountants to plan income around the exemptions. We need a flat tax so everybody pays taxes including the lower 60% of earners that currently pay nothing.
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This hits the nail on the head.
However, it's difficult to see any meaningful, progressive tax reform passing congress post-Citizens United. The 1% have bought and paid for the government. The current tax structure is what they get in return.
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@JDH
This is largely a fallacy, perpetuated by talking points that encourage voters to blame some homogeneous "super group" of uber wealthy people who spend all their time and money fixing the tax code in their favor. Another fallacy - those people are all Republicans.
The truth is that the Democratic party today represents much more wealthy and uber wealthy Americans than the Republicans do. Fact - the wealthiest sixty-four districts in America are represented by fifty-four Democrats and just ten Republicans.
Another fact - under the administration of Ronald Reagan the top tax rate fell from 70 to 50 percent (and eventually to just 37 percent). But it wasn’t Reagan who first proposed bringing the top rate down: It was Democrats in Congress who killed the 70 percent tax bracket. Look it up.
So I encourage you and others posting here that want to blame the richest among us for the current tax mess to go back and do some research. You might find that many of the richest actually are amenable to paying more taxes and that it is political gridlock, perpetuated by both parties, that has held back progressive tax reform.
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@JDH, you're right and wrong. The problems began with Ronald Reagan who convinced the American public that government was the problem and not worth funding. Then we had Norcross who believed in drowning government in a bathtub after reducing it to a size that made it possible by depriving it of the money needed to function. This is the part that you either don't know about or don't remember.
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@John
If you reread my comment, you’ll notice that I don’t say anything about political parties.
But since you mention it, I’ll freely concede that there have been – and are – many members of the Democratic party who are part of the problem. There are not, however, any members of the Republican party who are part of the solution. Name some Republicans leaders who would support the kind of progressive tax reform outlined in this article. Name some Republican leaders who have stood up to Grover Norquist and advocated for tax increases in the top brackets.
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I have some issues with this analysis. If you earn around $1m in New York City, as a salaried employee, your tax rate is SIGNIFICANTLY above what is indicated in this analysis. Income tax alone - between federal (37% top rate), state (8.82%), city (3.648%) - is 49% on the margin. Add consumption, add payroll, add property taxes and you definitely end up well north of 50% on the margin, and probably in your 40ies all-in. And what does that get you? An okay-sized 2 bedroom, a dirty city where things barely work, a 60+ hour work week and cries from them left to "tax the rich".
Newsflash: there is a large tier of well-off people in high-tax cities who are taxed up to their eyeballs already. Not opposed to paying a fair share but enough is enough.
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@Elizabeth the key phrases to keep in mind are "on the margin," and "taxable income." And those who don't want to pay the freight for an "okay-sized 2 bedroom" in New York City can move elsewhere.
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@Elizabeth Marginal rate is not the same as effective rate, and if you don't like working 60+ hour weeks in a city with an insane cost of living, take a lower paying job in a smaller market.
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Prices rise due to supply/demand. When no one can afford the cost of said homes, prices will fall. But no one wants falling home values either ....
Even looking at the top 1% is a bit disingenuous, as it includes doctors, lawyers, architects, etc. they tend to pay the highest rates.
It’s really the 0.1% that have the political influence to cut their taxes in capital gains, property, etc that are the real problem.
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Consider the Golden Rule. He who has the gold makes the rules. In this case, the tax rules.
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@Suburban Cowboy The tax rules and many other rules as well are created by the wealthy. So thank you, Supreme Court: your own economically isolated life styles amongst the professional and upper classes have allowed you to believe that the common prejudices of men no longer exist. According to you, racism no longer is a problem.
We can hardly wait for your decision that LGBT and trans-gender people aren’t included in the Constitution and so can’t be included in the economically protected class of “human.” Interestingly, “humans” are not mentioned in the Constitution as a protected class either. Does that actually exempt everyone from Constitutional protection? The “logic” of this Court is often riddled with obvious bias and nonsense.
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@Suburban Cowboy
They still only get one vote. That's the part that needs to get repeated.
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@Suburban Cowboy Proverbial from the Gold Rush times..150 years ago.
Don’t forget that while the average Joe and Jane are trekking to H&R Block et al every Spring, the super wealthy have their army of highly qualified accountants whose only job is to find and exploit tax loopholes. It’s not just tax inequality, it’s the entire baffling myriad of laws, rules and regulations that keep lower income people paying more. Some cynics might say it’s deliberately baffling for exactly that reason. Hmmm.
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@Rmski77 - In lowering the capital gains tax, Trump PROMISED to remove tax loopholes that allow some of the richest individual and corporate tax payers to pay a tiny percentage of their income, or in the case of 60 to the top Fortune 500 corporations: ZERO. He also promised lowering taxes for the "job creators" would encourage them to bring back TRILLIONS of $$$ off-shored over past decades to avoid taxes. Well, we are still waiting for the removal of loopholes and the vast wealth that the tax cheaters were going to bring back to the USA. And the JOBS they were going to add to the economy. Sure we have lower unemployment, which is only a measure of people who currently QUALIFY for unemployment benefits. So far, the middle class workers have mostly moved into lower paying jobs, who lost hundreds of thousands of great jobs post-2009 due to the high-risk banking crash. The banks were bailed out by tax payers; the same taxpayers lost millions of homes and will never enjoy the same lifestyle. The Trump tax cuts were just another perk given to the rich, creating higher national debt and higher income inequality via a broken tax system that uses the excuse given by Reagan in 1981 regarding the"trickle down" effect of tax cuts for the rich "job creators." They are mostly not job creators. Only 20% of millionaire/billionaires are self-made: 80% are mostly wealth hoarders, who hide their vast holdings via private corporations listed in the Cayman Islands etc. VOTE #BernieSanders2020
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@Rmski77 And thanks to Republicans, ordinary people no longer have a state tax available to them as a deduction. That alone raises taxable income by thousands. In ways large and small Republicans fleece their flock of poor but true believers in “individual power.”
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@Rmski77
What this op-ed fails to mention is that one of Elizabeth Warren's proposals is to create a special enforcement department in the IRS to focus on exactly that problem of the uber-wealthy using tax havens or other shady methods to hide wealth and income.
One thing that's obvious at this point is that current IRS audit and enforcement efforts are a joke.
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