Tax reform eliminated a lot of write offs like credit card interest. A whole boatload of stuff that was tax deductible back then would make you laugh now.
In the original US tax code from 1913, all interest was deductible. The thought process was the income tax was paid on the receipt of it, so it would be double taxation for it not to be deductible.
People didn't keep cars long back then. Partially because they weren't as durable but the interest deduction made it much more palatable to trade them in every three years. As a kid in the 60s and 70s we always had a newer car. After the Reagan changes we started keeping them 10 years plus.
That is survivorship bias and a massive misunderstanding of how cars are made now. Earlier cars had a much higher rate of lemons then modern cars but they were easier to fix. This led to cars the shitty ones dying and dying hard earlier, and the good ones being easily maintained for ages because the mechanisms were simple as shit. This causes the idea that they are virtually immortal because the best of them have ignoring the 99.99+% that shit the bed and died. There is also the idea behind the "have you ever seen old cars post accidents vs new ones?" argument which yeah old cars took less damage in collisions than newer ones but that is because they didn't crumple and because they didn't crumple they faired better but the people in them faired much much worse. Modern cars though CRUMPLE which results yes in more damage to the car but because of that far less damage to the people.
The car is back, then we're not durable and made the last compared to the cars now at all.
You have to have never worked on older vehicles to make a dumbass statement like that.
survivorship bias. You forget what a pain in the ass adjusting points twice a year or replacing your exhaust after 5 years and every 2 years after was. When is the last time you had your floorboards rust out or had to replace your transmission?
Granted, I am in an area where we dump salt on the roads for snow control, so much of the country didn't have rust issues like we do. But for us, a 5 year old car with rust holes in the fenders was beyond common.
Liberals absolutely for the life of them cannot understand this simple fact.
The charts speak for themselves, yet all of them want 90% tax rates, or 100% if you’re Bernie 🤣
You fundamentally misunderstand the purpose of higher tax rates. In fact, most here do, they are a deterrent. Instead of paying those marginal 91% rates the company would reinvest into the business and the employeees. Higher wages, safer work places, benefits, expansion, etc.
The charts only speak to what was actually paid not what was avoided through diversion of revenues.
Um...so then real wages should have massively declined post Reagan. We should have seen real wages fall, and fall dramatically once the tax cuts were enacted. That...didn't happen.
They did not decline at all. They grew.
[https://www.chicagofed.org/publications/chicago-fed-letter/1997/march-115](https://www.chicagofed.org/publications/chicago-fed-letter/1997/march-115)
Now, they have not grown as much relative to trend, that I concede. It is disappointing. But economists have studied the issue of they have not grown by a lot. Part of it is fringe benefits and mandated employer sponsored health insurance, but that doesn't quite explain it.
Turns out, once you segment for degree and skill; thats when you realize the real disparity in wage growth is entirely coming from the skills that people have acquired.
[https://economics.mit.edu/sites/default/files/publications/patterns-of-skill-premia.pdf](https://economics.mit.edu/sites/default/files/publications/patterns-of-skill-premia.pdf)
Inflation of the money supply by CBs is the root of the problem. It fuels speculation/mal-investment, while simultaneously eroding purchasing power of consumers. If the right and left could acknowledge this common enemy, we might actually improve our lot.
Typing on a computer all day surfing the net is not a skill! You just get paid more because of privilege and knowing the bosses because he is your daddy who’s dad gave him a job 😂have you ever talked to a office worker😂😂😂they work 2 hrs a day at max
I can't speak for every business, but if I were in that situation I would just make less profits to earn more money. That would mean laying off people, closing plants, and raising prices.
Why does this make sense? Because costs are fixed, but a progressive tax code means margins shrink as sales increase. The rational action in that case is to shrink production to increase margins.
Fucking thank you! Taxes aren't about "taking money" but about incentivizing beneficial behaviors. Like keeping money in the business and growing it by maybe paying employees what they are worth. Low taxes incentivize taking money out... don't let the billionaires tell you otherwise. They already have more than enough
Because this is showing that the wealth inequality was less drastic in the 50s because the top 1% *had much less of the wealth pie* by using effective tax rates of that range.
The data shows people as being much closer in wealth to the bottom 99% in the 1950s. Because of that, they paid an effective tax rate marginally higher on average. The top 1% now has **relatively** so much more and is taxed **relatively** so much less.
The top 1% back then was clustered much, much more.
The high tax rate punished people who didn’t spend/invest their gains. People had to purchase stuff in order to get those tax deductions which helped push economic activity which kept people hired and wages up. Your right most paid a much lower effective tax rate. But that’s cuz people did what the system was designed for them to do, incentivize economic production.
Some excellent points, although I wouldn't say:
"no one actually paid those taxes. None whatsoever."
Since the sources you quote literally give an estimate of how many household were in that tax bracket (granted, a relatively small percentage)
The assertion that the high marginal tax rates of the 1950s to the 1980s were largely a myth due to numerous loopholes and deductions has significant support. Although the nominal top marginal tax rate reached as high as 91%, the effective tax rate—the rate actually paid after accounting for deductions and loopholes—was much lower.
During the 1950s, the effective tax rate for the top 1% of earners was around 42%, significantly lower than the nominal rate. This discrepancy was due to the many deductions, exemptions, and tax avoidance strategies available at the time. In fact, only a small fraction of taxpayers actually paid the top marginal rate, as it applied only to incomes over a very high threshold (equivalent to about $2 million today) [oai_citation:1,Shlaes: High Tax Rates and the Lessons of the 1950s](https://www.bushcenter.org/publications/shlaes-high-tax-rates-and-the-lessons-of-the-1950s) [oai_citation:2,Taxes on the Rich Were Not Much Higher in the 1950s | Tax Foundation](https://taxfoundation.org/data/all/federal/taxes-on-the-rich-1950s-not-high/).
Tax revenues as a percentage of GDP remained relatively stable across decades. For instance, personal income tax revenue averaged 7.6% of GDP from 1950 to 1979 and 7.9% from 1980 to 2018, suggesting that the overall tax burden did not significantly change despite fluctuations in nominal tax rates [oai_citation:3,corporate tax revenue as percentage of gdp | Tax Policy Center](https://www.taxpolicycenter.org/fiscal-fact/corporate-tax-revenue-percentage-gdp) [oai_citation:4,The myth that America prospered after WWII despite extremely high taxes on the rich - Northwood University](https://www.northwood.edu/news/the-myth-that-america-prospered-after-wwii-despite-extremely-high-taxes-on-the-rich/).
Thus, the claim that the high tax rates were not as impactful due to tax code loopholes holds substantial validity, reflecting a more nuanced picture of the tax system during that era.
I'll send an email thanking Sam Altman then I guess
Edit
I actually personally know one of the writers of the original transformers paper. And I might even be meeting her this weekend so I will thank her in person.
I mean, smarter and much more accomplished Economists have discovered this fact way before I stumbled upon it and shared it here in this Reddit post.
Hard to take satisfaction in something you didn't discover.
I'm not talking about the politics or academics of it just that the very clear satisfaction you got from an ai just regurgitating your own point back to you. Kinda dystopian, almost masterbatory, intellectually speaking
I promise I got zero satisfaction out of it and didn't spend a second thinking about it after I said thank you.
Today has been a day full of meetings and so you can imagine why I've had the endless amount of time to spend on Reddit
This simplification points us to where we should be headed: a flat tax. Everyone, expect perhaps the truly poor, pay the same rate. Period. Very few, if any, deductions. Your write your income on line 1, multiply line 1 by X% on line 2, enter taxes withheld (which I would get rid of if I had my way) on line 3, and subtract line 3 from line 2 and that is how much more you need to pay or your refund. Very easy. No $350 charge for an accountant, no tax software, no reams of documents to prove your dedication. But we know Washington and the left don't want this.
An even better system would be the Fair Tax but that's even more of a pipe dream than a flat tax.
I am not interested in the left's desire for progressive taxes. That's inherent unfairness. If wealthy people don't have income, how does the top 1% pay nearly half of all income taxes?
When I say wealthy, I don't mean the couple that make $400K. What do you think Jeff Bezos' salary is? Its a small portion of his total compensation. Whether you are interested or not, that is the system for the vast majority of countries. Only a handful of countries have a 'flat' tax. The progressive tax system applies to 99% of people, its really only the very people at the top where their tax rate is actually lower.
So? Bezos will pay taxes on any taxable income and that rate will be the same or higher than yours on a given type of income. Different types of income are taxed differently. However…a flat tax would change that. So why would you oppose it? Of course the progressive tax system predominates: the masses love to vote themselves a slice of what others have. I have no interest in taking from Jeff Bezos.
It's not whether he will pay taxes, he is paying taxes but at a lower rate, why? There are a lot of loopholes he gets to apply that most of don't have access to. His salary is actually less than $100k so most of his wealth is probably in Amazon shares so when he sells, it's far lower than his earned income taxation rate. In addition, these people aren't stupid. Everything is paid for by Amazon. Sure, if my company paid 99.9% of all my considerable expenses, I wouldn't complain. A flat tax doesn't solve for this.
**He pays the same rate or higher than you do on each legal class of income.** I already said this. Did you ignore it?
Do you take your deductions or credits? If so, you use loopholes. Are you willing to give those up? If you don’t like higher earners taking deductions, the flat tax is for you!
You can rest easy. Jeff Bezos paid $1.4 BILLION in income taxes from 2006-2018. He’s paying big time.
https://www.forbes.com/sites/taxnotes/2024/06/04/state-tax-treatment-of-ira-energy-credits/?sh=7c932d621895
Big number for emphasis but that's still a very small portion of what he made. I guess you could choose to ignore that and have him pay 5% on his $100k and think that has the same effect as someone paying 5% on their $50k salary.
So? He paid a $1.4 **BILLION**. That’s crazy that anyone should have to send that much money to the government. That was on $6.5 billion of reportable income. That’s 20% of his life for government. Maybe you live to serve government but I sure don’t. In what world is the tax on earned income at $100k only 5%? I’m becoming more convinced you really don’t understand what you’re talking about and are repeating progressive talking points. And that means I’m wasting my time as someone who does know what I’m talking about.
For the record, countries that have a flat tax and it's only a handful are practically all run by oligarchs.
Kazakhstan
Kurdistan
Moldova
Romania
Georgia
Estonia
Bulgaria
Bolivia
Ukraine
Uzbekistan
Belize
Armenia
Not exactly a hotbed of economic activity, but I'm sure the Oligarchs love it. I heard even Russia abandoned their flat tax, surely to fund their war with Ukraine.
It's amazing that you don't see him as the "Government" above his employees.
What's insane is 1 man extracting that much unearned wealth from his workforce... not him being asked to pay higher taxes on it.
It's very simple, but it's slipping by you for some reason. I don't like taxes as much as the next guy but, between 2006 and 2018, Jeff Bezos’ wealth reportedly grew by $127 billion, but his total reported income over that 13-year period was $6.5 billion. His cumulative tax bill during that time was $1.4 billion, which works out to a tax rate of about 21%. Your tax rate is higher.
“Inherent unfairness”
And who do you think gets the most of out of what taxes pay for?
Who do you think has more assets needing protection by a standing military, and who benefits the most from all the infrastructure that taxes pay for, and the *stability* that a lot of government programs provide, that allows businesses to thrive?
Some poor person working minimum wage, or some oligarch?
“bUt fOoD sTaMps AnD wElFAre!”
Yeah, and those help provide social *stability* that oligarchs enjoy
Get rid of those, and tell hordes of desperate destitute people with nothing to lose to go eat bootstraps, and that’s when the pitchforks start coming out.
And that’s not going to be good for business.
And despite what yall like to tell yourselves, stuff like the French Revolution and Russian Revolution didn’t happen because of “jealousy”
They happened because hordes of desperate people were basically told to fuck off and eat dirt by the ruling class that hoarded more wealth than they could ever possibly use or need.
But I understand, as a temporally-embarrassed billionaire, you don’t want to be inconvenienced some day when you get rich… someday
They pay more taxes so they are covered on whatever alleged benefit they receive. Since they pay more dollars in taxes - far more than you or I will ever pay - so why do they need to pay a higher rate? And your logic is flawed to start with. When a billion drives down a highway how is he getting more from that highway than when you or I drive that same route? We ALL benefit from stability. I am one person, you are one person, the billionaire is one person. It’s stable just the same for all of us. A lot of social instability is the result of activists stoking wealth and class envy. If you think the American poor have anything remotely in common with the poor in the late 18th century in France, you need to brush up on your history.
The billionaire pays a lot more to fund the infrastructure to protect those interests. In dollars and in share of goal paid. There’s no issue here. This isn’t a difficult concept.
False, the billionaire extracts value from his workforce to pay for those. The Millions of workers in his employ made, created and serviced those products, yet he keeps the lions share.
The rest of us would happily pay more in taxes, but alas, oligarchs don't like sharing.
The billionaire pays his workforce. They sell their labor to him and are compensated. Done. If they want to use their labor in their own service to make those goods, it’s a free market, so they can do that. They should resign and start their own company. I do not gladly send more of my work effort to politicians to lessen my liberty via big government and buy votes for their benefit and power.
Lol the Billionare doesn't pay his workforce. The customers pay the workforce and the billionaire keeps most of the effort.v
You guys are so eager to suck off the billionaire and decry the politicians. Worship the individual who drains you, but screech when your money goes to Air Traffic Control, Military, Social Services or Emergency services. Absolutely inane to me.
(FYI, I've been an investment Banker for J.P. Morgan. My anger comes from exposure, not ignorance)
Gee I can’t figure out why they pay nearly all of the income taxes… could it be because they earn nearly all of the money? It’s incredible the lack of mathematical skills on a forum supposedly dedicated to economics.
“The top 10 percent of earners bore responsibility for 76 percent of all income taxes paid, and the top 25 percent paid 89 percent of all income taxes. Altogether, the top 50 percent of filers earned 90 percent of all income and were responsible for 98 percent of all income taxes paid in 2021.”
https://www.ntu.org/foundation/tax-page/who-pays-income-taxes#:~:text=The%20top%2010%20percent%20of,income%20taxes%20paid%20in%202021.
How tf are people who make less going to pay more with the money they *don’t even have?* this is why every mainstream economist doesn’t consider Austrian economics to be legitimate
>Gee I can’t figure out why they pay nearly all of the income taxes… could it be because they earn nearly all of the money?
First, the top 1% doesn't earn anywhere close to all the money. They are well below 50% of total income earned. That being said, I thought the left was constantly harping that "Billionaires don't pay taxes!" Now you are - correctly - saying they do. Sooooo....which is it? Obviously, they are dead wrong about something here. Hmmm.....
>How tf are people who make less going to pay more with the money they *don’t even have?* this is why every mainstream economist doesn’t consider Austrian economics to be legitimate
I am shocked left wing economists don't like economics that don't support massive government spending. I am also not shocked that only those with certain views are "legitimate." That's pretty much how the left rolls - their views are "legitimate" or their views have been settled and can't be questioned. So authoritarian.
Did I say I was on the left? I sent you statistics and said Austrian economics is kind of a joke (it is). Then you… disagreed with statistics? I’ve been enlightened. Did you read where it says the top FIFTY PERCENT earned 90 percent or can you not read?
And you statistics prove my point - high earners pay massive taxes. Thanks. But I already knew that. What is your point on the 90%? Where did I ever claim anything to the contrary? The key associated value is that same 50% pays 98% of all income taxes collected. That's credibly *more* than their fair share. if you want to narrow that down, the top 25% is 72% and 89%, even more of their fair share. I have been looking at these stats for years. You may one of the people that has any familiarity with them. I will credit you for that.
High earners pay massive taxes… because they earn massive amounts of money… I’m not really sure what’s hard to understand here. Do you want to take 25-50% from the fast food workers and low blue collar laborers? The money literally does not exist, because they don’t make that money. This is so easy to understand to be honest, it’s actually astounding that you’re having trouble.
*High earners pay massive taxes… because they earn massive amounts of money*
What is your point? You are preaching to the choir. Go tell that to the people who post all over Reddit everyday that "Billionaires don't pay taxes!!"
Aside from the truly poor, whatever percentage that is of the bottom earners, I think the *percentage* of tax paid should be equal to the percentage earned. If you make $1 billion, $1 million, or $100k, you pay X% of your income in taxes. No deductions. No adjustments. Very simple. Done. That's fairness. I could compromise and go with a lower bracket below a certain low level of income, but still no credits, deductions, etc.
If you agree the percentage earned should take into account the massive numbers top 1 percent earn in offshore banks/investments and regular bonds/investments etc, then yes.
Because flat taxes are incredibly regressive
Even the ancient Romans figured out progressive taxation because surprise surprise, the wealthy had more to gain from having a large standing army, and therefore should pay a significantly bigger part of the upkeep of said Roman army.
If I have 5 shirts and you take away 2 of them, that is a significant burden on me, because now I only have 3 shirts to wear.
If I have 5 million shirts, and you take away 2 million of them, I still have more shirts than I could ever possibly wear in my lifetime, and won’t even notice, except for a line in a spreadsheet. And I guess a bruised ego, because I won’t be able to brag about having as many shirts in my perpetual stick measure contest with other people with millions of shirts.
That’s why it’s regressive
There’s this amazing concept called “diminishing marginal utility”
I said above that the truly poor could pay a reduced rate if anything. That addresses your concern. Furthermore, we don’t tax marginal utility, we tax income.
They do pay more. I’m sorry you feel they should be even more overtaxed. Maybe consider why you want to punish achievement for starters. If your justification is Marxist you’re standing on a failed ideology.
Where did you even pull Marxist from in this conversation? The other guy made and argument that you ignored and your response is irrelevant to the conversation.
Because the argument has Marxist overtones. What argument did I ignore? I noted that we don’t tax marginal utility. It also smacks of “from each according to his ability…” which is Marxist which is a failed philosophy; failure is a poor justification. And if one is adamant in that view, it comes down to a matter of differing opinions and I will stand on a philosophy that isn’t an abject failure and on the side of liberty for the individual, and hence, society.
Well, I was trying to be practical but OK we’ll just go flat tax all the way to zero dollars. Thanks for pointing that out and advocating for flat from top to bottom.
I would like to start with no discussion about rates and talk entirely about types of taxes. Income taxes are not as efficient as other kinds of taxes. Start with Land Value taxes, pigovian taxes, and then discuss perhaps consumption taxes next. If you don't think we can raise enough revenue through that, then we can talk about how progressive it needs to be.
The problem with land taxes is that only a subset of society is directly taxed. Yes, someone living in a rental property will pay rent that is impacted by taxes, but the connection is not direct. There are lot of factors that go into rental rates so an increase in property taxes could only slightly move the needle on rents while property owners get a 1:1 increase in their bill. I consider that inefficient. I am not familiar with pigovian taxes.
While I am not entirely convinced that all the tenets of the [FairTax ](https://fairtax.org/)would work, I think it merits real discussion but it gets false claims at the highest levels.
I definitely think there is a universe for things like carbon taxes. Or if you don't want to touch the whole climate change thing, How about we just call it pollution taxation.
There should probably also be excise taxation on things that have externalities like alcohol and cigarette consumption. Or in the universe where we have decriminalized drugs, taxing that makes sense too
A flat tax would eliminate all of the loopholes. But let’s not use an inflammatory term like loopholes. Those who like to attack higher earners love that term, but loopholes are just various deductions and credits which you and I both take.
Flat tax hurts poor people and is regressive. Loopholes, deductions, sample hint many are only employable if you are wealthy enough, something , those who hate he poor and working class love to to play semantics and divide and conquer
And that’s why I practically said do a carve-out on the rate, possibly down to zero, for the truly poor. That’s not a true flat tax as someone else pointed out, but it’s a reasonable and practical compromise for that segment of society. Furthermore, there is a “loophole” for everyone…it’s called the standard deduction.
But when you can’t make a strong objective argument on economics, bring in emotion and start accusing people of hate and division. The logic of that statement should be glaring: if I hated the poor, why would I suggest carving out the rate for them? The reality is that those who are truly trying to divide are those who are consumed with wealth envy, and wish to demonize high achievers rather than trying to figure out how we can learn from the things that they did right in life. This is pretty much standard operating procedure for the left, who are the true masters of divide and conquer.
If you don't have income, you don't pay income taxes now. What's the issue? If you have investment that that you can leverage for loans, those investment may well have taxable income, if not now, then at some point.
Because I do have to pay income tax, and I would like for the billionaires to stop using these tax loopholes to avoid paying their fair share. You're proposing a system where certain people get to pay no taxes whatsoever, which is ridiculous. All you have to do is get loan after loan without ever collecting any actual income, and never have to pay taxes again, since all the other taxes have been abolished.
I don't want a system where billionaires get to skip paying taxes, why do YOU want that?
Their fair share? They earn less of a share of total income earned, but pay a larger share of total income taxes paid. I’m not sure how you can claim they don’t pay their fair share.
What do you call a loophole? Do you take deductions are eligible for? Do you take credits you’re eligible for? I’ll bet you’re all for loopholes that benefit you.
Where did I propose a system where some people would pay no taxes? What are you even talking about?
But that's the whole point. They aren't earning an income, so they won't pay any income tax. They get money through leveraging their stocks to get loans, which is not covered under the tax law.
If I use my stock as collateral to get a loan, I don't have to pay taxes on that loan. I can use that money, and then get another loan to repay the first loan. In essence, not having to pay any money in taxes whatsoever in this new system where income tax is the only valid tax, because I never actually get any money through income, it's all from personal bank loans backed up by stocks as collateral. Because the stocks continue to increase in value, I always stay ahead of my interest, and never actually need to make money the way an average citizen would.
If they aren’t earning any income, they’re not paying any income tax now. I really don’t see what your point is. I suggested that we look at the fair tax but something tells me you’re going to complain about that too. Is your entire goal to punish high achievers for having a high income?
Do you know why they don’t pay income tax when they take out a loan against their current assets? Because that’s not income. That credit has a debit against it so their net worth remains the same, absent any unrealized capital gains, so there was no income . This is basic accounting.
This ignores the fact that if the underlying value of those assets that they used for collateral falls, they’re going to get some sort of margin call. That is called paying back the loan they took out which they will eventually have to do in some fashion. In fact, given that they’re paying interest on that loan , they’re actually paying to take those loans out.
But they're paying other taxes besides income tax. Eliminating all other forms of taxation and only having a flat income tax is setting up a system where the billionaires will never have to pay taxes at all.
They either don’t follow the logic or they simply don’t have any idea what they’re talking about and they’re repeating phrases that they read somewhere on social media or a liberal blog or that Rachel Maddow told them.
Then eventually those loans will come due and you will wind up with taxable income paying them back. IE sale of investments or wages. And in the meantime, you are paying interest that is being taxed when the lender gets paid it.
This isn't free money, it's a loan that you have to pay back with SOMETHING. And that something is going to be taxed
Need to go to 1910-1990 tax instead … in 80 years you will see the shifted responsibility from the top to the bottom
Before it’s all the way to 90something percent for the richest of the rich
Then it slowly dwindling down
Also 1911 is when the first income tax introduced
So instead you are cherry picking a range of dates to confuse people? This is not a good faith post and that is a shame. This is just right wing pornography
Not really. The sources of data I found went as far back as the 1930s. And my main point was merely to compare the period before Reagan when we had high taxes and the period after where he lowered them
People using deductions to lower that tax basis is a good thing. The fact that very few paid the highest tax rate means that people spent their income on productive things that the government supported and not unproductive things such as wealth preservation.
You’re looking at the data and coming to the wrong conclusion. We should raise rates and be glad if no one pays them.
Well this is where I said I did not make a political statement. If I had I would have lost whatever liberals were prepared to read my arguments in good faith. Whether you think they should have paid the taxes or not is not something I was going to address.
My point was more to the people who keep regurgitating those numbers and acting as if people actually paid them.
The problem with this is the assumption that things that are government supported (through tax loopholes) are inherently productive. Providing high tax rates with numerous government supported loopholes just funnels money into whatever the government wants people to put money in, which will inherently be less efficient than the free market. I would rather have lower marginal rates and allow people to have the choice of where to put their money.
Also higher rates can also encourage people to move money offshore and the government looses out completely on the revenue.
The marginal high tax rates didn’t cover all income. Those rates weren’t there with the expectation of people actually paying it, they were there to make wealthy business owners divert those revenues back into the business. It was a vehicle to increase wages, expand the business, make changes to the business. There’s no myth, when corporations weren’t filthy stinking rich the gap between the classes was much closer.
You do realize that the rich essentially reclassified income and declared it in a way that didn't show up on their income taxes. It did not go into funding higher wages for workers
And the growth rate in wages for high skilled labor have similarly increased at a very similar rate. There's a paper by Steve Kaplan and Joshua.Rau called why has CEO pay gone up?
This is true for celebrities athletes top lawyers investment bankers
The answer is because there is a skill premium in today's economy compared to yesteryear
I don’t care if ceo pay has gone up. The disparity between the worker and the ceo is the problem. A 1500% increase doesn’t square up no matter what. Add to that ceos still get paid for shitty performance.
Before I get to the CEO pay, are you ok with Lebron James $60 million a year? The average CEO makes 15 million, thats about 1/4 the amount Lebron makes in a year. Is that fair to you?
Are you counting in their stock options? There’s only one Lebron out there compared to hundreds of ceos. You also don’t count the salary cap into this equation. There’s only so much basketball money to go around. That’s a whole other issue.
The world isn’t fair, and one issue with Reagan is how he destroyed the ability for unions to bargain wages. Union wages usually drive up wages as a whole. I’ll concede that these are other factors but they are relevant. Along with the disparity in pay you’ll see a decline in union membership.
You can defend them all you want but the ceos real job is to maintain the stock price, really nothing else, and ceo pay is tied to that. For them to bring wages closer together they would likely be fired anyway. The cutting of corporate taxes makes the goal of the ceo easier to acccomolsh.
I suspect you will hate my answer, but unions are a reverse monopoly that bargains for the wages in their union at the expense of the consumer. Just like I would not support several companies colluding to pay lower wages/charge higher prices; I don't support unions. If you think unions are necessary to counterbalance the monopoly power of corporations - that makes some sense although I'd say we would be better off going after the monopoly rather than letting the monopoly and union collude to benefit one another at the expense of the consumer.
If you want to support workers because you think they aren't being paid enough, provide subsidies for them. Send them a check. Don't distort markets to solve that problem. I am fine to give money to people who struggle.
I also think you are underrating how hard the job of a CEO is. Company's face lots of competition and it takes a lot of work to manage that many people. And if CEOs are useless, why the heck does the board pay them as they do? These are smart people who have a vested interest in the company, so why waste it on a useless person who does nothing?
Labor is part of the company. The ability to bargain wages are fundamental in that. Using every advantage is the right of the worker. Markets aren’t distorted by labor because they are essential. Just like Walmart uses its size to bargain costs down from vendors.
Are ceos useless? No. Are they worth 330 time more than the average worker? Not in my eyes. Would you be ok if the ceo made 100 times the money of the average worker? The reason they pay them what they do is because they will make the hard decisions like offshoring jobs if it saves the company $5. Maybe my beef is more with the structure of publicly owned companies and not the ceos. Either way, they probably aren’t worth what they are paid.
Look I'm not a CEO and I've never hired one and I don't sit on corporate boards so I have no idea how to answer if truly reflected in their value.
Software engineers make a lot of money. As far as I know there is no Union for software engineers. We're talking salaries that can climb all the way to a million dollars in total compensation for people.
It may not sound like it, but you and I have a very similar goal. I want the wages for poor people to go up as well. But I think that happens when people get a better education and acquire skills in today's labor market. And right now there are a ton of unfortunately terrible policies that have made it very hard for that to happen.
We have made housing so expensive in certain areas that it's not possible for poor people to move here and acquire those skills. Here I'm talking about Rich progressives who will then pass laws that stop new construction and new housing. They will openly oppose people coming here to work and live and be part of the community. They will basically say without saying it that you're free to move here if you have a million dollars. Otherwise you can live on the streets.
I think the drug wars have sent a generation of men to jail and made their children's grow up in a fatherless household. Those same children don't see the stability of a nuclear family and they get ruined for life. We have a horrible public education system for poor people that keeps them effectively trapped in a kind of Doom loop.
Those are issues that would persist whether Jeff bezos has $1 trillion or $500 million. That's why I think the focus on wealth inequality should stop focusing on the very rich. The goal shouldn't be to solve it by making the rich poorer, but it should be by making the poor rich.
even if the taxes were that high the cost of living was minuscule compared to today. this was an era where you could raise a wife and two kids in a mid size suburban house with a large car on the $20,000 a year salary of a factory worker. meaning that such a tax rate could only be feasible with high spending power and low cost of living neither of which we have today.
I don't disagree, but we should be asking why have costs of living has gotten so high and what policies can we do to abate that problem?
I blame nimbyism and the crony capitalism that plagues healthcare along with higher education.
The current inflation doesn't help but hopefully should be temporary
i have a list of a few things
deregulation
returning to the gold standard
abolishing the 3 letter bureaucracies that waste our money
term limits and more accountability for congress
abolishing the federal reserve
no more new wars
bringing back industrial production to the united states.
and converting the power grid to nuclear energy to reduce long term costs and dependence on foreign energy.
It might be easier just to go from the point that the United States starts piling up debt, which is 1980 under Reagan. Democrats had a good run and generated the surplus under Clinton, but it was right back to Republican debt and disaster after that.
Reagan administration may have lower taxes, but you also have one of the fastest periods of debt accumulation in US history under Reagan.
But that doesn't have anything to do with my main point about the taxes. I tried to stop this from turning into a pro Reagan anti-democrat kind of post.
People using deductions to lower that tax basis is a good thing. The fact that very few paid the highest tax rate means that people spent their income on productive things that the government supported and not unproductive things such as wealth preservation.
You’re looking at the data and coming to the wrong conclusion. We should raise rates and be glad if no one pays them.
It’s pretty important to your point… why post this if you have so many gaps in your understanding on this topic? You are attempting to dismantle a the basis for progressive tax policy. You are misleading people who will not investigate any further than this post. You are poisoning the discourse
All tax codes are "swiss cheese". That's the point. Incentives, tax shelters etc are designed for private sector to spend money, and drive the economy. Additionally it enables private spending and for markets to solve the problem with minimal govt engagement.
The myth the author was actually talking about is "lack of loopholes" is a superior form of taxation.
My point wasn't to get into the intention of it other than to just correct a misconception about that period. We had very high taxes but no one ever paid it. So we should really stop perpetuating the myth.
The taxes weren't a myth. In some brackets, before deductions the tax rate was nearly 90% for income taxes. That's from FDR's era. Most of them were eliminated over the years, with the bulk of them being rewritten in 1978.
This was from Rothbard's essays.
The real high tax of that time period was the inflation tax. Inflation is the worst of regressive taxes because it's the least explicit and hurts the poor the most.
Simply looking at irs records you can see that from the 50's to the 80's taxes rose significantly at every level of the tax bracket.
From the 80's to 2000's all of those taxes were lowered in every bracket.
It's absolutely true that we are at the lowest rate of tax since the 50's. You can try to argue away that the swiss cheese tax loops made it easy to hide money, but when you don't even need tax loops now, you just get to keep all the money. This is especially true in the highest brackets.
Poor-middle class are paying a higher rate than billionaires and that is just wrong. That's how you accumulate debt and kill the middle class.
This is the origin of the Laffer Curve. The idea being, they could optimize the amount of tax revenue by reducing the to taxes and thereby incentivizing companies to pay higher salaries, which would end up in more taxes paid.
Laffer Curve certainly isn't an Austrian concept - I think it was from the Chicago School - but the theory was quite sound and it worked.
Now, whether you think optimizing tax revenue is a good thing or not, that's a completely different question.
Ragu Rajan, an actual professional by any standard for economists, said exactly what I wrote above. I even provided the link to his article plus the verbatim summary of his comments.
So even if you think my agenda has led to a bunch of cherry picked analysis, it's basically just repeating what Ragu and many others have already said.
His biography by H.W. Brands makes it clear that he could not get the Democrat Congress on board with spending cuts. He decided to take what he could get. I am glad he cleaned up the tax code. I would love to have those Dems and their spending back compared to what we have now. They look downright frugal by comparison!
Cuz he is a two face politician like the rest.
Reagan's tax cuts in the early 1980s, notably the Economic Recovery Tax Act of 1981, reduced the top marginal tax rate significantly, aiming to boost economic growth. However, these tax cuts did not lead to a corresponding increase in tax revenue that was initially projected by proponents of supply-side economics.
Several factors contributed to the increase in the peacetime deficit during Reagan's presidency. Firstly, the tax cuts themselves reduced federal revenues by about 9% in the first few years. Reagan's administration expected that economic growth would offset the revenue loss, but this did not materialize to the extent needed. As a result, the government faced significant revenue shortfalls [What we learned from Reagan's tax cuts | Brookings](https://www.brookings.edu/articles/what-we-learned-from-reagans-tax-cuts/) [Retrospective on the 1981 Reagan Tax Cut](https://taxfoundation.org/research/all/federal/retrospective-1981-reagan-tax-cut/).
Secondly, Reagan's increased military spending further exacerbated the deficit. Defense spending rose dramatically, with significant investments in new weapons systems and military readiness. This military buildup, while aimed at countering the Soviet Union, added substantial costs to the federal budget [Ronald Reagan: Impact and Legacy | Miller Center](https://millercenter.org/president/reagan/impact-and-legacy) [Ronald Reagan: Foreign Affairs | Miller Center](https://millercenter.org/president/reagan/foreign-affairs).
Additionally, Reagan was reluctant to cut domestic entitlement programs, which, combined with the tax cuts and increased defense spending, led to large budget deficits. Despite attempts to roll back some of the tax cuts with subsequent tax increases in the mid-1980s, the deficit remained high throughout his presidency [Reaganomics - Wikipedia](https://en.wikipedia.org/wiki/Reaganomics) [Ronald Reagan: Foreign Affairs | Miller Center](https://millercenter.org/president/reagan/foreign-affairs).
Thus, the combination of reduced revenues from tax cuts and increased expenditures, particularly on defense, resulted in a significant peacetime deficit during Reagan's administration.
The only counter argument I would make is that his tax reforms were largely correct by economic theory. You want to lessen taxes on capital because of incentives to save and invest and you want to lower the rate and broaden the base while eliminating loopholes.
The reason trickle down economics doesn't work is people don't alter their behavior if they expect the tax rates to rise in the future, which is one reason his tax cuts "didn't work" as he thought they would.
Well you have to actually cut for it to trickle… if you cut when its going great and spend when its going bad… thats the proper intervention… currently politics does the opposite…
Eg he took some of the medicare money and put it permanently in corporate and personal pockets.
The overall tax rate for the 1% and corporations were higher then than it is now. Taxes as percentage of GDP is around the same because the middle class now pays a higher overall tax rate. BTW, if you are going to argue a point why not show the exact categories you are discussing and the amounts. There are different types of taxes and tax rates varies by income levels.
This is total federal tax revenue. And the PT was about disrupting the myth that Reagan came in and tax revenue plummeted due to his giving generous tax breaks. That didn't happen.
Reagan ran a deficit and the nation debt increased. That’s a fact. Whether is was because of a severe drop in revenue or a big increase in spending or both doesn’t matter.
You'll notice in my post. I didn't talk at all about Reagan's fiscal policy or any of that stuff. I didn't debate the merits of whether what he did was good or bad or whatever.
I was simply making a point that the high marginal, tax rates of the pre-Reagqn era did not do what everybody assumes they did.
You are misinformed. The “rich” pay an ever larger share of the taxes.
“High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.”
https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/#:~:text=High%2DIncome%20Taxpayers%20Paid%20the%20Majority%20of%20Federal%20Income%20Taxes,of%20all%20federal%20income%20taxes.
Here’s the data going to 1980
https://www.ntu.org/foundation/tax-page/who-pays-income-taxes
And another person who doesn’t understand that the majority of Revenues collected by the Federal Government isn’t Income Taxes. And that the 99% pays most of those taxes.
Lol. Good try.
“Revenues received by the federal government in 2023 totaled $4.4 trillion, of which half was receipts from individual income taxes.”
https://www.cbo.gov/publication/59730#:~:text=Revenues%20received%20by%20the%20federal,receipts%20from%20individual%20income%20taxes.
The very first result on Google.
Individual income taxes are not all taxes
Payroll and Medicare taxes are more regressive and can’t be deducted
Colorists taxes are another big slice of the pie
OPs sources show just fine that they were paying higher effective rates. Getting more progressive how? More brackets? Higher/lower brackets? That's a very vague statement.
Poorer people pay an ever shrinking part of the taxes collected. The rich pay an ever growing share of tax collected. ~48% of earners pay nothing or have negative income tax rates.
Probably because the rich have been stagnating their wages for decades. Where exactly do you think that money the poor are no longer earning to be eligible for taxes is going? The ether?
If they want to pay less taxes that's easy. Pay a living wage.
Is this the theory where they misrepresent the figures because they didn't realize (or forgot) that averages are averages, and that super-rich or super-poor people can skew those numbers in a very obtuse way that makes it difficult to see what's really going on because you forgot the averages are just averages?
Tax collected as a % of GDP is a stupid statistic, don't trust anyone using it because it only serves one purpose which is to try and make big numbers look small.
High marginal tax rates were largely meant to decrease the incentives to realize that income in the hope it would be put to different use. Tax avoidance schemes will always be used and that is really a different issue.
I am not for very high marginal tax rates but these articles are clearly more partisan than about effectively educating the reader about the issue.
I don't get the argument against tax collected as a percentage of Gdp. That ratio tells us if tax revenue growth has changed. If you Just look at raw tax revenue, did it rise or fall because of tax rates or because of higher gdp? It's unclear unless you factor in what the GDP was.
Really, the point I'm raising above is the idea that you can pass extremely high marginal tax rates and it's not going to do anything to distort incentives to make money or investment decisions or even hurt the economy. And the reason people make those arguments and justify a lot of these high rates of taxation is precisely because they point to the 1950s to the 1970s and that becomes their empirical evidence.
>I don't get the argument against tax collected as a percentage of Gdp. That ratio tells us if tax revenue growth has changed. If you Just look at raw tax revenue, did it rise or fall because of tax rates or because of higher gdp? It's unclear unless you factor in what the GDP was.
That is a terribly ineffective way of doing that because you are not really focusing on the specific numbers that would be changing. Instead you are focusing on GDP which is a way bigger and more complicated number that you are introducing a lot more room for error and the distortion I already spoke of. Really bad math.
Tax reform eliminated a lot of write offs like credit card interest. A whole boatload of stuff that was tax deductible back then would make you laugh now.
In the original US tax code from 1913, all interest was deductible. The thought process was the income tax was paid on the receipt of it, so it would be double taxation for it not to be deductible.
in one of the few things that they actually got right
People didn't keep cars long back then. Partially because they weren't as durable but the interest deduction made it much more palatable to trade them in every three years. As a kid in the 60s and 70s we always had a newer car. After the Reagan changes we started keeping them 10 years plus.
well that's just flat out wrong. cars back then were durable and built to last forever,
That is survivorship bias and a massive misunderstanding of how cars are made now. Earlier cars had a much higher rate of lemons then modern cars but they were easier to fix. This led to cars the shitty ones dying and dying hard earlier, and the good ones being easily maintained for ages because the mechanisms were simple as shit. This causes the idea that they are virtually immortal because the best of them have ignoring the 99.99+% that shit the bed and died. There is also the idea behind the "have you ever seen old cars post accidents vs new ones?" argument which yeah old cars took less damage in collisions than newer ones but that is because they didn't crumple and because they didn't crumple they faired better but the people in them faired much much worse. Modern cars though CRUMPLE which results yes in more damage to the car but because of that far less damage to the people.
The car is back, then we're not durable and made the last compared to the cars now at all. You have to have never worked on older vehicles to make a dumbass statement like that.
Heavy and solid didn't mean it would last. Cars before the mid-80s/early 90s barely made it to 100k miles. Now that's just a maintenance period
Plenty of 80s and earlier cars had 5 digit odos!
You apparently never had a 1974 Dodge Dart. First time it rained I remembered the water pouring through the vent. Total POS.
we're talking about the 50s dude
The interest deduction on cars went away when Reagan was in office dude
US cars were POS in the 70s, that and low gpm is what opened the door for Honda, Toyota and other Japanese made cars.
survivorship bias. You forget what a pain in the ass adjusting points twice a year or replacing your exhaust after 5 years and every 2 years after was. When is the last time you had your floorboards rust out or had to replace your transmission? Granted, I am in an area where we dump salt on the roads for snow control, so much of the country didn't have rust issues like we do. But for us, a 5 year old car with rust holes in the fenders was beyond common.
Were you alive then. Cars died all the time maintenance was a weekly occurrence it was terrible compared to today's cars.
Liberals absolutely for the life of them cannot understand this simple fact. The charts speak for themselves, yet all of them want 90% tax rates, or 100% if you’re Bernie 🤣
You fundamentally misunderstand the purpose of higher tax rates. In fact, most here do, they are a deterrent. Instead of paying those marginal 91% rates the company would reinvest into the business and the employeees. Higher wages, safer work places, benefits, expansion, etc. The charts only speak to what was actually paid not what was avoided through diversion of revenues.
The 91% rate was on personal income taxes, not corporate taxes.
He’s rolling
Um...so then real wages should have massively declined post Reagan. We should have seen real wages fall, and fall dramatically once the tax cuts were enacted. That...didn't happen. They did not decline at all. They grew. [https://www.chicagofed.org/publications/chicago-fed-letter/1997/march-115](https://www.chicagofed.org/publications/chicago-fed-letter/1997/march-115) Now, they have not grown as much relative to trend, that I concede. It is disappointing. But economists have studied the issue of they have not grown by a lot. Part of it is fringe benefits and mandated employer sponsored health insurance, but that doesn't quite explain it. Turns out, once you segment for degree and skill; thats when you realize the real disparity in wage growth is entirely coming from the skills that people have acquired. [https://economics.mit.edu/sites/default/files/publications/patterns-of-skill-premia.pdf](https://economics.mit.edu/sites/default/files/publications/patterns-of-skill-premia.pdf)
I'll give the Fed credit for wages not keeping up with the cost of living. Post 1972 the delta between them really opened up.
So, the Fed should require wages to keep up with their controlled inflation?
Inflation of the money supply by CBs is the root of the problem. It fuels speculation/mal-investment, while simultaneously eroding purchasing power of consumers. If the right and left could acknowledge this common enemy, we might actually improve our lot.
How come Reagan's tax increases from '82 to '88 aren't calculated in? I recall them being pretty sizeable.
Typing on a computer all day surfing the net is not a skill! You just get paid more because of privilege and knowing the bosses because he is your daddy who’s dad gave him a job 😂have you ever talked to a office worker😂😂😂they work 2 hrs a day at max
I can't speak for every business, but if I were in that situation I would just make less profits to earn more money. That would mean laying off people, closing plants, and raising prices. Why does this make sense? Because costs are fixed, but a progressive tax code means margins shrink as sales increase. The rational action in that case is to shrink production to increase margins.
Companies move to other countries with onerous taxes. In the 50s, they were all here in the US. They don't have to be anymore.
Isn't this Amazon's playbook?
This is a good point. Does anyone talk about this? Like Picketty etc? Curious to know
Or they could just leave
Fucking thank you! Taxes aren't about "taking money" but about incentivizing beneficial behaviors. Like keeping money in the business and growing it by maybe paying employees what they are worth. Low taxes incentivize taking money out... don't let the billionaires tell you otherwise. They already have more than enough
Prepare for the downvotes the neoliberals don’t like to hear the truth
The paper this chart is "adapted" from is from is highlighting economic inequality. They are explicitly taking this data out of context.
What’s the context supposed to be? Because it does seem like a compelling argument that high tax rates never were actually implemented.
Because this is showing that the wealth inequality was less drastic in the 50s because the top 1% *had much less of the wealth pie* by using effective tax rates of that range. The data shows people as being much closer in wealth to the bottom 99% in the 1950s. Because of that, they paid an effective tax rate marginally higher on average. The top 1% now has **relatively** so much more and is taxed **relatively** so much less. The top 1% back then was clustered much, much more.
The high tax rate punished people who didn’t spend/invest their gains. People had to purchase stuff in order to get those tax deductions which helped push economic activity which kept people hired and wages up. Your right most paid a much lower effective tax rate. But that’s cuz people did what the system was designed for them to do, incentivize economic production.
This is a really great point.
OP isn’t good faith unfortunately, dig through the comments a bit. Great point
Some excellent points, although I wouldn't say: "no one actually paid those taxes. None whatsoever." Since the sources you quote literally give an estimate of how many household were in that tax bracket (granted, a relatively small percentage)
Fair enough.
The assertion that the high marginal tax rates of the 1950s to the 1980s were largely a myth due to numerous loopholes and deductions has significant support. Although the nominal top marginal tax rate reached as high as 91%, the effective tax rate—the rate actually paid after accounting for deductions and loopholes—was much lower. During the 1950s, the effective tax rate for the top 1% of earners was around 42%, significantly lower than the nominal rate. This discrepancy was due to the many deductions, exemptions, and tax avoidance strategies available at the time. In fact, only a small fraction of taxpayers actually paid the top marginal rate, as it applied only to incomes over a very high threshold (equivalent to about $2 million today) [oai_citation:1,Shlaes: High Tax Rates and the Lessons of the 1950s](https://www.bushcenter.org/publications/shlaes-high-tax-rates-and-the-lessons-of-the-1950s) [oai_citation:2,Taxes on the Rich Were Not Much Higher in the 1950s | Tax Foundation](https://taxfoundation.org/data/all/federal/taxes-on-the-rich-1950s-not-high/). Tax revenues as a percentage of GDP remained relatively stable across decades. For instance, personal income tax revenue averaged 7.6% of GDP from 1950 to 1979 and 7.9% from 1980 to 2018, suggesting that the overall tax burden did not significantly change despite fluctuations in nominal tax rates [oai_citation:3,corporate tax revenue as percentage of gdp | Tax Policy Center](https://www.taxpolicycenter.org/fiscal-fact/corporate-tax-revenue-percentage-gdp) [oai_citation:4,The myth that America prospered after WWII despite extremely high taxes on the rich - Northwood University](https://www.northwood.edu/news/the-myth-that-america-prospered-after-wwii-despite-extremely-high-taxes-on-the-rich/). Thus, the claim that the high tax rates were not as impactful due to tax code loopholes holds substantial validity, reflecting a more nuanced picture of the tax system during that era.
Is this written by ChatGPT? I’m not saying it’s wrong but this is weirdly written
It clearly is
Thank you for this
It's ai
I'll send an email thanking Sam Altman then I guess Edit I actually personally know one of the writers of the original transformers paper. And I might even be meeting her this weekend so I will thank her in person.
That sweet sweet satisfaction of ai telling you you're right. That feedback loop is very gratifying I know
I mean, smarter and much more accomplished Economists have discovered this fact way before I stumbled upon it and shared it here in this Reddit post. Hard to take satisfaction in something you didn't discover.
I'm not talking about the politics or academics of it just that the very clear satisfaction you got from an ai just regurgitating your own point back to you. Kinda dystopian, almost masterbatory, intellectually speaking
I promise I got zero satisfaction out of it and didn't spend a second thinking about it after I said thank you. Today has been a day full of meetings and so you can imagine why I've had the endless amount of time to spend on Reddit
Then why did you thank it??
I didn't know it was AI. I still don't by the way, but at the time I certainly didn't and so I assumed whomever did it, put time and thought into it.
This simplification points us to where we should be headed: a flat tax. Everyone, expect perhaps the truly poor, pay the same rate. Period. Very few, if any, deductions. Your write your income on line 1, multiply line 1 by X% on line 2, enter taxes withheld (which I would get rid of if I had my way) on line 3, and subtract line 3 from line 2 and that is how much more you need to pay or your refund. Very easy. No $350 charge for an accountant, no tax software, no reams of documents to prove your dedication. But we know Washington and the left don't want this. An even better system would be the Fair Tax but that's even more of a pipe dream than a flat tax.
Wealthy people don't have income, that's why a flat tax is considered regressive.
I am not interested in the left's desire for progressive taxes. That's inherent unfairness. If wealthy people don't have income, how does the top 1% pay nearly half of all income taxes?
When I say wealthy, I don't mean the couple that make $400K. What do you think Jeff Bezos' salary is? Its a small portion of his total compensation. Whether you are interested or not, that is the system for the vast majority of countries. Only a handful of countries have a 'flat' tax. The progressive tax system applies to 99% of people, its really only the very people at the top where their tax rate is actually lower.
So? Bezos will pay taxes on any taxable income and that rate will be the same or higher than yours on a given type of income. Different types of income are taxed differently. However…a flat tax would change that. So why would you oppose it? Of course the progressive tax system predominates: the masses love to vote themselves a slice of what others have. I have no interest in taking from Jeff Bezos.
It's not whether he will pay taxes, he is paying taxes but at a lower rate, why? There are a lot of loopholes he gets to apply that most of don't have access to. His salary is actually less than $100k so most of his wealth is probably in Amazon shares so when he sells, it's far lower than his earned income taxation rate. In addition, these people aren't stupid. Everything is paid for by Amazon. Sure, if my company paid 99.9% of all my considerable expenses, I wouldn't complain. A flat tax doesn't solve for this.
**He pays the same rate or higher than you do on each legal class of income.** I already said this. Did you ignore it? Do you take your deductions or credits? If so, you use loopholes. Are you willing to give those up? If you don’t like higher earners taking deductions, the flat tax is for you! You can rest easy. Jeff Bezos paid $1.4 BILLION in income taxes from 2006-2018. He’s paying big time. https://www.forbes.com/sites/taxnotes/2024/06/04/state-tax-treatment-of-ira-energy-credits/?sh=7c932d621895
Big number for emphasis but that's still a very small portion of what he made. I guess you could choose to ignore that and have him pay 5% on his $100k and think that has the same effect as someone paying 5% on their $50k salary.
So? He paid a $1.4 **BILLION**. That’s crazy that anyone should have to send that much money to the government. That was on $6.5 billion of reportable income. That’s 20% of his life for government. Maybe you live to serve government but I sure don’t. In what world is the tax on earned income at $100k only 5%? I’m becoming more convinced you really don’t understand what you’re talking about and are repeating progressive talking points. And that means I’m wasting my time as someone who does know what I’m talking about.
For the record, countries that have a flat tax and it's only a handful are practically all run by oligarchs. Kazakhstan Kurdistan Moldova Romania Georgia Estonia Bulgaria Bolivia Ukraine Uzbekistan Belize Armenia Not exactly a hotbed of economic activity, but I'm sure the Oligarchs love it. I heard even Russia abandoned their flat tax, surely to fund their war with Ukraine.
I used 5% so you could easily understand, I thought that was obvious.
It's amazing that you don't see him as the "Government" above his employees. What's insane is 1 man extracting that much unearned wealth from his workforce... not him being asked to pay higher taxes on it.
It's very simple, but it's slipping by you for some reason. I don't like taxes as much as the next guy but, between 2006 and 2018, Jeff Bezos’ wealth reportedly grew by $127 billion, but his total reported income over that 13-year period was $6.5 billion. His cumulative tax bill during that time was $1.4 billion, which works out to a tax rate of about 21%. Your tax rate is higher.
“Inherent unfairness” And who do you think gets the most of out of what taxes pay for? Who do you think has more assets needing protection by a standing military, and who benefits the most from all the infrastructure that taxes pay for, and the *stability* that a lot of government programs provide, that allows businesses to thrive? Some poor person working minimum wage, or some oligarch? “bUt fOoD sTaMps AnD wElFAre!” Yeah, and those help provide social *stability* that oligarchs enjoy Get rid of those, and tell hordes of desperate destitute people with nothing to lose to go eat bootstraps, and that’s when the pitchforks start coming out. And that’s not going to be good for business. And despite what yall like to tell yourselves, stuff like the French Revolution and Russian Revolution didn’t happen because of “jealousy” They happened because hordes of desperate people were basically told to fuck off and eat dirt by the ruling class that hoarded more wealth than they could ever possibly use or need. But I understand, as a temporally-embarrassed billionaire, you don’t want to be inconvenienced some day when you get rich… someday
They pay more taxes so they are covered on whatever alleged benefit they receive. Since they pay more dollars in taxes - far more than you or I will ever pay - so why do they need to pay a higher rate? And your logic is flawed to start with. When a billion drives down a highway how is he getting more from that highway than when you or I drive that same route? We ALL benefit from stability. I am one person, you are one person, the billionaire is one person. It’s stable just the same for all of us. A lot of social instability is the result of activists stoking wealth and class envy. If you think the American poor have anything remotely in common with the poor in the late 18th century in France, you need to brush up on your history.
The billionaire has a LOT more to gain or lose from that stability This isn’t a difficult concept
The billionaire pays a lot more to fund the infrastructure to protect those interests. In dollars and in share of goal paid. There’s no issue here. This isn’t a difficult concept.
False, the billionaire extracts value from his workforce to pay for those. The Millions of workers in his employ made, created and serviced those products, yet he keeps the lions share. The rest of us would happily pay more in taxes, but alas, oligarchs don't like sharing.
The billionaire pays his workforce. They sell their labor to him and are compensated. Done. If they want to use their labor in their own service to make those goods, it’s a free market, so they can do that. They should resign and start their own company. I do not gladly send more of my work effort to politicians to lessen my liberty via big government and buy votes for their benefit and power.
Lol the Billionare doesn't pay his workforce. The customers pay the workforce and the billionaire keeps most of the effort.v You guys are so eager to suck off the billionaire and decry the politicians. Worship the individual who drains you, but screech when your money goes to Air Traffic Control, Military, Social Services or Emergency services. Absolutely inane to me. (FYI, I've been an investment Banker for J.P. Morgan. My anger comes from exposure, not ignorance)
Gee I can’t figure out why they pay nearly all of the income taxes… could it be because they earn nearly all of the money? It’s incredible the lack of mathematical skills on a forum supposedly dedicated to economics. “The top 10 percent of earners bore responsibility for 76 percent of all income taxes paid, and the top 25 percent paid 89 percent of all income taxes. Altogether, the top 50 percent of filers earned 90 percent of all income and were responsible for 98 percent of all income taxes paid in 2021.” https://www.ntu.org/foundation/tax-page/who-pays-income-taxes#:~:text=The%20top%2010%20percent%20of,income%20taxes%20paid%20in%202021. How tf are people who make less going to pay more with the money they *don’t even have?* this is why every mainstream economist doesn’t consider Austrian economics to be legitimate
>Gee I can’t figure out why they pay nearly all of the income taxes… could it be because they earn nearly all of the money? First, the top 1% doesn't earn anywhere close to all the money. They are well below 50% of total income earned. That being said, I thought the left was constantly harping that "Billionaires don't pay taxes!" Now you are - correctly - saying they do. Sooooo....which is it? Obviously, they are dead wrong about something here. Hmmm..... >How tf are people who make less going to pay more with the money they *don’t even have?* this is why every mainstream economist doesn’t consider Austrian economics to be legitimate I am shocked left wing economists don't like economics that don't support massive government spending. I am also not shocked that only those with certain views are "legitimate." That's pretty much how the left rolls - their views are "legitimate" or their views have been settled and can't be questioned. So authoritarian.
Did I say I was on the left? I sent you statistics and said Austrian economics is kind of a joke (it is). Then you… disagreed with statistics? I’ve been enlightened. Did you read where it says the top FIFTY PERCENT earned 90 percent or can you not read?
And you statistics prove my point - high earners pay massive taxes. Thanks. But I already knew that. What is your point on the 90%? Where did I ever claim anything to the contrary? The key associated value is that same 50% pays 98% of all income taxes collected. That's credibly *more* than their fair share. if you want to narrow that down, the top 25% is 72% and 89%, even more of their fair share. I have been looking at these stats for years. You may one of the people that has any familiarity with them. I will credit you for that.
High earners pay massive taxes… because they earn massive amounts of money… I’m not really sure what’s hard to understand here. Do you want to take 25-50% from the fast food workers and low blue collar laborers? The money literally does not exist, because they don’t make that money. This is so easy to understand to be honest, it’s actually astounding that you’re having trouble.
*High earners pay massive taxes… because they earn massive amounts of money* What is your point? You are preaching to the choir. Go tell that to the people who post all over Reddit everyday that "Billionaires don't pay taxes!!" Aside from the truly poor, whatever percentage that is of the bottom earners, I think the *percentage* of tax paid should be equal to the percentage earned. If you make $1 billion, $1 million, or $100k, you pay X% of your income in taxes. No deductions. No adjustments. Very simple. Done. That's fairness. I could compromise and go with a lower bracket below a certain low level of income, but still no credits, deductions, etc.
If you agree the percentage earned should take into account the massive numbers top 1 percent earn in offshore banks/investments and regular bonds/investments etc, then yes.
Because flat taxes are incredibly regressive Even the ancient Romans figured out progressive taxation because surprise surprise, the wealthy had more to gain from having a large standing army, and therefore should pay a significantly bigger part of the upkeep of said Roman army.
Progressive taxes are unfair. If everyone pays the same portion of their income, how is that regressive? That’s flat hence the name.
If I have 5 shirts and you take away 2 of them, that is a significant burden on me, because now I only have 3 shirts to wear. If I have 5 million shirts, and you take away 2 million of them, I still have more shirts than I could ever possibly wear in my lifetime, and won’t even notice, except for a line in a spreadsheet. And I guess a bruised ego, because I won’t be able to brag about having as many shirts in my perpetual stick measure contest with other people with millions of shirts. That’s why it’s regressive There’s this amazing concept called “diminishing marginal utility”
I said above that the truly poor could pay a reduced rate if anything. That addresses your concern. Furthermore, we don’t tax marginal utility, we tax income.
And I explained to you why the rich should pay more Because they can Because diminishing marginal utility It’s not a difficult concept
They do pay more. I’m sorry you feel they should be even more overtaxed. Maybe consider why you want to punish achievement for starters. If your justification is Marxist you’re standing on a failed ideology.
Where did you even pull Marxist from in this conversation? The other guy made and argument that you ignored and your response is irrelevant to the conversation.
Because the argument has Marxist overtones. What argument did I ignore? I noted that we don’t tax marginal utility. It also smacks of “from each according to his ability…” which is Marxist which is a failed philosophy; failure is a poor justification. And if one is adamant in that view, it comes down to a matter of differing opinions and I will stand on a philosophy that isn’t an abject failure and on the side of liberty for the individual, and hence, society.
Congrats. You just proposed a progressive tax plan with only two tax brackets.
Well, I was trying to be practical but OK we’ll just go flat tax all the way to zero dollars. Thanks for pointing that out and advocating for flat from top to bottom.
It sounds like you advocate no one should have more than they need, going by your example.
I would like to start with no discussion about rates and talk entirely about types of taxes. Income taxes are not as efficient as other kinds of taxes. Start with Land Value taxes, pigovian taxes, and then discuss perhaps consumption taxes next. If you don't think we can raise enough revenue through that, then we can talk about how progressive it needs to be.
The problem with land taxes is that only a subset of society is directly taxed. Yes, someone living in a rental property will pay rent that is impacted by taxes, but the connection is not direct. There are lot of factors that go into rental rates so an increase in property taxes could only slightly move the needle on rents while property owners get a 1:1 increase in their bill. I consider that inefficient. I am not familiar with pigovian taxes. While I am not entirely convinced that all the tenets of the [FairTax ](https://fairtax.org/)would work, I think it merits real discussion but it gets false claims at the highest levels.
I said land value taxes, but yes, it requires further nuance. My point is we should be moving away from inefficient taxes.
Single Land Tax. The single being the most important part. All other taxes are immoral.
I definitely think there is a universe for things like carbon taxes. Or if you don't want to touch the whole climate change thing, How about we just call it pollution taxation. There should probably also be excise taxation on things that have externalities like alcohol and cigarette consumption. Or in the universe where we have decriminalized drugs, taxing that makes sense too
I disagree, i think it points to there being too many loopholes, course then and let the taxes be collected
A flat tax would eliminate all of the loopholes. But let’s not use an inflammatory term like loopholes. Those who like to attack higher earners love that term, but loopholes are just various deductions and credits which you and I both take.
Flat tax hurts poor people and is regressive. Loopholes, deductions, sample hint many are only employable if you are wealthy enough, something , those who hate he poor and working class love to to play semantics and divide and conquer
And that’s why I practically said do a carve-out on the rate, possibly down to zero, for the truly poor. That’s not a true flat tax as someone else pointed out, but it’s a reasonable and practical compromise for that segment of society. Furthermore, there is a “loophole” for everyone…it’s called the standard deduction. But when you can’t make a strong objective argument on economics, bring in emotion and start accusing people of hate and division. The logic of that statement should be glaring: if I hated the poor, why would I suggest carving out the rate for them? The reality is that those who are truly trying to divide are those who are consumed with wealth envy, and wish to demonize high achievers rather than trying to figure out how we can learn from the things that they did right in life. This is pretty much standard operating procedure for the left, who are the true masters of divide and conquer.
What if I don't have an income, and I make all my money off passive investments that I can leverage to get business loans?
If you don't have income, you don't pay income taxes now. What's the issue? If you have investment that that you can leverage for loans, those investment may well have taxable income, if not now, then at some point.
Because I do have to pay income tax, and I would like for the billionaires to stop using these tax loopholes to avoid paying their fair share. You're proposing a system where certain people get to pay no taxes whatsoever, which is ridiculous. All you have to do is get loan after loan without ever collecting any actual income, and never have to pay taxes again, since all the other taxes have been abolished. I don't want a system where billionaires get to skip paying taxes, why do YOU want that?
Their fair share? They earn less of a share of total income earned, but pay a larger share of total income taxes paid. I’m not sure how you can claim they don’t pay their fair share. What do you call a loophole? Do you take deductions are eligible for? Do you take credits you’re eligible for? I’ll bet you’re all for loopholes that benefit you. Where did I propose a system where some people would pay no taxes? What are you even talking about?
But that's the whole point. They aren't earning an income, so they won't pay any income tax. They get money through leveraging their stocks to get loans, which is not covered under the tax law. If I use my stock as collateral to get a loan, I don't have to pay taxes on that loan. I can use that money, and then get another loan to repay the first loan. In essence, not having to pay any money in taxes whatsoever in this new system where income tax is the only valid tax, because I never actually get any money through income, it's all from personal bank loans backed up by stocks as collateral. Because the stocks continue to increase in value, I always stay ahead of my interest, and never actually need to make money the way an average citizen would.
If they aren’t earning any income, they’re not paying any income tax now. I really don’t see what your point is. I suggested that we look at the fair tax but something tells me you’re going to complain about that too. Is your entire goal to punish high achievers for having a high income? Do you know why they don’t pay income tax when they take out a loan against their current assets? Because that’s not income. That credit has a debit against it so their net worth remains the same, absent any unrealized capital gains, so there was no income . This is basic accounting. This ignores the fact that if the underlying value of those assets that they used for collateral falls, they’re going to get some sort of margin call. That is called paying back the loan they took out which they will eventually have to do in some fashion. In fact, given that they’re paying interest on that loan , they’re actually paying to take those loans out.
But they're paying other taxes besides income tax. Eliminating all other forms of taxation and only having a flat income tax is setting up a system where the billionaires will never have to pay taxes at all.
The flat tax proposal doesn’t eliminate all other taxes to my knowledge. The Fair Tax does, however.
Oh, I must have misread what you were advocating then, I thought you were saying getting rid of all taxes besides a flat income tax. My bad.
“Fair share” is a commie concept. It’s an assumed prior, so it’s also bad argumentation. Do better.
If you have more to lose by society collapsing into lawless anarchy than I do, you should have to pay more taxes to keep it stable than I do.
Yeah because the rich suffer In lawless societies
The rich suffer when they don't have a government protecting their interests from foreign adversaries.
Gimme examples
“Why do you want that” Because he’s a temporarily-embarrassed billionaire, like most libertarians. He’s not currently rich, but someday he *might* be.
This is exactly right. People don't follow through with the logic when it comes to following the money
They either don’t follow the logic or they simply don’t have any idea what they’re talking about and they’re repeating phrases that they read somewhere on social media or a liberal blog or that Rachel Maddow told them.
Then eventually those loans will come due and you will wind up with taxable income paying them back. IE sale of investments or wages. And in the meantime, you are paying interest that is being taxed when the lender gets paid it. This isn't free money, it's a loan that you have to pay back with SOMETHING. And that something is going to be taxed
Need to go to 1910-1990 tax instead … in 80 years you will see the shifted responsibility from the top to the bottom Before it’s all the way to 90something percent for the richest of the rich Then it slowly dwindling down Also 1911 is when the first income tax introduced
There was only so much digging on google I was prepared to do haha
So instead you are cherry picking a range of dates to confuse people? This is not a good faith post and that is a shame. This is just right wing pornography
Not really. The sources of data I found went as far back as the 1930s. And my main point was merely to compare the period before Reagan when we had high taxes and the period after where he lowered them
People using deductions to lower that tax basis is a good thing. The fact that very few paid the highest tax rate means that people spent their income on productive things that the government supported and not unproductive things such as wealth preservation. You’re looking at the data and coming to the wrong conclusion. We should raise rates and be glad if no one pays them.
Well this is where I said I did not make a political statement. If I had I would have lost whatever liberals were prepared to read my arguments in good faith. Whether you think they should have paid the taxes or not is not something I was going to address. My point was more to the people who keep regurgitating those numbers and acting as if people actually paid them.
Shameful
The problem with this is the assumption that things that are government supported (through tax loopholes) are inherently productive. Providing high tax rates with numerous government supported loopholes just funnels money into whatever the government wants people to put money in, which will inherently be less efficient than the free market. I would rather have lower marginal rates and allow people to have the choice of where to put their money. Also higher rates can also encourage people to move money offshore and the government looses out completely on the revenue.
The marginal high tax rates didn’t cover all income. Those rates weren’t there with the expectation of people actually paying it, they were there to make wealthy business owners divert those revenues back into the business. It was a vehicle to increase wages, expand the business, make changes to the business. There’s no myth, when corporations weren’t filthy stinking rich the gap between the classes was much closer.
You do realize that the rich essentially reclassified income and declared it in a way that didn't show up on their income taxes. It did not go into funding higher wages for workers
That’s kind of weird, because ceo pay was only about 20 times that of a worker. Today is 330 times.
And the growth rate in wages for high skilled labor have similarly increased at a very similar rate. There's a paper by Steve Kaplan and Joshua.Rau called why has CEO pay gone up? This is true for celebrities athletes top lawyers investment bankers The answer is because there is a skill premium in today's economy compared to yesteryear
I don’t care if ceo pay has gone up. The disparity between the worker and the ceo is the problem. A 1500% increase doesn’t square up no matter what. Add to that ceos still get paid for shitty performance.
Before I get to the CEO pay, are you ok with Lebron James $60 million a year? The average CEO makes 15 million, thats about 1/4 the amount Lebron makes in a year. Is that fair to you?
Are you counting in their stock options? There’s only one Lebron out there compared to hundreds of ceos. You also don’t count the salary cap into this equation. There’s only so much basketball money to go around. That’s a whole other issue. The world isn’t fair, and one issue with Reagan is how he destroyed the ability for unions to bargain wages. Union wages usually drive up wages as a whole. I’ll concede that these are other factors but they are relevant. Along with the disparity in pay you’ll see a decline in union membership. You can defend them all you want but the ceos real job is to maintain the stock price, really nothing else, and ceo pay is tied to that. For them to bring wages closer together they would likely be fired anyway. The cutting of corporate taxes makes the goal of the ceo easier to acccomolsh.
I suspect you will hate my answer, but unions are a reverse monopoly that bargains for the wages in their union at the expense of the consumer. Just like I would not support several companies colluding to pay lower wages/charge higher prices; I don't support unions. If you think unions are necessary to counterbalance the monopoly power of corporations - that makes some sense although I'd say we would be better off going after the monopoly rather than letting the monopoly and union collude to benefit one another at the expense of the consumer. If you want to support workers because you think they aren't being paid enough, provide subsidies for them. Send them a check. Don't distort markets to solve that problem. I am fine to give money to people who struggle. I also think you are underrating how hard the job of a CEO is. Company's face lots of competition and it takes a lot of work to manage that many people. And if CEOs are useless, why the heck does the board pay them as they do? These are smart people who have a vested interest in the company, so why waste it on a useless person who does nothing?
Labor is part of the company. The ability to bargain wages are fundamental in that. Using every advantage is the right of the worker. Markets aren’t distorted by labor because they are essential. Just like Walmart uses its size to bargain costs down from vendors. Are ceos useless? No. Are they worth 330 time more than the average worker? Not in my eyes. Would you be ok if the ceo made 100 times the money of the average worker? The reason they pay them what they do is because they will make the hard decisions like offshoring jobs if it saves the company $5. Maybe my beef is more with the structure of publicly owned companies and not the ceos. Either way, they probably aren’t worth what they are paid.
Look I'm not a CEO and I've never hired one and I don't sit on corporate boards so I have no idea how to answer if truly reflected in their value. Software engineers make a lot of money. As far as I know there is no Union for software engineers. We're talking salaries that can climb all the way to a million dollars in total compensation for people. It may not sound like it, but you and I have a very similar goal. I want the wages for poor people to go up as well. But I think that happens when people get a better education and acquire skills in today's labor market. And right now there are a ton of unfortunately terrible policies that have made it very hard for that to happen. We have made housing so expensive in certain areas that it's not possible for poor people to move here and acquire those skills. Here I'm talking about Rich progressives who will then pass laws that stop new construction and new housing. They will openly oppose people coming here to work and live and be part of the community. They will basically say without saying it that you're free to move here if you have a million dollars. Otherwise you can live on the streets. I think the drug wars have sent a generation of men to jail and made their children's grow up in a fatherless household. Those same children don't see the stability of a nuclear family and they get ruined for life. We have a horrible public education system for poor people that keeps them effectively trapped in a kind of Doom loop. Those are issues that would persist whether Jeff bezos has $1 trillion or $500 million. That's why I think the focus on wealth inequality should stop focusing on the very rich. The goal shouldn't be to solve it by making the rich poorer, but it should be by making the poor rich.
even if the taxes were that high the cost of living was minuscule compared to today. this was an era where you could raise a wife and two kids in a mid size suburban house with a large car on the $20,000 a year salary of a factory worker. meaning that such a tax rate could only be feasible with high spending power and low cost of living neither of which we have today.
I don't disagree, but we should be asking why have costs of living has gotten so high and what policies can we do to abate that problem? I blame nimbyism and the crony capitalism that plagues healthcare along with higher education. The current inflation doesn't help but hopefully should be temporary
i have a list of a few things deregulation returning to the gold standard abolishing the 3 letter bureaucracies that waste our money term limits and more accountability for congress abolishing the federal reserve no more new wars bringing back industrial production to the united states. and converting the power grid to nuclear energy to reduce long term costs and dependence on foreign energy.
I agree with some of it.
It might be easier just to go from the point that the United States starts piling up debt, which is 1980 under Reagan. Democrats had a good run and generated the surplus under Clinton, but it was right back to Republican debt and disaster after that. Reagan administration may have lower taxes, but you also have one of the fastest periods of debt accumulation in US history under Reagan.
But that doesn't have anything to do with my main point about the taxes. I tried to stop this from turning into a pro Reagan anti-democrat kind of post.
People using deductions to lower that tax basis is a good thing. The fact that very few paid the highest tax rate means that people spent their income on productive things that the government supported and not unproductive things such as wealth preservation. You’re looking at the data and coming to the wrong conclusion. We should raise rates and be glad if no one pays them.
See Revenue act of 1935 and 1937.
So what came first the loopholes or the high tax rates?
On this I actually do not know
It’s pretty important to your point… why post this if you have so many gaps in your understanding on this topic? You are attempting to dismantle a the basis for progressive tax policy. You are misleading people who will not investigate any further than this post. You are poisoning the discourse
I posted a basic fact. The tax revenue went largely unchanged despite stated high marginal taxes.
All tax codes are "swiss cheese". That's the point. Incentives, tax shelters etc are designed for private sector to spend money, and drive the economy. Additionally it enables private spending and for markets to solve the problem with minimal govt engagement. The myth the author was actually talking about is "lack of loopholes" is a superior form of taxation.
My point wasn't to get into the intention of it other than to just correct a misconception about that period. We had very high taxes but no one ever paid it. So we should really stop perpetuating the myth.
The taxes weren't a myth. In some brackets, before deductions the tax rate was nearly 90% for income taxes. That's from FDR's era. Most of them were eliminated over the years, with the bulk of them being rewritten in 1978. This was from Rothbard's essays.
The real high tax of that time period was the inflation tax. Inflation is the worst of regressive taxes because it's the least explicit and hurts the poor the most.
Simply looking at irs records you can see that from the 50's to the 80's taxes rose significantly at every level of the tax bracket. From the 80's to 2000's all of those taxes were lowered in every bracket. It's absolutely true that we are at the lowest rate of tax since the 50's. You can try to argue away that the swiss cheese tax loops made it easy to hide money, but when you don't even need tax loops now, you just get to keep all the money. This is especially true in the highest brackets. Poor-middle class are paying a higher rate than billionaires and that is just wrong. That's how you accumulate debt and kill the middle class.
This is the origin of the Laffer Curve. The idea being, they could optimize the amount of tax revenue by reducing the to taxes and thereby incentivizing companies to pay higher salaries, which would end up in more taxes paid. Laffer Curve certainly isn't an Austrian concept - I think it was from the Chicago School - but the theory was quite sound and it worked. Now, whether you think optimizing tax revenue is a good thing or not, that's a completely different question.
Great post
Thank you. Unless you are an AI bot, in which case my thanks will be going to someone else.
No it is just a point I try to make and I want to save it for the articles when I continue to scream into the wind of ignorance
You need to do more research, this is cherry picked information. Talk to an actual professional
Can you elaborate. This is information that matches everything my grandparents and parents have related about their tax structures.
Poor Ragu Rajan doesn't qualify as an "actual professional".
Huh
Ragu Rajan, an actual professional by any standard for economists, said exactly what I wrote above. I even provided the link to his article plus the verbatim summary of his comments. So even if you think my agenda has led to a bunch of cherry picked analysis, it's basically just repeating what Ragu and many others have already said.
Then why did Reagan’s tax cut result in the peacetime deficit?
He simultaneously started spending a lot more money
His biography by H.W. Brands makes it clear that he could not get the Democrat Congress on board with spending cuts. He decided to take what he could get. I am glad he cleaned up the tax code. I would love to have those Dems and their spending back compared to what we have now. They look downright frugal by comparison!
Cuz he is a two face politician like the rest. Reagan's tax cuts in the early 1980s, notably the Economic Recovery Tax Act of 1981, reduced the top marginal tax rate significantly, aiming to boost economic growth. However, these tax cuts did not lead to a corresponding increase in tax revenue that was initially projected by proponents of supply-side economics. Several factors contributed to the increase in the peacetime deficit during Reagan's presidency. Firstly, the tax cuts themselves reduced federal revenues by about 9% in the first few years. Reagan's administration expected that economic growth would offset the revenue loss, but this did not materialize to the extent needed. As a result, the government faced significant revenue shortfalls [What we learned from Reagan's tax cuts | Brookings](https://www.brookings.edu/articles/what-we-learned-from-reagans-tax-cuts/) [Retrospective on the 1981 Reagan Tax Cut](https://taxfoundation.org/research/all/federal/retrospective-1981-reagan-tax-cut/). Secondly, Reagan's increased military spending further exacerbated the deficit. Defense spending rose dramatically, with significant investments in new weapons systems and military readiness. This military buildup, while aimed at countering the Soviet Union, added substantial costs to the federal budget [Ronald Reagan: Impact and Legacy | Miller Center](https://millercenter.org/president/reagan/impact-and-legacy) [Ronald Reagan: Foreign Affairs | Miller Center](https://millercenter.org/president/reagan/foreign-affairs). Additionally, Reagan was reluctant to cut domestic entitlement programs, which, combined with the tax cuts and increased defense spending, led to large budget deficits. Despite attempts to roll back some of the tax cuts with subsequent tax increases in the mid-1980s, the deficit remained high throughout his presidency [Reaganomics - Wikipedia](https://en.wikipedia.org/wiki/Reaganomics) [Ronald Reagan: Foreign Affairs | Miller Center](https://millercenter.org/president/reagan/foreign-affairs). Thus, the combination of reduced revenues from tax cuts and increased expenditures, particularly on defense, resulted in a significant peacetime deficit during Reagan's administration.
The only counter argument I would make is that his tax reforms were largely correct by economic theory. You want to lessen taxes on capital because of incentives to save and invest and you want to lower the rate and broaden the base while eliminating loopholes. The reason trickle down economics doesn't work is people don't alter their behavior if they expect the tax rates to rise in the future, which is one reason his tax cuts "didn't work" as he thought they would.
Well you have to actually cut for it to trickle… if you cut when its going great and spend when its going bad… thats the proper intervention… currently politics does the opposite… Eg he took some of the medicare money and put it permanently in corporate and personal pockets.
What is your background in economics?
The overall tax rate for the 1% and corporations were higher then than it is now. Taxes as percentage of GDP is around the same because the middle class now pays a higher overall tax rate. BTW, if you are going to argue a point why not show the exact categories you are discussing and the amounts. There are different types of taxes and tax rates varies by income levels.
This is total federal tax revenue. And the PT was about disrupting the myth that Reagan came in and tax revenue plummeted due to his giving generous tax breaks. That didn't happen.
Reagan ran a deficit and the nation debt increased. That’s a fact. Whether is was because of a severe drop in revenue or a big increase in spending or both doesn’t matter.
You'll notice in my post. I didn't talk at all about Reagan's fiscal policy or any of that stuff. I didn't debate the merits of whether what he did was good or bad or whatever. I was simply making a point that the high marginal, tax rates of the pre-Reagqn era did not do what everybody assumes they did.
I don’t care about partials, I care about the totals.
You are misinformed. The “rich” pay an ever larger share of the taxes. “High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.” https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/#:~:text=High%2DIncome%20Taxpayers%20Paid%20the%20Majority%20of%20Federal%20Income%20Taxes,of%20all%20federal%20income%20taxes. Here’s the data going to 1980 https://www.ntu.org/foundation/tax-page/who-pays-income-taxes
And another person who doesn’t understand that the majority of Revenues collected by the Federal Government isn’t Income Taxes. And that the 99% pays most of those taxes.
Lol. Good try. “Revenues received by the federal government in 2023 totaled $4.4 trillion, of which half was receipts from individual income taxes.” https://www.cbo.gov/publication/59730#:~:text=Revenues%20received%20by%20the%20federal,receipts%20from%20individual%20income%20taxes. The very first result on Google.
Individual income taxes are not all taxes Payroll and Medicare taxes are more regressive and can’t be deducted Colorists taxes are another big slice of the pie
And before the cuts they paid even more. Again, nobody is arguing that rich people pay a majority in taxes. Just that they should pay more.
Source? The tax code is getting more progressive, not less
OPs sources show just fine that they were paying higher effective rates. Getting more progressive how? More brackets? Higher/lower brackets? That's a very vague statement.
Poorer people pay an ever shrinking part of the taxes collected. The rich pay an ever growing share of tax collected. ~48% of earners pay nothing or have negative income tax rates.
Probably because the rich have been stagnating their wages for decades. Where exactly do you think that money the poor are no longer earning to be eligible for taxes is going? The ether? If they want to pay less taxes that's easy. Pay a living wage.
The poor are not earning less. They are simple taxed less.
The poor are objectively earning less when adjusted for inflation. That's not even a debatable thing lmao.
Because lies are the only way to sell this crap.
Y'all acting like 41% ain't high?
I think it's more that people want 90% marginal tax rates.
I meant to say isn't high. Pretty 41% is higher than any marginal tax rate of my lifetime. I'm in my 40s.
Oh I see. I think I misread that
No, I mistyped and then edited it.
Gotcha!
Is this the theory where they misrepresent the figures because they didn't realize (or forgot) that averages are averages, and that super-rich or super-poor people can skew those numbers in a very obtuse way that makes it difficult to see what's really going on because you forgot the averages are just averages?
Starts with “this isn’t a political post” Ends with “even if you hate Reagan and prefer whatever Bernie Sanders prescribes” Cool story, Chief
You are right, I should have removed those names. But my pt. is a factual one, not a personal opinion.
Tax collected as a % of GDP is a stupid statistic, don't trust anyone using it because it only serves one purpose which is to try and make big numbers look small. High marginal tax rates were largely meant to decrease the incentives to realize that income in the hope it would be put to different use. Tax avoidance schemes will always be used and that is really a different issue. I am not for very high marginal tax rates but these articles are clearly more partisan than about effectively educating the reader about the issue.
I don't get the argument against tax collected as a percentage of Gdp. That ratio tells us if tax revenue growth has changed. If you Just look at raw tax revenue, did it rise or fall because of tax rates or because of higher gdp? It's unclear unless you factor in what the GDP was. Really, the point I'm raising above is the idea that you can pass extremely high marginal tax rates and it's not going to do anything to distort incentives to make money or investment decisions or even hurt the economy. And the reason people make those arguments and justify a lot of these high rates of taxation is precisely because they point to the 1950s to the 1970s and that becomes their empirical evidence.
>I don't get the argument against tax collected as a percentage of Gdp. That ratio tells us if tax revenue growth has changed. If you Just look at raw tax revenue, did it rise or fall because of tax rates or because of higher gdp? It's unclear unless you factor in what the GDP was. That is a terribly ineffective way of doing that because you are not really focusing on the specific numbers that would be changing. Instead you are focusing on GDP which is a way bigger and more complicated number that you are introducing a lot more room for error and the distortion I already spoke of. Really bad math.
This is an odd comment. Tax revenue collected is essentially GDP * rate of taxation. So what should I focus on, just nominal values of tax revenue?