Happy Tax Day 04/15/13

Stiglitz points out that our progressive tax system is far less than progressive in implementation, particularly at the very high end.

The richest 400 individual taxpayers, with an average income of more than $200 million, pay less than 20 percent of their income in taxes — far lower than mere millionaires, who pay about 25 percent of their income in taxes, and about the same as those earning a mere $200,000 to $500,000. And in 2009, 116 of the top 400 earners — almost a third — paid less than 15 percent of their income in taxes.

At least or marginal rates aren’t 95% anymore:

But that always seemed to be more honored in the breach. There were a whole lot more loopholes available in the 1950s. Imagine if consumer debt interest were still deductible. Elimination of that created the home equity loan boom. Talk about the law of unintended consequences.

45 Responses

  1. Jared Bernstein has a few opinions on the topic as well.

    (we are undertaxed in historical terms)
    {snip}
    At this point, pro-tax arguments are almost exclusively based on this fairness theme, and again, I myself am a purveyor of such arguments, with lots of outrageous distributional graphics to make the case.

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  2. Should earned income be treated differently than investment income? If so, why? Also, should Municipal bonds lose their tax free status?

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  3. Eliminate deductibility of mortgage interest and increase the standard allowance accordingly. If you check international tables, you’ll find it does squatloo to increase home ownership rates in the U.S. A nice benefit for upper middle class, though.

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    • Eliminate deductibility of mortgage interest and increase the standard allowance accordingly.

      The Realtors® will never let this happen.

      As someone with a low mortgage in relationship to my income, I’d be in favor of that. Far more likely is to happen is to eliminate deductibility and pocket the difference.

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  4. yello:

    You Bernstein link seems not to work.

    Also, when stiglitz talks about what millionaires pay, I wonder if he is including the corporate taxes that they pay. Probably not…that is the usual tactic taken by people who want to minimize the amount of taxes paid by a given person.

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  5. “Talk about the law of unintended consequences”

    At this point, progressives really can’t claim ignorance when it comes to “unintended consequences” of their proposals.

    See for example:

    “Will New York City’s large soda ban backfire?
    Posted by Sarah Kliff on April 14, 2013 at 11:06 am

    The whole Idea of New York City’s (currently delayed) large sugary drinks ban was to get New Yorkers to consume less soda. But what if they actually ended up drinking more with such a regulation in effect?”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/14/will-new-york-citys-large-soda-ban-backfire/

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  6. Cap the deductions at X level and also increase the standard deduction to the same level so that there’s no point to itemizing. Saves the trouble of fighting each interest group individually. Yes, that applies to charities too.

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    • From Bernstein:

      Their first advantage is government dysfunction. Not only can they run for office on this platform: government is the problem, it’s broken, let’s cut your taxes and shrink it. Then if they win, they can ensure that their prophecy that gov’t is broken is fulfilled. Fomenting dysfunction is a highly effective strategy of those who want to cut taxes and shrink government.

      What evidence is there that such a strategy has ever been employed by anyone? What examples are there of low-tax, smaller-government politicians “fomenting dysfuntion” within government spending programs?

      Berstein’s apparent conviction that the usefulness and efficiency of government activity is somehow correlated to elected officials’ desire for it to be true is certainly not obvious to me.

      I am also dubious that his self-congratulatory “fact-based” arguments for higher taxes are in fact anything of the kind. Alas, his link to the FT doesn’t actually have his article in it.

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      • A good clue as to Bernstein’s strange notion of what a “fact-based” argument is.

        The sharp growth in income inequality suggests that higher-income taxpayers can and should contribute more in taxes to help reduce deficits.

        Questions about what people “should” do depend not on “facts” but rather moral judgements.

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  7. Oh, we could, you know, cut spending.

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  8. Bernstein does get to the root of the matter:

    “People have to believe, as is more often the case in other advanced democracies, that their money will be efficiently spent on services they want and need, and that the private sector either won’t provide (public goods, infrastructure, pollution abatement, innovative investments) or will do so less efficiently and affordably (retirement security, public education). And for people to effectively and lastingly believe it, it has to be true.”

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  9. Also, the 2012 Tax Payer Receipt.

    http://www.whitehouse.gov/2012-taxreceipt

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  10. Free refills at most fast food places make the cup size a moot point anyways. I try to buy the smallest size soda at the theater but they deliberately game the system by making the 6 oz baby cup only a quarter cheaper than the 48 oz bladder buster.

    Soda sizes are so huge because they are such high profit margin that the marginal cost of selling twice as much sugar water is nearly zero.

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  11. NoVA,
    That’s not a parody account like LOLGOP? Because it’s damn funny.

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  12. The only positive thing I can come up with to contribute to a tax day thread is that it’s a new thread.

    I read in our local paper that small business owners in wealthy suburbs of Los Angeles are targets of IRS audits. I’m hoping that because we’re a wealthy suburb of (technically) Riverside County, that we’ll be safe. Also in the list were San Francisco, Houston, Atlanta and DC…………….yikes.

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  13. at least around here, the real estate bubble seems to be inflating. my brother sold his condo in 2 days a month ago for over asking.

    http://www.washingtonpost.com/realestate/hot-housing-markets-revive-techniques-that-marked-the-bubble-of-a-decade-ago/2013/04/10/8565827c-a078-11e2-9c03-6952ff305f35_story.html

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  14. got it.

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  15. Even Bernstein does acknowledge the fundamental disconnect between Obama’s spending plans and his tax proposals:

    “President Obama’s been better—in his presentation, a lot better—but he’s got a weird angle to this tax point. He articulates, better than almost anyone in high office in recent years, the “we’re-in-this-together” theme, along with quite deep and resonant analyses of how and why we need an amply funded, efficient government sector. His health care plan alone is evidence that he gets this, as are his words and many of his actions regarding investing in clean energy, infrastructure, safety-nets, productivity-enhancing innovations, and education.

    But his tax policy falls far short of his agenda. Simply put, that agenda cannot be capitalized solely by households above $400,000 (about the top 1.5%) and the permanence of the Bush tax cuts noted above.”

    What Berstein refers to as a “weird angle” with regards to Obama’s rhetoric on fairness vs his actual proposals I consider to be simple dishonesty.

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    • But his tax policy falls far short of his agenda. Simply put, that agenda cannot be capitalized solely by households above $400,000 (about the top 1.5%) and the permanence of the Bush tax cuts noted above.

      I concur that the current tax structure does not support the current spending levels. Something has to give. FICA should go up to $200k. I like the ideas upthread of raising standard deductions and eliminating itemized deductions. Both of these would hit me in the wallet but they are the right thing to do.

      Defense spending can take a much bigger hit than it has. I’d like to see Department of Education scaled back significantly. I’m not sure it’s much of a value-add over state authority. Convert it to block grants or something and then whittle it away.

      The double-taxation complaint about corporate taxes and capital gains has never carried water for me. Those are separate buckets. Eliminating carried interest is small potatoes but it’s symbolic and should be done.

      And the health care of dying people (which is all of us) is the biggest elephant in the room. If we don’t bend the cost curve on end-of-life care it is going to swallow up all ‘discretionary’ spending, most of which is the good stuff.

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  16. It’s not dishonesty. it’s just that it’s true from a certain point of view.

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  17. “And the health care of dying people (which is all of us) is the biggest elephant in the room. If we don’t bend the cost curve on end-of-life care it is going to swallow up all ‘discretionary’ spending, most of which is the good stuff.”

    Why would single payer, administered by politicians desiring re-election do anything to alienate the electorate that most reliably votes? Name a time when seniors have had their entitlements cut?

    Doom, unless…

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  18. breaking — bombing at boston marathon.

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  19. good point, scott

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  20. Hearing 30 injured / 3 killed.

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  21. Wow, just saw some of the video looks like one of them at least was a pretty powerful explosion…….hope they catch the bastards, assuming it wasn’t an accident.

    Sending best wished from the West Coast.

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  22. So much good stuff. I should have come here early today, instead of worrying over which position to apply for (alas, most of them ask for certifications or degrees I lack . . . I suppose “or equivalent” will let me least apply, given I’ve been working for the school system for several years now, but I dunno . . . ).

    Anyhow, call for help!: Can any legal minds tell me if getting a letter of testamentary regarding the disbursement of previously unclaimed property involves opening up probate again (probably not, no)? My wife is last living descendant, unclaimed property is $600, I figure it’s just amount of hopefully getting a letter of testamentary from the firm that handled his will, but don’t know, and not sure who (if anybody) is still with the firm some 6/7 years later.

    Trying to get unclaimed property, but it’s in her father’s name, something that apparently got missed when he changed his address when he separated from his 2nd wife. In any case, all that stuff was left explicitly to my wife in the will, or split between her and her sister (now deceased). Any

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    • Kevin, I would bet that getting another letter testamentary will cost less than $20 in the Probate Clerk’s office where the will was probated.

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      • Compelled by the dearth of any high profile MSM coverage of Kermit Gosnell and his questionable exploits as a provider of late-term abortions, James Taranto has penned what I think is a fantastic synopsis of the abortion debate in America, how that debate is engaged, and where it needs to go. Definitely worth reading.

        BTW, he makes a point in his intro that I thought was both amusing and revealing. So paltry has been the coverage of the Gosnell horrors that Snopes.com, the site dedicated to debunking urban legends, was compelled to write a piece confirming that yes, the story is true and not just an urban legend.

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  23. @Markinaustin: So, we go to the probate office where the will was probated (I think the lawyer handled all that, so we will have to get someone at the law firm to at least point us in the right direction, maybe), and can hopefully do all by mail or over the phone, as probate office is in North Carolina. 😉

    Thanks!

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  24. Scott.
    Your link goes to a Facebook fan page. Taranto seems rather loquacious on the topic. Is there a more specific article? I notice that he deleted a Boston marathon related tweet out of a sense of good taste, something Jennifer Rubin hasn’t done.

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    • yello:

      Your link goes to a Facebook fan page.

      Yeah, I noticed that and it should be fixed now.

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    • yello:

      I notice that he deleted a Boston marathon related tweet out of a sense of good taste, something Jennifer Rubin hasn’t done.

      Neither has Nick Kristof, who upon hearing of the Boston explosions immediately tweeted:

      “explosion is a reminder that ATF needs a director. Shame on Senate Republicans for blocking apptment”

      And, of course, you can always count on Chris Matthews to be a partisan hack.

      (BTW, I think Rubin makes an excellent point, even if her timing is questionable.)

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  25. Thanks. That is a very interesting article. This seems to be the thesis of Taranto’s argument:

    The reductio ad absurdum of the pro-abortion side is Kermit Gosnell. That is why the Gosnell case has crystallized our view that the current regime of abortion on demand in America is a grave evil that ought to be abolished. It is murderous, if not categorically then at least in its extreme manifestations. Maintaining it requires an assault on language and logic that has taken on a totalitarian character.

    The defining question does always seem to be: When does abortion turn into infanticide? There is a long continuum between an IUD and what Gosnell was doing.

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  26. Kristof has apologized as has Rubin, sort of. Only hers disingenuously pretends her original tweet was directed at the New York Post instead of being a catty swipe at Sarah Kliff.

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  27. Kevin, I don’t know if it is still this way or not, but when I handled my mother in law’s probate in pro per, there was a lawyer at the courthouse available to answer simple questions as a public service. I forget what he was called but was specifically there to help non lawyers through the process. He couldn’t answer legal questions but could review paper work and answer technical questions. You might look into that. I always met with him in person but perhaps a phone call could yield some results.

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    • Kev, if you or your sis know which Court, then just call the clerk for instructions. If you know which county, the probate clerk probably maintains a web site. If you have a copy of the Order Admitting the Will to Probate you are golden.

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  28. NoVa, didn’t know you read Ace. Good on ya! I’ve only ever gotten one hat-tip from him. /humblebrag

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