Looks like we are heading back to the future, the future of 1920's where the rich were really rich and the poor really poor. Too bad we didn't learn from that... soon to head to the 1930's.

There SHOULD be income disparity between college educated and everyone else. How could there not be? Only if education did not matter. Apparently, education DOES matter. This is not a bad thing.

I think the United States is undergoing structural economic change. Gone are the days when someone with only a high school education could earn $28 to $40 per hour ($56,000 to $80,000 per year) plus healthcare, plus retirement benefits as an auto worker in Detroit. Those days are over. Competition from Toyota, Hyundai and others makes these wages impossible in today's world. It was great while it lasted, but those days are clearly over. Now the autoworker needs to go to school and become an x-ray technician.

Change is not a bad thing. We must deal with it and we must continue to improve education on all fronts.

What is interesting, and perhaps a bit worrisome, is when one considers rising standards of living for the middle from the 1970s through 2008, embodied by such things as larger houses, more electronic gadgetry, etc., and in the face of rising costs of health care and education. All this with wages stagnant. It was made possible through increasing use of credit cards, home equity, and other forms of borrowing. With borrowing now curtailed and likely to remain that way for a while, wage stagnation is now likely to make itself fully felt. And high unemployment is likely to depress wages further.

I was very angry when I first heard about Obama's Corrupt Bargain. He acts helpless in the face of tea party opposition and waved the white flag before the battle even started. Bill Clinton, for all of his faults, knew when to compromise and when not to compromise, and he won a decisive victory in the 1994 budget battle.

This reminds one of the scene in "Key Largo" in which Frank McCloud (Humphrey Bogart) explains the motivation of mobster Johnny Rocco (Edward G Robinson):

McCloud: You want more, don't you, Rocco? Rocco: Yeah! That's it! I want more! Temple (Lionel Barryomre): Will you ever get enough? Rocco: Never have - nah, I guess I won't!

There is greed and class warfare being waged over this issue, but not from the corner which the author would have you believe. Rocco in this analogy isn't the well-to-do, he's the government. And he'll never get enough.

Class warfare, perhaps, but waged by whom?

It is ironic that the Crosscut front page links to an article in today's Journal by William McGurn, entitled "Billionaires On the Warpath." That author quite correctly lays out the moral argument against higher taxes.

How much is enough tax revenue? What is the highest "moral" tax rate? You won't hear Pres Obama or Gov Gregoire answer either question because they honestly believe the government can spend our money more wisely than we can.

The American people and Washingtonians have rejected that notion time and again, most recently in the November elections. I am a better steward of my hard-earned income than are politicians.

Good points dbreneman and PJS.

How much should the rich pay in taxes? I mean, obviously, much more. But how much??

The top 1% of earners pay 40% of all income taxes right now. (I know, what a ripoff!) Is this fair? (They earn 23% of the income) They are getting away with murder. So, how much is fair??

Should they pay 50%, 60% 70% of all taxes? Perhaps more? Don't worry the bottom 50% of earners pay 2.7% of all income taxes. That means almost half of the people in America pay no income taxes. The makers and the takers. This is not a good way to organize a country. Every American should have some stake in the government.

I would set 70% as a fair highest tax bracket, to set in at perhaps one million dollars. The economy was doing better--lower unemployment, more affordable cost of living, etc.--when we are at this level than now. The President should state this, or what he would consider to be the target, and stop letting the extreme right control the discussion.

This piece was devoted entirely to the effects of federal taxing policies. It ignores the class warfare being practiced against the lower half of the population in this community by state and local government managers.

Here’s something the author got partially right:

“Short-term tax cuts for people who spend most — or all — of their paychecks will produce the intended effect: consumer spending.”

What’s correct about that is consumer spending is critical. It’s what brings regions out of recessions, by creating new jobs. What the author doesn’t seem to get though is that income taxes are progressive. The people who’re spending most or all of their paychecks are the ones with such low incomes that federal taxes are a relatively small burden for them.

In contrast, that’s the demographic cohort that is disproportionately hammered by the exceedingly high regressive taxes imposed by our state and local revenue-system designers. We’ve got the most regressive stacked state and local taxes in the country. Olympia’s and Seattle’s government managers target individuals and families with an abusive 9.5% sales tax rate.

Sales taxes that high are a big problem. They act as an economic anchor on the lives of people and locally-owned businesses. That kind of taxing is designed to dampen local economic activity by starving people and local businesses of dollars. Local spending generates the cash flow individuals and families everywhere else can rely on to build personal wealth and get their communities out of recessions. Not here though. Job creation is poor, especially in the small business sector which leads other areas out of recessions.

Sales taxes target the poorest and most vulnerable people in the community. That kind of revenue-raising is designed to eliminate a relatively large percentage of the disposable income of many individuals and families. The poor are supposed to be hurt more by them and they take food off the tables of the economically-weakest households.

There’s an economics principle called the multiplier effect. Money spent locally sloshes around many times in the local economy. Not enough of that happens here. We’re not going to get that here either, unless things change. We aren’t going to experience a robust enough economy because of what would be done with far too much of the tax revenues to be confiscated over the next several decades.

To take one really bad example, consider how much of the regressive tax revenue confiscated for “transit” is lost to the local economy, immediately. Sound Transit can’t ship sales tax revenue out of the local private sector fast enough. It makes huge payments to bondholders, non-local contractors, and engineering firms. Vast sums are sent to BNSF and Amtrak. It takes tax revenue, and then buys investment securities for its reserve fund. Oversees contractors get hundreds of millions of dollars for railsets and tunnel boring machines. The size of ST’s payments to entities such as other local governments, state governments, and indirectly to unions are staggering – far larger than its peers make.

Local small businesses are hurt by this. They can not afford to hire new employees. New businesses will open elsewhere, where the private sector spending is more robust. This dynamic will continue for decades, and get worse and worse.

What we've got here is an out-of-balance tax structure that was designed to punish that sector: small local businesses depend on local consumer spending. That won’t be happening around here to the extent it should because so much money is being drawn out by the 1.8% transit sales taxes (FAR higher than the peers use). And it’s not like we’re getting back any real value in return for ST’s excessive regressive taxing.

Sales taxes here grew from 5% in the 1960’s to 9.5% now. Dow Constantine tried to raise them again last month. You can’t blame Bush for that. There’s been a drive by the political leadership around here to raise regressive state and local taxes higher and higher, irrespective of the cost to people and the local economy. Anyone have a sense of why people and small businesses here are being targeted for undue financial impacts by the architects of our state’s taxation regime?

There are so many points to comment on in both the story and the preceding comments, let me try to make three points as we enter a dangerous decade:

1) Education does not ensure you better wages or employment. Right now Boeing has college-educated employees working 80 hours a week for 40 hours pay. A college education only proves you were willing to sit through 4-6 more years of class time. Contrary to popular belief, it does not make you smarter. You were either smart or dumb before you went on to college. After college; you are still the same person only with more class time.
2) Nothing will happen until the failing middle class wises up to the realities of life. Look to the French Revolution or the Russian Revolution. Serfs were serfs, it was their lot in life, but when the middle class of the era started to starve, things changed. Think about General Douglas MacArthur under the direction of President Hoover killing WWI veterans in 1932. This is what we have to look forward to when wealth is concentrated in the pockets of too few people.
3) Communism, Nazism, any of the ism’s can only get a foothold when people are hungry, disgruntled or see no future for their children.

Well, then stop having children people if you do not like the way things are going. All you will end up doing is giving to them what we are ruining anyway.

America's best days are behind us. We are leaving behind a cruel, uncaring world where the all mighty dollar rules the day, a life, a nation.

I am 48 and with no children. There was a time I cared for the world I left behind, to leave it in a better place than what it was given to me. But I don't care anymore. I do not give a rat's arse what happens any more to what is left behind after I'm gone. Because I will have no children to have to live in this quagmire. In 35 years I'll be gone and things will be BAD.

It's as if the entire race of Homo Sapiens is all in a car that is heading straight into a brick wall at 150 mph, . . . and they're arguing about the seating arrangements.

Neither tax nor education policy bears direct responsibility for the Great Recession. What's clear though, is that recession-caused unemployment has hit those with less education (and commonly less income) much harder than those with college degrees (and commonly greater incomes). College degrees then are a proxy for the group still moving ahead despite the recession and those falling further behind. The result as the recession continues is likely to be a split in America's middle class. It's hard to imagine this is a good thing. For more on this, see Monday's NYT editorial [http://www.nytimes.com/2010/12/14/opinion/14tue1.html?_r=1&partner;=rssnyt&emc;=rss], which details the effects of the stagnant job market on NEW college graduates. Those under 25 are beginning to see unemployment rates closing in on their peers who don't have degrees. Hard to imagine that's a good thing, either.

Fascinating discussion, but my take is a bit different and focuses on the culture of wealth. In the post-WWII era the U.S. had absolutely no global economic competitors (Europe and Asia were devastated), so its economy expanded at a phenomenal rate. This left several cultural legacies:
- an expectation that everyone could eventually get rich and if you didn't it was a function of your laziness; therefore, the rich "earned" their wealth, rather than exploited the advantages they built into the very economic system they created in the first place;
- the move to an economy of consumption (rather than production) meant that "more" (i.e., greed) was good--more cars, more clothes, more house, more toys (note what will happen in the malls this season of "giving"), so the moral argument against greed was eroded;
-as the wheels started to come off this bandwagon (oil embargo in the 70s, failure to pay for the war in Vietnam), the rich found a way to turn it to their advantage--blame the government (Reagan). The rich didn't want to pay, the consumers didn't want to pay, the unionized workers didn't want to pay, so . . . make the poor pay and blame their government entitlements. Cherry-pick the middle-class students for elite education and make it look like meritocracy. Never mind you're underfunding poor neighborhoods with lousy schools, some of the worst teachers who aren't paid anything anyway.
The U.S. economy is waning but it's not going without a fight. Hence, in the state of Washington an attack upon the students, the poor, the disabled, and the vulnerable. For, if it weren't for them and those damn government workers, we'd all be rich.

As I read more comments, I have one other point to make. Look in the mirror. We are the one at fault. As some call them, the Wal-Mart generation is a graphic example. These folks shop for the cheaper prices. The good they purchase made overseas do not support our economy, thus we send ourselves down a steeper and steeper spiral to economic disaster. There is no free lunch, wal-mart cheap goods will cost us somewhere; in the current parlance, “we just keep kicking the can down the road.”

You're confusing correlation with causation. I'll go out on a limb here and guess that you, like our president and congressional leaders, have never studied economics. One might just as well say "The US marginal tax rate in 1944 was 94%. All we need to do is turn Europe over to a dictator and we can afford to pay higher taxes." Just because the American people were able to overcome adversity in the past, it doesn't mean that adversity should be built into the system.

Warren Buffet recently pointed out that there's class warfare going on, "and my class is winning." How high should income tax rates be set? How about back up to where they were during the time of America's greatest economic growth, or perhaps to where they were the last time this nation ran a surplus; you remember, under a Democrat names Bill Clinton.

The debate isn't over how wise government spending is vs. private spending, the debate is are we going to raise enough revenue to start bringing down the national debt again. No, not start reducing the deficit -- start reducing the debt by running surpluses for some years into the future.

I'll go out on a limb here and guess that you, like our president and congressional leaders, have never studied economics.

That's false and it's a personal insult.

Good straightforward article, Mr. Lilly but in your comment above you do not respond to the request from (I think) dbrenemen as to what you think the top income earners should be paying. Another (accurate) comment above is that the top 1% earners in this country pay nearly 40% of the total income taxes. You refrain from responding to this. What is the proper tax burden for this cohort? if 40% is not enough what is?

Would pepper cheerfully pay $700,000 in federal income taxes on an AGI of $1million? if I were that lucky I would probably chafe at a tax burden like that and I would seek the advice of clever lawyers and accountants. This is in fact what happens under very high levels of taxation; it generates an entire business model of tax avoidance which tends to distort normal productive business activity.

Years ago I amazed a fellow contributor here by guessing that he was a professor of sociology. He was so happy with the Holmesian nature of my deduction that I didn't have the heart to tell him it wasn't a compliment...

C'mon, Kieth, we're talking about marginal tax rates here. With a $1m AGI and a top bracket of 70%, the tax owed is NOT $700,000! But then you probably know that and just wanted to shove more junk into the discussion.

Conservatives rage against high marginal tax rates, claiming they "are not good for an economy", and if that's true, how come the economy did so well in the 1950's when the top rate was something like 90%? No need to go back that far, however; I'd settle for rates as they were in the 1990's when we were running surpluses.

Keith,

The economy functioned well during the 50's and 60's when the top income tax rates were 60% or 70% or higher. The economy functioned just fine during the Clinton years when the top tax rates were 38%. The economy did not function very well during the Bush years when taxes were as low as they've been since the 1920's. As they say in the investment advertisements I would say that there is no concrete evidence that raising the top tax rates to 38% would damage the economy. Can't say if that's "fair" or "right." Certainly the very rich have managed to collect almost all of the wealth created in the last 10 years. The rest of the country is working harder creating wealth but is taking less of that wealth home - which is also not "fair". I don't know if you can say that the two unfair things balance out, however.

I think that the bigger problem in our society is that the very rich are more and more able to control our entire society. I think that there is a point where the very rich are so wealthy that democracy becomes a meaningless sham. Wealth equals power, and a rich oligarchy can tyrannize the middle class just as effectively as a totalitarian government. We have a congress bought by campaign contributions from corporations, and a compliant supreme court willing to re-write the rules for the wealthy. I doubt the rich have too much to fear from anyone.

Mr. Lilly's effort to redefine class warfare in terms of education (and to thus implicitly blame its victims) is a classic example of how Ruling Class Media serves the oppressor by confusing or obscuring the issues -- in this case the nature of capitalism and its paradigm of governance.

Economic gobbledygook aside, capitalism is infinite greed defined as maximum virtue and relentless selfishness defined as ultimate good.

In other words, capitalism is the total repudiation of any and all humanitarian values, religious or secular – the rejection of the Ten Commandments, the Beatitudes, the Manifesto, the Four Freedoms and above all their implicit notion of a caring society: from each according to ability, to each according to need.

Recognizing that the mode of capitalism extant today is not just an economic theory but a doctrine of increasingly unrestrained savagery expressed as murderous downsizing at home and genocidal imperialism abroad, former Secretary of Labor Robert Reich has labeled it “supercapitalism.”

But I believe a far more apt designation is “tyrannocapitalism,” named after Tyrannosaurus Rex, the most vicious predator this planet ever produced – an implicit expression of the moral imbecility characteristic of lizard-brain thinking.

Meanwhile the paradigm of governance that tyrannocapitalism inevitably imposes – previously evident in Mussolini's Italy, Hitler's Germany, Pinochet's Chile plus myriad banana republics and petroleum despotisms (all financed almost entirely by Wall Street) – is now being imposed on the United States at all levels, federal, state and local.

What this means in practice is absolute power and unlimited profit for the Ruling Class, total subjugation and deadly poverty for the rest of us.

The deadliness of such poverty is manifest in the methodical destruction of the humanitarian safety net, its obliteration intended to exterminate “surplus human capital” without the usual concentration-camp trappings of a Final Solution.

It is a diabolically clever strategy. It murders those of us condemned to the socioeconomic death of “jobless recovery” – the condition of the U.S. economy from now on – but it does so in a manner that allows the Ruling Class to claim our fates are self-inflicted.

The new paradigm in which this deliberately murderous poverty plays such an important role is as evident in Washington state as it is in Washington D.C.; Governor Christine Gregoire's calculated atrocities against disabled, elderly and impoverished people are of a kind with President Barack Obama's attack on Social Security and his permanent exemption of the rich from meaningful taxation.

Barack the Betrayer or Christine the Cruel, it's the same story.

Disguised as "compromise" by the protective cover of the Republican noise machine, these are precisely the triumphs the capitalists have sought since the time of New Deal.

And they are undeniably permanent. The staggering betrayals now associated with the Democratic Party could easily signal its destruction. They guarantee that – even if the party somehow manages to survive – it will remain out of power for the foreseeable future.

Politically we have thus effectively been reduced to a one-party nation – an undoing of constitutional democracy that is as revolutionary as any right-wing coup – a development for which there is no national precedent either historically or psychologically.

The coup-like result is already generating the venomous suspicion Obama was a kind of Manchurian Candidate – a deep-cover Republican carefully implanted in the Democratic Party specifically to bring about its downfall – a suspicion solidly based on Obama's unparalleled record of serial betrayals.

Whatever the truth about Obama, the socioeconomic result of tyrannocapitalist governance is an emergent class system most closely resembling that of the Dark Ages: the manorial aristocracy on one side, agricultural slaves (i.e., serfs) on the other.

Its modern variant likewise allows for only two classes: the Big Business aristocracy lording it over all the rest of us, with the (former) middle class – blue-collar and white-collar alike – effectively compressed into a new, newly dispossessed and now abjectly powerless class for which we have yet to find an adequately descriptive name.

But Mr. Lilly ignores these facts. Instead – as if he were an agent assigned to suppress legitimate fear, minimize solidarity and discourage activism – he portrays a fantasy world in which those who were rich enough (or cunning enough) to pay for college education remain somehow magically immune to tyrannocapitalism's viciousness.

Despite its deceptive cloak of statistical evidence, Mr. Lilly's PollyAnna hypothesis is utter nonsense.

Just ask the out-of-work college professors, schoolteachers, librarians and social workers – all people whose forever-abolished jobs demanded degrees.

Or ask those of us who used to be journalists – a college-educated group about 75 percent of whom are now permanently unemployed thanks to the Ruling Class decision to curtail public access to information.

“Will Work For Food”: such is the new American Dream.

Dear lorenbliss,

Could you please sum up your views in just one short paragraph? (If you used to be a journalist, you must have been paid by the word.)

Capitalism has pulled more people out of poverty than any other system devised by mankind. It is not always fair and it does not guarantee equal results. It has its flaws, but it is still better than any other system.

By the way, I was neither rich nor cunning, but I put myself through college and graduate school. I had many jobs and I worked hard. Now I am an entrepreneur and no one can fire me. You should try it.

R on Beacon Hill, I am embarrassed; you are, of course right. I think the remaining point I make is correct; very high tax rates result in very great distortions to normal business decisions. Back in the days before the 1986 tax reform arranging one's life to minimize taxes was a major determinant of, not just business activity, but all economic decisions.

Talk about confusing the issues. The rich and the elite are not necessarily the same, even in the USA. And those who think they know what is best for everyone else are not necessarily rich or elite. The problem, even in a democracy, is that power tends to corrupt. Viva the exceptions!

If I were young now, all my parents and I could afford would be Community College. Every day that goes by I feel more and more fortunate to have been young when this was not the case and that for steerage I got a first class education.. Ever since, I have lived my parents' dreams. For all that education, or maybe because of it, I didn't have the brains while they were alive to see that their efforts made them just as "elite" as me.

Kieth, I understand the rhetoric about high marginal tax rates leading to distortions, etc., but I've seen enough interesting articles pointing out the high economic growth this country has experienced during times of high tax rates (no time to look up cites, alas). These are personal income tax rates we're talking about, and nearly all of the business world is incorporated and taxed as businesses, not as individuals.

Restoration of the pre-Bush tax rates for upper income folks (and I'd put the threshhold at $100K) would be a positive step. We've got to do a number of things to grow the middle class, again. The rich are getting richer and the poor are getting poorer, and that's not just a slogan any more. Our country will collapse into third-world status if that continues unabated.

There are a lot of negatives we can recall about the 1950's, but the middle class boomed during that period. All of us, Democrats and Republicans, should be looking for answers to turn this around. I remember a time when both parties championed the middle class, but right now the Republicans have abandoned any pretense.

To R on Beacon Hill. You are wrong about this. Most businesses in America are small businesses. And almost all small businesses are taxed at the individual level. The business does not pay taxes because it is either an S Corp or an LLC. So, the individual tax rates are the ones that matter.

How does increasing the taxes on those earning over $200K help the middle class? Those earning $200K plus are the successful entrepreneurs, the successful business owners. These are the people who are creating the new jobs. Reducing their cash through taxes does not help reduce unemployment and it does not help the middle class. The best thing you can do for someone in the middle class is give him or her a good job.

The mistake that the lazy rich are making is that they think that they will be safe because they can buy protection. They cannot insulate themselves from what is coming. Know it. History is ripe with similar events.

Because most of the rest of the industrialized world was still rebuilding from the devastation of World War II. In assuming that high taxes bring prosperity, you're confusing correlation with causation. Of course, maybe if we destroy the rest of the industrialized world again, the US will be able to compete with such a tax rate. But we won't be able to compete in the world as we know it today.

Good point about post-WWII rebuilding in the 50's, db. I'll settle for returning to the tax rates of the 90's when we were running surpluses (yes, I'm repeating myself).

Taupe, how does restoring Clinton-era tax rates help the middle class? Well, it's one step in defusing the debt bomb that's going to hit if we don't do something to reduce and eliminate the deficit. And we know from the balance of power in DC that the pain will be distributed downward.

taupe, you stated:

"The top 1% of earners pay 40% of all income taxes right now. (I know, what a ripoff!) Is this fair? (They earn 23% of the income) They are getting away with murder. So, how much is fair??"

Take a look at this article:

http://economix.blogs.nytimes.com/2009/07/30/top-1-paid-more-in-federal-income-taxes-than-bottom-95-in-07/

and this quote from the article:

"For comparison, here’s a chart showing the portion of adjusted gross income earned by the top 1 percent and by the bottom 95 percent. You’ll see that one major reason why the share of taxes paid by the richest Americans has risen is that the richest Americans have experienced much greater income growth".

So, inadvertently, you have proven Dick Lilly's point.

Can you wrap your mind mind around this?

Thanks for that, Andy. And another thing those comparison charts miss is they omit payroll taxes, which don't apply to income beyond $100K or so. When comparing federal tax burdens among the classes, we should be talking Federal taxes, not just income taxes.

R, very true. Also, most of the very wealthy do not pay much income tax. Most of their wealth is in real estate, stocks, or stock options, etc. There are many loopholes for them to avoid taxes altogether.

On the corporate side, many profitable u.s. corporations have a negative effective income tax rate:

http://www.reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

"Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years, included, among others: Pepco Holdings (-59.6 percent tax rate), Prudential Financial (-46.2 percent), ITT Industries (-22.3 percent), Boeing (-18.8 percent), Unisys (-16.0 percent), Fluor (-9.2 percent) and CSX (-7.5 percent), the company previously headed by current Secretary of the Treasury John Snow."

Andy, good charts. I like them. My point was more about absolute than relative. I was not commenting on income growth or one year compared to another year. My point is that the top 1% earn 23% of the income and pay 40% of the taxes. Everyone is bitching about the rich getting a tax cut (even though it is not a cut when the rates remain the same). And everyone is bitching about the rich paying their fair share.

The only way to address these questions is to look at the facts. Most people have absolutely no idea that the rich pay 40% of all income taxes. In fact, most of the people I talk to around Seattle actually think the rich pay very little in taxes, because of all the "loopholes and write-offs", etc. They have no idea.

So if we are to move forward with a better tax policy, the first thing is let's understand who is paying what now.

My question was a real one: How much do you think is fair for the top 1%
to pay? 40%, 50%, 60%? What is fair? Everyone, well the liberals anyway, want the rich to pay more. Just because. I know it is human nature to want the other guy to pay more. I do find it interesting that so many people want to punish the rich.

Andy,
I just saw your second post. You say "most of the very wealthy do not pay much income tax. Most of their wealth is in real estate, stocks, or stock options, etc. There are many loopholes for them to avoid taxes altogether."

How could that possibly be true if the rich are paying 40% of all income tax????

taupe, my point is that the wealthy rarely pay the nominal income tax rate because of deductions, shelters, off shore accounts, wealth from investments, etc. Also, long term capital gain tax is lower.

Now to your question of what the wealthy should pay. Let's look at what they actually pay, based on their wealth. This is from wikipedia:

If the federal taxation rate is compared with the wealth distribution rate, the net wealth (not only income but also including real estate, cars, house, stocks, etc) distribution of the United States does almost coincide with the share of income tax - the top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% (wealth 57.2%), top 10% pay 68% (wealth 69.8%), and the bottom 50% pay 3.3% (wealth 2.8%).

You see that the bottom 50% actually pay a larger percentage than the top, when measured against their share of wealth.

If you ever wonder why the right wing has quit talking about a flat tax, this is why. It is a fait accompli. In fact, it has turned regressive.

Now, what should they pay? I believe the the tax code is an instrument of social policy. If we let the wealthy accumulate too much over the generations, there will be big trouble. It is difficult to answer your exact question, since it does not take income disparity into account--the rich are so much richer than anyone else now. If I could graph my idea of a progressive income tax, it would be a gently sloping curve, so that the higher the wealth, the higher percentage of wealth would be paid in tax, but not so much as to discourage true economic production.

Andy and Taupe are talking about different things. Andy is mixing the concepts of "wealth" and "income."

The US government taxes income. It only taxes wealth pursuant to the estate tax --- when people with certain wealth levels die. Capital assets are only taxed when they are sold for a gain --- and then without any adjustment for inflation.

State and local governments tax a form of wealth --- real property. But that's not what you guys are talking about.

The reason that wealth isn't taxed is because it results in a double taxation --- if I earn $100,000, pay fed income tax of $36,000, I have $64,000 left. I will spend some of that on living expenses. If I invest some of it in stocks, bonds or toaster ovens, a wealth tax would begin taxing me on the value of those assets. Thus I would pay tax twice. I am in that scenario incented to spend the entire $64,000 on hamburgers instead of saving any of it. That's bad for America.

No serious economist is proposing a wealth tax on the living. Andy, are you?

PJS, please explain how you could possibly pay $36,000 in income taxes on an annual income of $100,000??? You are way exaggerating there. A typical family with that income would be paying something on the order of $7,000 in federal taxes, give or take.

R - my example was simply an illustration of the effect of a wealth tax on the living. Assume a single person, or multiple the numbers by 2 or 3 or 4, or reduce the rate of taxation, if it helps you understand my point.

OK, which one of you guys is really Thurston Howell III ?

We often hear about whether one or another government regulation provides a “level playing field” for competition between different people in our society. For instance, people may debate whether giant corporations and small business compete on a “level playing field.” That’s about fairness, a level playing field is not a stacked deck, it doesn’t give one player a huge unfair advantage over another player. And in modern economies, everyone competes, and we think competition is good. So for everybody who competes, either their playing field is level, or somebody has an unfair advantage.
Large size has a variety of advantages. In a business, doing a large volume of business gives you more power in negotiating lower prices from suppliers (a technique Wall Mart is a master at), and so on. The larger the business, the more money it can contribute to political campaigns, the more lobbyists it can hire to plead it’s case in congress, and so on. Perhaps the biggest advantage along that line is that a very large business can command support from members of congress in districts in which they have factories. Because they are a huge part of the state economy, congress members go to great pains to encourage that business, and smooth the way. Things like subsidies, cutting red tape, etc. (think sports teams getting stadiums built for them by the city government, then the owners sell their team for a gigantic profit.) The list of advantages goes on and on. Quickly it can become what some people call “corporate welfare” (lots of subsidies paid for by average taxpayers for giant corporations. We actually have lots of that, and spend more on that than welfare for the poor.) Small businesses can’t command those.
Same things happen with individuals. A billionaire can hire all sorts of fancy tax accountants and lawyers to get them tax breaks, and push for tax breaks from Congress. Your average working stiff can’t do that. Again, many more advantages and power goes to the wealthy, the more wealthy the more powerful to swing things in their favor. In the old societies of England and Europe, they were called the “privileged” classes. They sent their kids to the best schools to give them an extra advantage. You think a poor kid has an equal shot to the kid with super-wealthy parents? Get real.
This is not a level playing field, by a long long shot. If you do nothing about it, and have lassez-fare capitalism (lassez-fare is French for “let do”, you know, let them do anything they want to), you get monopolies, which then once they have killed all the competition, charge whatever the market will bear- they gouge their customers as much as they think they can get away with. Highly profitable business ripping people off. Recent administrations have largely looked the other way on anti-trust law. Part of the deregulation that almost wrecked our economy and turned us into a second world economy.
You can choose to do nothing about the huge advantages that huge corporations naturally develop. If you do that, you will end up a society with a few giant monopoly corporations and a few fabulously wealthy people with all the money and power. You know, like Suharto in Indonesia, Marcos in the Philippines, Mobutu, and some of the dictators that may now fall in the Middle East in the current wave of revolutions. Countries that all have huge masses of desperately poor people, and a very very few fabulously rich people. And tend to produce huge numbers of angry people and revolutions.
Our country is moving in that direction, as this article correctly points out.
Or, you can do things to “level the playing field” and make it a little more fair for the little guy, the average working stiff, who otherwise gets cheated by the system very badly indeed. One of the best ways of doing that is a strongly progressive tax system. People who were in the top tax bracket in the time of the Eisenhower administration paid 91% marginal tax rate, and the economy boomed. Keep in mind, that is only for additional dollars of income, they don’t pay that on their whole income, they pay the bottom rate for the first low tax bracket just like the average working stiff. Sales taxes are regressive, they tax the poor heavily, and let the rich get off nearly scot free (since they spend a much smaller proportion of their income). Washington state sales tax is regressive and aids the rich, Oregon’s income tax helps level the playing field and helps produce a fairer system.
So aren’t all taxes unfair?? It’s your money, and the government comes and puts a gun to your head and says “give me what you worked hard to earn, so I can waste it!! Or else!!” That’s what the rich argue. Well, tell you what, when you earn money you like to think it is all yours and you earned it and nobody else did anything to help you. Right. No government built roads so you could drive to work or ship your goods. No government enforced laws to protect your business from crooks. No government regulated utility companies so you could get electricity, water, etc at a fair price. No, you did it all by yourself, and you don’t owe them one thin dime!! Or do you??? You know, if you went into your basement and built something completely on your own, and didn’t get anything from society, you won’t owe society a thing. But no giant business does that. No indeed. They could never make a dime if it weren’t for other people buying their goods, or for other people supplying their raw goods, or the government providing a long long list of services we like to take for granted.
So every selfish person wants to get as much as they can and spend as little on taxes as possible, and deny that they owe society or the government a thing. And while the little working stiff can want that, he can’t get it, but with all the power the giant corporation has, guess what they can do?? Ever hear of “buying congressmen?” Well, the Republican-appointed Supreme Court ruled that corporations have a right to free speech that includes buying influence including Congress. Call it legalized corruption.
For more info on how the wealthiest Americans have gotten much more wealthy from the Reagan-GW Bush tax breaks for the wealthy, and on how a strongly progressive tax system can give tax breaks for middle class people who will spend the extra money and stimulate the economy, see Robert Reich’s website, http://robertreich.org/ He’s a leading economist, and knows what he’s talking about. Amazing things, like you can fix Social Security forever by just raising the maximum amount of income that SS tax is levied on to $180,000. No need to raise SS tax on anyone other than the rich, no need to cut benefits. And the people who have $5 billion a year income like one hedge fund chief wouldn't pay a dime of SS on all they made over $180,000. Check it out.
By the way, Republicans love to say that if you raise taxes on the rich, you’ll be starting “class warfare.” In fact, Reagan and his right wing supporters started class warfare on the middle class when they passed the first huge tax cuts for the rich. Now they want to say that leveling the playing field is attacking them, when it is actually just defending everyone other than the rich from the rapacious wealthy.

So every selfish person wants to get as much as they can and spend as little on taxes as possible, and deny that they owe society or the government a thing. And while the little working stiff can want that, he can’t get it, but with all the power the giant corporation has, guess what they can do?? Ever hear of “buying congressmen?” Well, the Republican-appointed Supreme Court ruled that corporations have a right to free speech that includes buying influence including Congress. Call it legalized corruption.
For more info on how the wealthiest Americans have gotten much more wealthy from the Reagan-GW Bush tax breaks for the wealthy, on how a strongly progressive tax system can give tax breaks for middle class people who will spend the extra money and stimulate the economy, see Robert Reich’s website, http://robertreich.org/ He’s a leading economist, and knows what he’s talking about. Amazing things, like you can fix Social Security forever by just raising the maximum amount of income that SS tax is levied on to $180,000. No need to raise SS tax on anyone other than the rich, no need to cut benefits. Check it out.
By the way, Republicans love to say that if you raise taxes on the rich, you’ll be starting “class warfare.” In fact, Reagan and his right wing supporters started class warfare on the middle class when they passed the first huge tax cuts for the rich. Now they want to say that leveling the playing field is attacking them, when it is actually just defending everyone other than the rich.