United States of Incompetence?

[DavidW]

If they know their children are going to lead miserable lives, why do they have kids?  Just wondering...

Some people think that life is a blessing... just saying always look on the bright side of life...

http://www.youtube.com/v/WlBiLNN1NhQ

[Todd]

Some people think that life is a blessing... just saying always look on the bright side of life...

There are also things such as no or little contraception, uneducated women (and men), social pressures and expectations, and, of course, the overwhelming biological instinct to reproduce.  It's kinda why we're here.

[Brahmsian]

of course, the overwhelming biological instinct to reproduce.  It's kinda why we're here.

Well then I'm a complete waste of space, as I've never, ever had the desire to reproduce.   

[Todd]

I've never, ever had the desire to reproduce.

Consider yourself one fortunate individual!

[Brahmsian]

Consider yourself one fortunate individual!

Why do you say this Todd? 

[Todd]

Why do you say this Todd?

Oh, no reason.  Or two.

[ibanezmonster]

There are also things such as no or little contraception, uneducated women (and men), social pressures and expectations, and, of course, the overwhelming biological instinct to reproduce.  It's kinda why we're here.

Yeah, I guess the obvious answer would be the right one. People there are different, I suppose, but if given the option of being born in a poor part of Africa or not being born at all, I'd probably choose the latter. I don't know how they can manage their lives- probably explains a lot of the violence and lust for power.

[Herman]

There should be a limit to how rich people can get (unless they donate heavily to good causes). No one needs that much power.

The better idea is to go back to a more sensible taxation system. US taxes for the higher incomes have never been as low as they are now, and the GOP has run itself into a corner where it's getting self-destructive to return to a more helpful kind of tax policy.

Only a week ago Warren Buffet, one of the richest men ever, wrote a piece in the NY Times saying he thought it was crazy he paid less taxes than his secretary.

It is a bit odd, btw, to see people defending billionaires getting richer and richer.

[Herman]

I side with Todd, mostly.

I don't think the rich should be taxed more though.

why not? Are you aware that US income tax for the upper brackets was almost twice as high in the fifties and sixties, that time we now see as the years of innovation and prosperity?

[Herman]

Two things to note, Greg:



(2) Poverty in the U.S. is defined statistically.  Most of those thus classified in America have a standard of living that most folks in the world would envy.

This is saying there's nothing to worry about as long as large numbers of people aren't dying of malnutrition.

That's setting the bar rather low, isn't it?

[ibanezmonster]

The better idea is to go back to a more sensible taxation system. US taxes for the higher incomes have never been as low as they are now, and the GOP has run itself into a corner where it's getting self-destructive to return to a more helpful kind of tax policy.

Only a week ago Warren Buffet, one of the richest men ever, wrote a piece in the NY Times saying he thought it was crazy he paid less taxes than his secretary.

It is a bit odd, btw, to see people defending billionaires getting richer and richer.

Yep, that would be a good idea.

This is saying there's nothing to worry about as long as large numbers of people aren't dying of malnutrition.

That's setting the bar rather low, isn't it?

Yeah, this is supposed to be "the greatest country in the history of the world." The bar is supposed to be set a bit higher than normal.

[Todd]

Are you aware that US income tax for the upper brackets was almost twice as high in the fifties and sixties, that time we now see as the years of innovation and prosperity?

Actually, peak marginal rates were over 90% in the 50s, well over twice the top marginal rates today.  I know a lot of people love to point that out, but it's not particularly relevant because it ignores the extent of deductions and other tax loopholes.  For instance, in past decades it was possible to deduct interest paid on all debt, though now it is not.  It was possible at various times to deduct all economic losses without limit, though now it is not.  The clear beneficiaries of unlimited deductions like those were the wealthy. 

A far more important and relevant figure than top marginal rates is the percent of GDP devoted to federal income taxes, which, though fluctuating at various times, has been relatively consistent with a slight upward trend since WWII.  The peak was during the late 90s - when top rates were still less than half the peak of the 50s - when the federal government benefitted mightily from the stock market bubble and chose not to address structural concerns, and the twin troughs came after the Bush tax cuts and the 2008 crash. 

The tax system should be revised, but a good part of that is changing, reducing, and eliminating the distortions of various deductions and preferences.  Rather than starting with increasing rates, why not start by eliminating home mortgage interest deductions on non-primary residences altogether and reducing or the cap on the primary residence, or eliminating it altogether?  Of course, this will meet huge resistance, and not just from the wealthy or super wealthy.  It would be possible to eliminate excluded capital gains from home sales as well.  These two items could raise $100 billion a year or more, depending on how they are structured.  Eliminating state tax and property tax deductions offers around $80 billion more.  (These deductions help higher income folks rather more than the poor.)  Various credits and deductions to companies for depreciation, profit repatriation, and other items could net between $70 and $100+ billion more, depending on what is targeted and how it's calculated.  Want another $100 billion+, well, why not eliminate tax preferences for pensions and defined contribution vehicles?  If the exclusion of employer health care benefits were repealed, that's over $100 billion more.  Okay, these last two will be fought by unions and retirees with everything they have, but there are literally hundreds of billions in deductions every year that can be addressed before raising rates, and in all cases but the last two, the greatest benefits go to higher income individuals and families.

And none of the above addresses the expenditure side, where over time the really big money is.  Guess what, some of that benefits high income people, too.

Why not address those these first, and then raise rates?  I know why.  It's good old fashioned politics.  The rich must pay higher rates, you see.  Raising rates is portrayed as somehow significant in itself, but it's not as significant as people want it to be.  Something I'd dearly love to see is a clear statement of goals with respect to the budget.  Something a bit more than a "balanced budget" (meaningless) or "the rich paying their share" (totally meaningless) or "it used to be like such and such" (so what?).   

[Herman]

Actually, peak marginal rates were over 90% in the 50s, well over twice the top marginal rates today.  I know a lot of people love to point that out, but it's not particularly relevant because it ignores the extent of deductions and other tax loopholes.  For instance, in past decades it was possible to deduct interest paid on all debt, though now it is not.  It was possible at various times to deduct all economic losses without limit, though now it is not.  The clear beneficiaries of unlimited deductions like those were the wealthy. 

It is relevant. Income taxes used to be much higher and top incomes used to pay more tax.

Loopholes have not been eliminated; they have changed.

This is why income inequality has vastly surged in the past two decades. Those are hard numbers.

[Todd]

It is relevant. Income taxes used to be much higher and top incomes used to pay more tax.

Loopholes have not been eliminated; they have changed.

This is why income inequality has vastly surged in the past two decades. Those are hard numbers.

Only problem is these statements are incorrect or incomplete.  Prior loopholes have been eliminated, that's just plain old fact.  There are new ones, but they are all limited in comparison to what came before.  Again, plain old fact.  Top income rates were higher in decades past, but there were many ways to avoid them.  People are constantly fixated on the wrong number.

For instance, a widely cited CBO study shows that the top quintile household federal tax rate was 27.5% in 1979 and it was 25.1% in 2007.  That's an 8.7% drop over that time period.  For the top 1% it went from 37% to 29.5%, a 20.3% drop.  Per the same CBO study, average tax rates fell by 50%, 25.9%, 23.1%, and 17.9% for the four lower quintiles (in ascending order) over the same period.  So, it is quite easy to see that the highest income 1% enjoyed a bigger percentage decrease in average federal taxes than the next 19% in the top quintile and the second quintile, but less than the bottom three quintiles.  Just looking at the top quintile, they received a smaller reduction than the bottom four quintiles.  What is also obvious is that the highest income households pay more taxes than everyone else.  The relative decrease in rates means that high income households pay a higher percentage of total federal taxes now than they did in 1979.  Do note that this includes all federal taxes, income, payroll, and otherwise.  Also note that the average rate is below the top rate in all cases.  Also, an interesting quote right from the CBO regarding rates over the period:

"The pattern of average tax rates has varied over time. The lowest three income quintiles have seen steady declines in their average rate. The tax rate on the fourth quintile was flat over most of this period, before declining in the early part of this decade. The tax rate on the top quintile has fluctuated more, with periods of increases and decreases."

Those are hard numbers Herman and an analytical statement from the CBO.  Perhaps you think the CBO cooked the books.  If you do, do you have any evidence?  (Longer term time series from the CBO and OMB tend to lump all income taxes together as one value, so more digging is needed to find more thorough information; by all means, if you can provide real hard numbers, please do so.)

As to income inequality, taxation itself has not caused the problem.  A combination of taxes and changes in expenditures has contributed to it.  But those two items are not the only causes.  Long term changes in the job market have been well noted for decades, and more highly educated workers are earning higher income premiums.  That trend will continue. 

But this still begs a bigger question: So what?  What is the purpose of the US federal budget?  Income equality is but one factor.  People can say sock it to the rich all they want, which you clearly love doing, but what should the federal budget be and what should the federal government do?  And given the demographic reality the US faces over the next several decades, what can it continue to do?

[AllegroVivace]

And given the demographic reality the US faces over the next several decades, what can it continue to do?

What do you mean by that? What demographic reality?

[eyeresist]

What do you mean by that? What demographic reality?

Aging population.

[Todd]

Aging population.

Yep.  I would have thought that was self-evident.

[AllegroVivace]

All right. I thought it was a hint at immigration. So I rolled up my sleeves for another round of debate. We're cool.

[Todd]

All right. I thought it was a hint at immigration.

And why would you think that? 

[AllegroVivace]

And why would you think that?

Well, because if you blamed the financial troubles of our nation (even partly) on the U.S. immigration policy, echoing Fox News, Mike Savage and the like... let's just say my reaction to the conclusion of your post would have been entirely different.