The NYTimes graphic department has your Sunday morning chart porn regarding the extension of tax cuts. Its an illustration fueled by data from the Tax Policy Center, a nonpartisan research organization.

The graphic shows how much Americans have gotten so far broken down by income groups. And it calculates that extending all of the Bush Tax Cuts for the next decade will cost another $2.7 trillion (through 2020).

Here is a guide to who will get what if the cuts are extended, and who got what from the last seven years of cuts:

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click for larger graphic

Courtesy of the NYT

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Source:
Your Coming Tax Cut (or Not)
BILL MARSH
NYT, September 18, 2010
http://www.nytimes.com/interactive/2010/09/19/weekinreview/19marsh.html

Category: Mathematics, Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

64 Responses to “Who Gets What If Tax Cuts Are Extended”

  1. Greg0658 says:

    my 1st instinct question to this chartporn = is this in strict tax relief $s or does this take into account the many rules of deductions that exist in each category and is accounted into by external other databases ?

    this is a statement of belief from something I was told many years ago as a child and could fathom = money circulates and $1 is useful to more than one person and the USG can tax it each time .. I remember that teacher said that $1 made it 14 times round before it evaporated … now older I realize that exporting that $1 outside the community circle it has less local effect .. so with that in mind and looking at the chart – in whos pocket will the effect be greatest I ask – keeping in mind that business capital development needs seed money also ?

  2. Winston Munn says:

    How can we call these tax cuts when we don’t generate enough taxes to pay the bills? Reality is that these “cuts” are nothing more than increases in debt spending – like deciding to give ourselves a raise by borrowing against our home equity because home prices never drop. And we know how well that turned out.

    With these increases of general budget spending, who is left holding the bag when cuts are necessary? Well, we can’t cut Medicare and we won’t cut Defense – so that leaves Social Security. Make no mistake. Social Security will be the sacrificial lamb the politicians slaughter to appease their gods.

  3. I believe it is strictly looking at the tax brackets only . . .

  4. David Yaseen says:

    Is there some logic to how the income groups were split up? It would seem to make sense to make a break at $250k, so we could see the difference between the two main approaches to the issue. Or is this just more mud in the tank?

  5. cognos says:

    This is great.

    I cannot believe that no Senator or President talks about the effects of govt policy in simple charts, with numbers(!), covering the 10-separate deciles of Americans.

    So, now the Bush tax cuts for the wealthiest… save the top 1% about $50-500k annually in taxes. And … save the bottom 50% $50-100 annually in taxes.

    The bottom 50% saves roughly 1/1000th of the top 1%.

    Hmm… you voting for that?

    Leona Helmsley — “only the little people pay taxes”.

  6. gremlin says:

    It would be good if this chart included what percentage of the “rich” are small business people paying small business taxes as individuals?

    A similar chart with real tax rates would be some exciting chart porn.

    US tax rates are a good bit lower than the bracket rates; living in Italy the past couple of years, when they say 45% tax rates that is pretty much what you pay…and that (plus 9% health tax) is a rate that reduces my willingness to do anything extra for extra money.

  7. Petey Wheatstraw says:

    cognos, that comment did not sound like you.

  8. ironman says:

    There’s a pretty big hole in the information presented in the graphic – it shows amount of the average tax cut for each listed income range but completely omits any indication of the amount of average income taxes paid for each listed income range, which matters just as much. If the graphic artists at the NYT are going to go to such trouble to create a ginormous graphic, it would be really nice to get a more complete picture.

  9. wunsacon says:

    >> Reality is that these “cuts” are nothing more than increases in debt spending

    And the difference is made up via *INFLATION TAX*…

    In particular, remember that what determines wealth isn’t (a) the overall number of dollars in my pocket but (b) the relative share that those dollars represent of all the dollars in circulation. (You’re no wealthier after a stock split. Similarly, ignoring for the moment the relationship with outstanding debt, you’re no wealthier if the government gives more dollars to everyone.)

    Now, look at what was given to each group. The nominal gain by the top 1% exceeds the gain by everyone else. That means the wealthy got a tax cut. But, perversely, these so-called “tax cuts” were a NET TAX INCREASE ON THE BOTTOM 99%.

  10. DL says:

    The critical issue is that of incentive effects. How much greater incentive exists when taxes are lower; how much less when taxes are higher?

    If “static assumptions” were a reflection of what happens in the real world, I would be far to the left of Obama on the tax issue; I would, under that hypothetical scenario, advocate a marginal tax rate of 90% on anyone who earns more money than I do.

  11. cognos says:

    The “incentive effects” issue is IDIOTIC.

    Bill Gates would’ve worked less hard if he only got to keep $50B instead of $100B (paid <5% lifetime tax rate!).

    One of the dumber things ever conconted. I live in the top 1%, but I also know my old boss did not need the Bush 5-7% tax cut on his $200M in annual income.

    Next IDIOTIC issue… is that the rich, big value creators will move. Ha! Greenwich is beautiful. Both northern and southern california are paradise. NO ONE will move. Everyone will just pay 5% more in taxes. Accounts will balance. Consumption will increase at the margin. Speculative bubble effects will decrease.

    Now, other "good tax" changes would be –

    1) tax gasoline an additional $0.25/gallon every year for 10 years.
    2) Lower the ceiling on "mortgage interest deduction 50k every year for 10 years.
    3) Cut corporate tax rate by 10% to 26%.
    4) Change current FICA tax from 6.2%/6.2% employer match to 3.1%/3.1% but remove 100k cap. That is, make it half the rate… but apply it to ALL income.
    5) Stop "charitable deductions" from being tax deductive. (the richest game this constantly)
    6) Stop "heathcare" from being tax deductible (again, gamed by the rich. benefits accrue mainly to the richest. creates an overly medicate society).
    7. Make EDUCATION tax deductible instead.

    Maybe…
    8. Tax ALL investment income the same as ordinary income (possibly with lower rates across the board) and then open up a special class for truly "long-term investments"/venture capital where 5-yr investment capital gains is taxed at 15%. No games allowed — options playing, structured games, to create false "long-term" income.

  12. DL says:

    Another issue is that of what Obama would do if he could squeeze more money out of the “fat cats”. The only thing he wants to do with it is give the money to people who earn less than $50K/year, or to people in labor unions.

    I fail to see one good reason why a person who earns between $75K and $200K would be better off if the top tax bracket is increased.

  13. DL says:

    Cognos @ 2:00

    It’s not about Bill Gates. It’s more about the guy who owns a plumbing supply store (and earns, say $275K/yr), or the guy who owns a few restaurants. Or the guy who runs a computer software company (and earns $300K/yr). And what about a physician who earns $275K/yr? Why shouldn’t he cut his hours, so that he’s earning $249,999/year…?

  14. [...] run-down of who will benefit if the Bush tax cuts are extended. The Big Picture The graphic shows how much Americans have gotten so far broken down by income groups. And it [...]

  15. DeDude says:

    @DL,

    If these high earners with their 250-300K income (about 1% of all people) were to cut their hours (and few if any would), then there would just be more work for others. People still need plumbing supplies, prepared meals and physician services even it these selfish slackers throw a fit because they are being asked to contribute a few % more to the society that allowed them to earn that kind of huge income.

  16. gremlin says:

    The incentive effect depends on the job. If all you have to do is continue managing your company for growth while destroying other software companies to make more money, then increased taxes won’t slow you down, destroying other companies is fun! But if your income is proportional to the amount you work, as income tax rate goes up towards 50% then why bother?

    If you look at the Italians, they live well and work hard during office hours, but at 6 pm they are out of there. They close restaurants for a month of vacation, and close businesses on thursday afternoon, and part of the reason for that is effective national tax rates are 54% for the top bracket.

  17. cognos says:

    Uh… there is also no such thing as a “bracket”.

    Each $1 taxed is in whatever bracket IT is in. That is, you never gain $ by cutting back to $249k. It just that the next $1 is taxed at 39% instead of 36%.

  18. Jojo says:

    Another variation on the theme here:
    ———-
    Bloomberg Businessweek
    Stacking Up the Bush Tax Cuts

    The Bush tax cuts expire on Dec. 31. President Barack Obama and most Democrats want to renew all the cuts except those affecting the highest incomes, at a 10-year cost of about $3.3 trillion. Republicans want to extend them for all income levels, adding almost $1 trillion. Former Fed Chairman Alan Greenspan says the U.S. can’t afford either approach.

    http://images.businessweek.com/mz/10/39/1039poltaxes33.pdf

  19. DL says:

    DeDude @ 3:06

    I have considered that argument. Consider first the “low tech” business owner, such as plumbing supplies or restaurants. You are quite correct that there will be no shortage of people willing to fill the gap if the wealthy owners (of the plumbing supply business or restaurant) decides to cut back. But one should also ask, how did these people get to the point where they’re earning $250K-$400K (for example) in a low-tech business? I think the answer is that they’re better managers, and because they provide better value for customers than the competition. If they pull back, there’s that much less competition in the marketplace.

    In the case of a physician, the vast majority of those earning more than $250K/yr are simply superior to the vast majority of other physicians and/or they’re willing to work a lot more than others. I’m certainly not arguing that if we raise the tax rate on doctors making more than $250K/yr, that all physicians will stop working. But on the margin, there will be an effect, particularly for those physicians who are simply able to get better results.

    I think that the analysis is a little more complicated for businesses that have proprietary products, such as software, or pharmaceuticals. First, they are in a position to raise their prices. In addition, they could decide to expand their business in other countries, rather than expand in the U.S. But for the guy who owns a subchapter-S software company, he’s got to decide whether to re-invest his capital, or perhaps just park it in municipal bonds.

    There’s also the question of tax loopholes, such as setting up a shell corporation in the Cayman Islands. This will have the effect of depriving the IRS of income, and will reduce also the amount of capital that would have been invested in a U.S. business.

    I’m not saying that tax cuts pay for themselves. But I do think that tax rates affect economic activity.

  20. DL says:

    cognos @ 3:29

    I agree with your analysis (@ 3:29)

    But “tax bracket” is a commonly used phrase.

    And you are correct that “you never gain $ by cutting back to $249K”. But for the person who is earning the money, it is a question, in part, of cost versus benefit, i.e., work versus leisure.

  21. Joe Friday says:

    gremlin,

    “It would be good if this chart included what percentage of the “rich” are small business people paying small business taxes as individuals?”

    Less than 3% of small businesses are in the brackets that would rise. That includes those that pass-through their business income over to their individual return (Subchapter S, partnership, some LLC).

  22. Jojo says:

    @Cognos (“good tax” changes) – nice to see someone present proposed SOLUTIONS instead of the usual complaints and nonsensical rants.

    I’d add to your list:

    - Make the eduction deduction come off of gross income before tax owed is calculated. Everyone says we are undereducated in the USA and need more schooling (which is why we have to bring in foreigners or outsource technical work), so this would certainly encourage more people to get more training/schooling.

    - Remove the capital gains exclusion from sale of a house. This would help return housing to a “roof over your head” instead of a potential investment vehicle.

  23. Tom K says:

    “The graphic shows how much Americans HAVE GOTTEN so far broken down by income groups.”

    I love the premise behind this post. The government is giving away THEIR MONEY, right? Where’s the chart that shows how much each group contributed Barry?

  24. Joe Friday says:

    gremlin & DL,

    As I’ve previously mentioned here, a man who would know, Warren Buffett, completely disagrees with your ‘galt’ theories.

    During an interview with Charlie Rose on November 13th, Rose asked Warren Buffett about the argument some advance that higher federal income taxation of the wealthy inhibits economic growth and/or discourages the work ethic. Buffett responded:

    “I’ve worked with all kinds of systems of taxation. I’ve worked with rich people, even in the ’50s and the ’60s when the top rate was 70% and I’ve worked with them when the capital gains rate was 39.6%, and not one of them ever said ‘It’s one o’clock, instead of working this afternoon I think I’ll go to the movies because my marginal rate is so high’. If anything, THEY WORKED HARDER.”

    (emphasis mine)

  25. gremlin says:

    Thanks Joe Friday.

    off topic a little bit, but I’m in Veracruz, Mexico and we had a hurricane on friday and now all the rivers are flooding. A good tax deduction is giving to the Mexican Red cross, and from watching local TV people here really need help.

  26. gremlin says:

    Joe friday
    Maybe for the rich that’s true, but I’m not talking about going home at 1 pm, I think a lot of the marginal labor happens at 7pm or on saturdays. Working in Italy until last month; when I was given the option to go and work extra for a flat day rate, I’d say no, any extra money would pass through a grinder (54% + plus private insurance+misc) and have such a small impact on my net I’d rather spend the weekend at home.

    if we’re worried about debt then I’d say we have a spending problem, not an income problem, if we’re not worried about debt then throw another couple trillion on the fire.

  27. patrick says:

    People who argue for more taxes are free to pay them. This country is going to go through big changes because most people don’t feel like the government spends their money wisely.

  28. DL says:

    Joe Friday @ 4:02

    I’ve actually heard Buffet say that.

    First, the analysis of the tax effect on “earned income” is somewhat different from that on so-called “unearned income”. Buffet seems unwilling to concede that the capital gains tax is voluntary… voluntary in terms of when it’s paid, and voluntary in terms of which assets are purchased initially. Also, capital is highly mobile; it can be moved around the world in seconds.

    With regard to taxes on capital gains specifically (as opposed to taxes on “earned income”), there’s actually pretty good evidence that raising the capital gains rate above where it is now won’t produce much more revenue (if any at all).

  29. DL says:

    Gremlin @ 5:04

    “if we’re not worried about debt then throw another couple trillion on the fire”.

    . . . . . . . . . . .

    That’s actually funny.

    (It won’t be quite as funny, however, when the bill comes due).

  30. Joe Friday says:

    gremlin,

    “Maybe for the rich that’s true, but I’m not talking about going home at 1 pm, I think a lot of the marginal labor happens at 7pm or on saturdays. Working in Italy until last month; when I was given the option to go and work extra for a flat day rate, I’d say no, any extra money would pass through a grinder (54% + plus private insurance+misc) and have such a small impact on my net I’d rather spend the weekend at home.”

    That’s a different phenomenon.

    Prior to the economic collapse, a large number of American workers were turning down overtime, stating they would rather be able to spend more time with their family than earn more income. Had nothing whatsover to do with tax rates.

    ~

    “if we’re worried about debt then I’d say we have a spending problem, not an income problem”

    You’d be wrong.

    According to the independent non-partisan Congressional Budget Office, the current federal budget deficits and debt, as well as the future projected federal budget deficits and debt, are overwhelmingly due to the massive drop in revenue as a result of the numerous rounds of tax cuts for the Rich & Corporate during the previous administration.

  31. Joe Friday says:

    DL,

    “With regard to taxes on capital gains specifically (as opposed to taxes on “earned income”), there’s actually pretty good evidence that raising the capital gains rate above where it is now won’t produce much more revenue (if any at all).”

    I’ve not seen any such “evidence”. I’ve only seen just the opposite. Contrary to the protestations of the American RightWing, when you cut tax rates tax revenue declines, and when you raise tax rates tax revenue increases.

  32. DeDude says:

    DL @3:35;

    That is a lot of twisted assumptions to get to the conclusion you are so eager to reach (that taxing rich people like you would be bad). Let me try that little assumption game. Lets hold on to your assumption that somehow the plumbing supplier with the 300K taxable income is “better” at supplying tubes than his competitor with 150K income. But then lets also assume that the reason he is stopping at 300K (if he is that good he could make 800K if he wanted) is that the 300K is about what he needs to cover his lifestyle (under current taxation). Now if we taxed him another 10K he would be forced to work a little harder to get the income he needs for his lifestyle. So that would be good for society since he is so great at it that society really want him to work more not less, right?

    If we get back to facts rather than anecdotes from Italy and other places. There is no data to support that increasing taxes on higher income by single digits has any overall effects on working hours or the economy. Probably because the number of people who increase effort and those who decrease effort as a result of higher taxes are canceling each other out.

  33. rip says:

    @cognos: Stop. You’re blowing my mind.

    Perhaps this is the second time I find myself agreeing with you.

    I find your suggestions quite sound.

    Except the FICA deal. Don’t know how cutting the rate in half but eliminating the cap balances things out in terms of needed funding levels.

    But if that works I would consider it a spectacular breakthrough.

    There’s some ouch for me in what you’re proposing, but it’s well worth it IF IT SIMPLIFIES THE TAX CODE AND LEVELS THE PLAYING FIELD.

    Tax code thoughts? All the fat cats get to hide behind it. Little guys don’t. How does that fit into the picture?

    Thanks much for well-thought comments.

  34. gremlin says:

    if you look at the chart here:
    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

    you can see from 2000 – 2004 tax receipts dropped from $2025B to $1880B, ($145B), spending increased from $1789B – $2293B ($503B). Giving a $413B deficit. Receipts then increased steadily until 2007, when the deficit was only $160B. Then the wheels fell off.

    To me it looks like revenue increased with decreased tax rates, and they grew at rates higher than GDP. If the wheels hadn’t fell off we’d be in surplus now.

  35. DL says:

    DeDude @ 6:06

    “a lot of twisted assumptions to get to the conclusion … that taxing rich people like you…”

    . . . . . . . .

    I’m a long way from being “rich”. I earn a lot less than $200K/year.

    The way I see it, Obama wants to take money from people who earn more than $250K, and give it people who make less than $50K.

    I don’t see how that’s going to help me.

  36. Joe Friday says:

    gremlin,

    “you can see from 2000 – 2004 tax receipts dropped from $2025B to $1880B, ($145B), spending increased from $1789B – $2293B ($503B). Giving a $413B deficit. Receipts then increased steadily until 2007, when the deficit was only $160B.”

    The deficits were much larger than displayed because so much was off-budget. From 2001 forward, all the expenditures for the war in Afghanistan, all the expenditures to rebuild from 9/11, as well as all the expenditures for Homeland Security, and more were off-budget. From 2003 forward, all the expenditures for the war in Iraq, the cost of the prescription drug program for the pharmaceutical industry, and more were off-budget. The last (2008) federal budget deficit from the previous administration was more than $1.3 trillion.

    ~

    “To me it looks like revenue increased with decreased tax rates, and they grew at rates higher than GDP.”

    Nope.

    According to the independent non-partisan CBO, the increased tax revenues from 2004 forward were as a result of a corporate tax cut expiring.

    Once again, when you cut tax rates, tax revenues decline. When you raise tax rates, tax revenues increase.

  37. Joe Friday says:

    DL,

    “I’m a long way from being ‘rich’. I earn a lot less than $200K/year. The way I see it, Obama wants to take money from people who earn more than $250K, and give it people who make less than $50K. I don’t see how that’s going to help me.”

    Besides your premise being faulty, you don’t seem to grasp how the national American economy functions. Some 73% of the national economy is (was) Consumer Spending. Guess who’s responsible for the vast overwhelming majority of Consumer Spending, those above $250,000/year or those below $250,000/year ?

  38. DL says:

    Joe Friday @ 8:52

    Explain to me again how people in the $75K – $200K income range are helped by Obama’s wealth transfer scheme.

  39. cyaker says:

    I am sure something is wrong with my math and logic but If instead of a thousand people we had one in each category and each got his percentage of the tax break this is what it would look like and this doesn’t seem fair
    I have rounded a little to make it easier on myself and I am not sure how to represent the over 1,000,000 b ut seems to me every individual should get at least a percentage equal to his income as a percentage of the entire tax break but it looks like the 1000000 which is 33% of the total gets 78% of the take that’s about fair in a reverse the Robin Hood World of the good old USA
    10000 .033 5 3.03 -5
    20000 .0066 137 .00083
    30000 .0099 503 .00030
    40000 .013 719 .0043
    50000 .0165 836 .00506
    75000 .02479 1180 .0071
    100000 .033 1936 .0117
    200000 ..066 3810 .023
    500000 .165 7484 .045
    999999 .3306 19495 .118
    1000000 .33 1288 .78
    3024999 1 164937 1

  40. Thor says:

    DL – Can you reference anything, anywhere, that will prove that increasing taxes lowers incentive?

    Are the economies of high taxes areas like Sweden or Germany less dynamic than ours? Are their economies suffering because they have a higher overall tax rate than ours?

  41. cognos says:

    Rip -

    Thanks.

    There is no single problem bigger than the 6.2%/6.2% FICA tax on the first 100k. Changing to 3.1%/3.1% on ALL income would really cure a HUGE portion of US imbalances… while simplifying and flattening the tax code.

    This 1 single move really could change everything. Think about the effects:

    1. This is the basic source of the “Buffet problem” where CEOs of major companies pay total LOWER tax rates than there secrataries. (WB has said he will pay any F500 CEO $1M who can show him this is not the case). The 16-yr old kid working at Taco Bell pays 12.4% FICA… the $1M/yr banker at Goldman… pay 1.2% FICA (cuz its capped at 100k). Why? Why do republician who supposedly want to “incentivize working with low flat rates” support this? Working at Goldman for $1M/yr is good? But your first job is 12.4% FICA? Insane.

    2. Besides being a major tax cut to all workers below $100k (3% into pocket) this would be a matching tax cut to those who EMPLOY the most workers BELOW 100K! Walmart – 3% cut in wage expenses. Starbucks – 3% cut in wage expenses. GM – 3% cut in wage expenses. While simulateously being a slight increase on extremely high wage paying companies — Goldman, top law firms, top hedge funds (where I work).

    3. This solves all the fake “social security insolvency” problems. First, these problems are actually fake and I would be happy to refute the bad math. But one basic source of the “$5T in unfunded liabilities” is that it is assumed that the 100k cap last forever… while most of our GDP growth occurs above that and over 50-yrs or 100-yrs the minimum wage exceeds $100k. Right? So since FICA is contributed to by ALL income… then FICA growth is much higher. Quickly this means SS is overfunded over time. That’s great BC we take take the rate down to 2% /2% match in 50 yrs, or whatever is appropriate.

    The second biggest problem is the “capital gains at 15%”… and moving to 20% would help alot. The reason is that lots of people can income shift in LT capital gains. All “small business owners” like partners in a hedge fund, as well as all senior execs of places like Goldman. Since they take their pay in stock or “partnership units” they can shift in LT cap gains rate. 20% is at least reasonable. 15% on millions of dollars in basic income… thats too rich.

    Again, Leona Helmsley — “Only the little people pay taxes”.

  42. DL says:

    Thor @ 9:26

    No doubt you can provide notarized documentation which proves that no matter high the marginal tax rate goes, small business owners will hire just as many people as they would have otherwise hired, and reinvest just as much capital as they would have otherwise invested.

    I do have a graph that shows the history of revenues resulting from changes in the capital gains tax rate. I don’t feel like getting it at the moment, but if you really want to see it, I’ll get it for you in the near future. There’s also the fact that during the 1970’s and the 1950’s, the wealthiest 1% paid less, relative to GDP, than they did in the year 2007 (despite the high marginal rates in the earlier years).

    As for Germany, yes they have a “dynamic economy”. But I know almost nothing about their tax system.

    As for the Swedish economy, I don’t know a whole lot about it except that they have high taxes, and according to most accounts, a high standard of living. I don’t know what sort of GDP growth rate they’ve had over the last 10-20 years. And I just don’t know whether we could replicate their system or not. I would actually be interested to hear arguments both for and against that proposition.

  43. obsvr-1 says:

    @cognos Says: There is no single problem bigger than the 6.2%/6.2% FICA tax on the first 100k. Changing to 3.1%/3.1% on ALL income would really cure a HUGE portion of US imbalances… while simplifying and flattening the tax code.

    This 1 single move really could change everything

    — Reply —
    Spot on ! Right on the mark for a significant and appr0priate change, business saves 3%, employees (under 100k of course) gain 3% which is stimulative to the economy whether it is spent or saved (ultimately it will be spent). With the optimistic view that over time the rate can be reduced, seems a no brainer; but would the rich follow the WB lead ?

    @DL Says:

    Explain to me again how people in the $75K – $200K income range are helped by Obama’s wealth transfer scheme.

    – DL, are you still referring to the tax issue or are you now talking about the bank bailouts ;-) …
    On taxes, you will be helped as not having your tax increased — only 200/250k and above would have the Bush Tax cut expire.

  44. radiowave says:

    I’m fascinated by this discussion in part because of the semantics involved. In the post above two phrases stand out:

    1) “The graphic shows how much Americans **have gotten** so far broken down by income groups.”

    “Have gotten” makes it sound like the government suddenly became Santa Claus and handed out presents. The simple truth is, in connection with the tax cuts, it *took less.* There is a difference.

    2) “And it calculates that extending all of the Bush Tax Cuts for the next decade will **cost** another $2.7 trillion (through 2020).”

    Using the word “cost” implies to me that tax rates will go down from 2010 levels in the tax cuts are extended. But the rates would be unchanged 2010-2011, so therefore there is not a quote cost unquote.

    The underlying suggestion behind both phrases is that all the money earned in this country belongs to the government at the start. I think the policy debate would be very very different if argued from the opposite perspective.

  45. DL says:

    radiowave @ 10:30

    “The underlying suggestion behind both phrases is that all the money earned in this country belongs to the government at the start”

    . . . . . . . .

    I agree with your basic sentiment. And I find it humorous when pundits say that if we “give away” $700B to the rich, we’ll have to borrow not just the $700B (from the Chinese), but $850B when you include interest.

  46. Joe Friday says:

    DL,

    “Explain to me again how people in the $75K – $200K income range are helped by Obama’s wealth transfer scheme.”

    Once again, there is no “wealth transfer scheme”.

    Allowing the tax cuts for the wealthy to expire will lower the federal deficit, just as increasing tax rates on the Rich & Corporate in 1993 did.

  47. Joe Friday says:

    DL,

    “No doubt you can provide notarized documentation which proves that no matter high the marginal tax rate goes, small business owners will hire just as many people as they would have otherwise hired, and reinvest just as much capital as they would have otherwise invested.”

    The top rate was 94% during FDR and was still 87% during Eisenhower. That was one of our country’s periods of greatest prosperity.

    ~

    “There’s also the fact that during the 1970’s and the 1950’s, the wealthiest 1% paid less, relative to GDP, than they did in the year 2007 (despite the high marginal rates in the earlier years).”

    That’s only because their income rose so dramatically in contrast to that earlier period.

  48. rip says:

    @cognos: Thanks.

    The one thought that comes to mind was that SS was supposed to be a “savings plan”. Not a transfer plan. You reap according to what you sow. So your 12.4% supposedly built your account.

    But that got poisoned when the gov spent it all anyway.

    And when they decided that the politicos could throw SS money at all kinds of vote attracting causes, like disabilities, and people that paid nothing in (relatives of immigrants, etc, etc). But the politicos don’t want to talk about that.

    So, in balance I still like your idea. It’s just different thinking about SS. As opposed to the GOP saying it’s bankrupt and needs to eliminate benefactors. Which ones? Needs test?

    I paid a lot in, as did my employers, and would like something back. What was promised.

    So I am still digesting your idea. It’s a major shift.

    But I still like it if our politicos can get it right.

    Ooops.

  49. Broken says:

    All I know is it is a lot better to make money in a high tax environment than to lose money in a low tax environment. I’ll take the “high tax” 90s over the “low tax” 00s any day.

  50. Joe Friday says:

    rip,

    “The one thought that comes to mind was that SS was supposed to be a “savings plan”. Not a transfer plan. You reap according to what you sow. So your 12.4% supposedly built your account. But that got poisoned when the gov spent it all anyway.”

    Ah, the “gov” didn’t “spend” any of Social Security. Where do you people get this gibberish from ?

    By federal statute, Social Security monies can only be spent on Social Security benefits. Period.

    ~

    “And when they decided that the politicos could throw SS money at all kinds of vote attracting causes, like disabilities, and people that paid nothing in (relatives of immigrants, etc, etc).”

    You seem to be conflating Social Security with SSI benefits. SSI was given to the Social Security Administration to administer, but no Social Security funds are involved. The Supplemental Security Income program is funded from general revenues.

  51. Jojo says:

    Speaking of Sweden – when you take the right steps, sometimes you do get good results.
    ————
    BusinessWeek
    Welfare States
    September 16, 2010

    At Election Time, Sweden Looks Less Socialist
    Reinfeldt’s Moderate Party is popular, and may continue its lower-tax, lower-welfare agenda

    Max Hansson remembers how much time he used to spend figuring out what taxes he and his company owed before a probusiness coalition won control of Sweden’s government in 2006. Hansson, chairman of PayEx, a payment services provider, ticks off the levies that have since been lowered or abolished: payroll taxes. The corporate tax. The wealth tax. “Things have become very good in Sweden,” he says.

    So many other Swedes share Hansson’s opinion that the ruling coalition of Prime Minister Fredrik Reinfeldt (left) and his Moderate Party has a good shot at winning a second term on Sept. 19. If that happens, Reinfeldt will be the first Moderate Party leader to gain a second term since 1908–an amazing feat, given the power of the Social Democrats.

    The Social Democrats created Sweden’s fabled welfare state, with its enviable cradle-to-grave benefits. Yet the cost of such largesse kept rising. Reinfeldt came to power by convincing voters that lowering income taxes and benefits would increase the number of jobs and actually boost the tax revenues necessary to keep the welfare state intact. Once in office, Reinfeldt’s coalition cut income taxes by 70 billion kronor, or about 2.3 percent of gross domestic product; tightened the budget; and trimmed jobless benefits to nudge people back to work. Reinfeldt has stressed gradual change, not the wholesale attack on the welfare state that earlier conservative leaders had called for.

    The economy has cooperated. After contracting last year, GDP will probably grow 4.5 percent this year, making Sweden one of Europe’s top performers.

    ….

    http://www.businessweek.com/magazine/content/10_39/b4196014934434.htm

  52. victor says:

    I see many suggestions that go like: tax this, tax that, include this and exclude that. I say to myself: grand ideas but beware of social engineering via taxation schemes. BR, I really love your blog, I’d be a terrific loss for me if somehow you stopped it. I do have a couple of tax related questions: 1) are there any reliable stat’s about small businesses that would be affected by not extending the tax cuts to the “rich”?, 2) at the risk of inserting politics here: isn’t it ironic that the Rep’s are now fighting to preserve the tax cuts for the rich the majority of whom, by most metrics are either registered Dem’s or contributors to the Dem’s. Aren’t the 400 ultra rich mostly non-Rep’s, think: Buffett, Gates, Soros, Kerry, etc, etc. And further, the ultimate irony: the Dem’s bragging over extending bad oilman’s Bush tax cuts for the 98% non-rich, the same cuts many of them opposed back then. 3) this is specifically for thinking outside the box: is it true or not that tax increases BEYOND A CERTAIN LEVEL, tend to favor the well off ? this a bit of a brain twister but I’m pretty sure you’ll give it a try…and finally:higher gasoline taxes just like license plate taxes would be a cruel tax on the poor, oh, I know, we can design a refund scheme, more red tape, what say you?

  53. gremlin says:

    here’s a link from a less contentious time (1996 house of reps report, who would have believed that the 1990′s were comparatively rancor free):

    http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

    “Since 1984 the JEC has provided factual information about the impact of the tax cuts of the 1980s. For example, for many years the JEC has published IRS data on federal tax payments of the top 1 percent, top 5 percent, top 10 percent, and other taxpayers. These data show that after the high marginal tax rates of 1981 were cut, tax payments and the share of the tax burden borne by the top 1 percent climbed sharply. For example, in 1981 the top 1 percent paid 17.6 percent of all personal income taxes, but by 1988 their share had jumped to 27.5 percent, a 10 percentage point increase. The graph below illustrates changes in the tax burden during this period.”
    …..
    As you raise taxes people will do something to avoid paying those taxes, either work less or hire more shysters to avoid paying taxes.

  54. obsvr-1 says:

    useful info on SS for clarifications on above

    http://www.ssa.gov/OACT/ProgData/fundFAQ.html

  55. obsvr-1 says:

    the laffer curve hypothesize the optimal top marginal tax rate to maximize revenue, like a bell curve it drops off if the rate is adjusted too low or high.

    Looking at the historic tax rates http://www.truthandpolitics.org/top-rates.php 1980 – 88 the regan (laffer) years suggest that the taxes were being adjusted to find that optimal level; 1980 marginal rates too high
    1988 marginal rates too low … looks like 1986 may have been that optimal point (50% — oh how the rich would be a kickin and a screamin).

    The question is where do we think we are on the laffer curve — left or right side — we’re definitely not at the optimal or equilibrium point.

    Another interesting point in the historic data is the income where the top bracket kicked in, it was adjusted down lower and lower to capture the upper end of the middle class into that bracket. Note in the 1980 -88 period that in 1986 the income was adjusted back up (middle class break).

    FIRST: Reducing the size of gov’t and cutting spending should be the top priority to balance the budget. Actually there should be a % allocated as reserve (e.g. 5%) that goes into a “rainy day fund”. When growth in the economy (GDP) returns or the reserve fund exceed the target, then the excess could be returned pro rata to the taxpayers. (obviously a dream scenario as the spending machine of congress just can’t help themselves, seems if there is a surplus dollar they will spend two).

  56. Greg0658 says:

    on taxes & allowed deductions & this 250K threshold of taxes being paid by a small businessman (to a tall businessman) .. I’ll remind youall who are chatting from little experience .. allowable deductions like the company car the fuel the cellphone (for starters) are subtracted from the taxable top * .. so we are talking these days of a 250K Profit to be spent on non-allowable deductions
    … I’m in favor of tax code changes that puts a family in a corporate taxcode category .. but thats a whole nother world of chat
    * wages and benefits are deductable
    ….
    and radiowave that was for you too with more for you .. I came to an understanding over the weekend .. Cash is an invention of governments to bring folks out from the woods into a more advanced society that will yoke them for eternity .. welcome to my world You New Worlds of Western Ways ** – you’ll love it * till you don’t – the pollution the crowds the politics of control

    * roads bridges & tunnels, water & sewers, policemen firemen armies, laws courts jails
    * some crowds want the stuff and want other crowds to pay for them

    ** “theres no way outta here – when you come in your in for good” thats in a song by David Gilmour

  57. WaveCatcher says:

    The chart shows that IF the tax cuts are extended, the top 17% of earners pay will continue to pay nearly 70% of the taxes. Seems like the high earners are paying their way.

  58. Joe Friday says:

    gremlin posted:

    “Since 1984 the JEC has provided factual information about the impact of the tax cuts of the 1980s. For example, for many years the JEC has published IRS data on federal tax payments of the top 1 percent, top 5 percent, top 10 percent, and other taxpayers. These data show that after the high marginal tax rates of 1981 were cut, tax payments and the share of the tax burden borne by the top 1 percent climbed sharply.”

    Once again, you missed the point.

    The wealthy only paid more taxes after the tax cut because their income went up so dramatically, not because they were paying a higher percentage of their income in taxes.

    ~

    “As you raise taxes people will do something to avoid paying those taxes, either work less or hire more shysters to avoid paying taxes.”

    No evidence.

  59. DeDude says:

    DL@7:42PM

    “I don’t see how that’s going to help me”

    You are making my point even if you are not a 250K+ but just a 250K+ wanna be. So let me tell you how it will help you. Those less than 50K people spend just about every dime you put in their pockets. With 70% of the economy being consumer spending (and investments being driven by consumption) you want more money in these peoples pockets to grown the economy. The 250K+ group “invest” almost all their extra money. When the economy is not growing they cannot put their money in productive investments so they put them into speculative bubble driven “investments”. That is how oil and other commodities gets driven way up. Those commodity bubbles have a very negative effect on the economy as they rip money out of the pockets of consumers and drives the most vicious and regressive tax of them all – inflation. So if you like everybody else is dependent on a growing economy you will be helped by anything that takes money out of the pockets of the investor class and put it into the pocket of the consumer class.

    Cognos; I like tha;t lets have a “Flat tax” on FICA and lets make sure to extend it to all types of income. Why should capital gains be taxed any different than income resulting from actual productive work? Tax all income with the same rates and lets get a Flat FICA tax.

  60. gremlin says:

    Joe Friday
    “Once again, you missed the point.

    The wealthy only paid more taxes after the tax cut because their income went up so dramatically, not because they were paying a higher percentage of their income in taxes.”

    I think you miss the point. That’s the exact effect we want. I don’t think taxes are a punishment for rich people, I don’t think we are in a zero sum game. You’re losing sight of the big picture, if our objective is to raise more money so we can piss it away on stupid federal projects, then lowering tax rates raises more money. If it has an evil side effect of people making more money individually, then great, yeah evil!

    The evidence for people avoiding taxes at higher rates is the Laffer curve, by definition. here’s the wikipedia entry: http://en.wikipedia.org/wiki/Laffer_curve

  61. DeDude says:

    @gremlin; you are kid’in us right?

    The “evidence” you link to says “In economics, the Laffer curve is a theoretical representation”.

    If something that is “theoretical” can be used as “evidence” then any sh!t I can dream up is supported by evidence simply because I dreamed it up. Evidence means actual real data from the actual real factual world that something is indeed as someone theoretized it to be.

  62. Joe Friday says:

    gremlin,

    “I think you miss the point. That’s the exact effect we want.”

    “We WANT” to reduce taxes on the Rich & Corporate and concentrate the wealth and income even more at the top ?

    I don’t.

    ~

    “I don’t think taxes are a punishment for rich people”

    Good. Then they should pay their fair share of the tax burden.

    ~

    “You’re losing sight of the big picture, if our objective is to raise more money so we can piss it away on stupid federal projects”

    You’re projecting. Never posted anything like that.

    ~

    “then lowering tax rates raises more money.”

    No, it doesn’t.

    ~

    “The evidence for people avoiding taxes at higher rates is the Laffer curve, by definition. here’s the wikipedia entry: http://en.wikipedia.org/wiki/Laffer_curve”

    A) Wikipedia is OPINION.

    B) Laffer and his “curve” are a joke.

    C) It’s NEVER happened. Reducing federal income tax rates has NEVER produced more federal income tax revenue. Every time federal income tax rates have been reduced, the national economy TANKED and federal income tax revenues PLUMMETED.

  63. gremlin says:

    you’re using the fold your arms and saying “no it isn’t” technique, not a single link or citation except the CBO, the same people that scored obamacare as saving money. (they say whatever the party in charge says to say).

    if Laffer is just a theory, so is evolution, global warming, etc. (too easy) If you don’t believe it you should go live in a high tax rate/low morals country. Italy is wonderful, but almost every transaction where it’s possible to pay cash and not get a real receipt is taken. Same thing here in Mexico, every transaction ends with “quiere factura?” do you want an official receipt or is this scrap of handwritten receipt enough. with taxi drivers that’s a negotiating point, you can ask for a discount without a receipt on a long ride.

    Since I can’t convince you with 30 second google sessions, I’ll end my part of this thread with my rationale, I think the laffer curve works, there is some point where higher taxes reduce total revenue, for the top bracket that point will be pretty close or past with the new rates. If I thought higher taxes were going to something of value I’d probably feel it would be worth the risk of raising rates, but most of federal budget is just welfare for different constituencies. (bankers, unions, MIC, etc.)

  64. Joe Friday says:

    gremlin.

    “you’re using the fold your arms and saying ‘no it isn’t’ technique”

    You’re responsible for substantiating your own unsubstantiated assertions.

    ~

    “not a single link or citation except the CBO”

    That’s one more valid one than you posted.

    ~

    “the same people that scored obamacare as saving money.”

    It does.

    ~

    “(they say whatever the party in charge says to say)”

    False.

    ~

    “if Laffer is just a theory”

    It’s not even a “theory”. It’s propaganda.

    Not to mention history proves that it’s never happened.

    ~

    “I think the laffer curve works”

    That’s merely an irrational unsubstantiated ideological belief.

    ~

    “If I thought higher taxes were going to something of value”

    Worked like a charm for Presidents FDR & WJC.

    ~

    “but most of federal budget is just welfare for different constituencies. (bankers, unions, MIC, etc.)”

    Nope.

    Most of the federal budget is the Military Industrial Complex, Corporate Welfare, and interest on the Reagan/Poppy Bush/Chimpy Bush federal debt.