Monday, September 5, 2011

Another table of doom

You don't have to read the text if you understand this table:
Income
Percentile
Higher top tax rate
1947-1981
Lower top tax rate
1982-2007
95th 2.11%               1.62%              
60th 2.22%               0.97%              
20th 1.96%               0.58%              

When top tax rates were higher, the middle class was actually holding its own against the folks at the top, and the poor were moving up at roughly the same rate as the rest of the nation. When tax rates were cut at the top, there was a radical change. Under the low taxes on the wealthy regime, middle class growth was cut in half. Growth of income for the poor was cut to less than a third of the previous pace.

Why? Because cutting taxes at the top does exactly what the conservatives have always advertised—it encourages the wealthy to make more money. However, personal taxes aren't paid on the revenues of a company. They're paid on how much you take home. Cutting taxes at the top encouraged the wealthy to put more cash into their own pockets and hold back pay that otherwise would have gone to middle class employees and the working poor...

When taxes drop so far that they cease to be a consideration, the best move is to simply grab all the money while it's available. Why tempt fate in the marketplace, why risk unforeseen circumstances, why do all that boring old work if you can simply pocket the profits and run?

The current system provides no incentive to build companies and systems that can stand the test of time, companies built around valuable and educated workers who have a stake in the success of the company, community, and society. We've built a system that's tottering on the edge of terminal instability, and those calling for still lower taxes are likely to knock out the last supports holding up the floor.

Serfs up: how coddling the rich is destroying the American dream

So, to be fair to rich people, they're not actually any stupider than the rest of the population. They voted for Reaganomics because it was in their own short-term best interest. Presumably the rest of the working class Republicans thought it was in their interest, too.

But they were wrong. And we know that now. The empirical data is there, the history is told. But it requires understanding, and that requires honesty. One dishonest way to look at the past is to smear it all together; to lump the two categories in the table above into one. Then the dismal performance of the last 25 years erases the good performance of the previous period, and so the conclusion becomes that we have to roll back the whole thing. This is what a lack of nuance does.

In fact, the Republicans are using this strategy right now, claiming that Obama is responsible for the economy that Bush built. (They've even convinced some people that Obama created the TARP act!) No wonder they think nuance is a dirty word.

3 comments:

Anonymous said...

wasn't a large part of TARP tax cuts?

Anonymous said...

Oh wait, I'm sorry, it was the stimulus package that had a very large part of it was tax cuts that were forced into the package by, oh dare I say it,,, the Republicans.

Funny, they take no responsibility for either Tarp or the stimulus pkg.

I voted Rep all my life so I can tell you my party has gone to shit since Goldwater. It's the social conservatives that started a war in the party. Now I'm not Republican enough. I actually saw a Tea Party person holding up a sign that called Romney a Rhino.

Frankly I believe, this parties mentality has slipped to irreversible lows and I see physical internal violence as the only out come. Our political structure already suffers from having different parties focusing to create chaos so the other party will look bad, and be thrown out. The populous is then no longer voting for actual leaders, but to instead just throw the bums out.

btw, I agree that rich people aren't any more stupid, but they sure are any more smart either.

We saw this same type of social/economic system in the Dark Ages and it didn't work then either. Only economies were supported by conquest of ever more poor to support and grow the society.

MCPlanck said...

I don't think it's irreversible; many a foe has counted America out and lived to regret their hasty judgment.

But I do agree it is troublesome to the extreme. This next election, while appearing to be just business as usual, has to be a wake-up call for ordinary citizens. They have to recognize who is to blame and vote appropriately.

It's just like the kids in the classroom; until the teacher starts handing out detention slips, the class just gets more and more dysfunctional.