soaking the rich

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The NYT begs of us "don't soak the rich" via Edward Kleinbard's assertion that "the American tax system already is the most progressive in the developed world"--a claim that I thought warranted further scrutiny. I checked into Foreign Affairs' "America the Undertaxed" article, which noted that "Compared with other developed countries, the United States has very low taxes, little redistribution of income [and] the overall U.S. tax system is only mildly progressive:"

In fact, the United States currently taxes top earners at some of the lowest effective rates in the country's history. Data from the Internal Revenue Service (IRS) show that the top one percent of taxpayers paid an average federal income tax rate of 23 percent in 2008, about one-third less than they paid in 1980, despite the fact that their incomes are now much higher in both real and relative terms. [...]

In Europe, regressive taxes are matched with highly redistributive states. In the United States, mildly progressive taxes are matched with a not very redistributive state. As a result, the United States experiences greater inequality than most other advanced nations, with the tax-and-transfer system doing little to alleviate it.

Kleinbard claimed later in the piece that "reducing inequality is not about where the money comes from, but where the money goes, and how much of it is spent:"

The better response to income disparity, then, is not to tax the rich more, but to boost revenue over all so that government can invest more, and offer higher quality social insurance programs. [...] To address troubling trends in income inequality, we need more government, not less. But we do not need steeply higher marginal income tax rates to yield a richer, more equal and happier society.

FDL takes apart his argument:

Kleinbard isn't relying on the arguments of Modern Money Theory to make his case: he says the government needs revenues to support the spending programs he favors. He doesn't want to soak the rich, so he intends that increased revenues come from the middle of the income distribution. That leaves us with the bizarre notion that a nation that is willing to cut food stamps for the poorest part of the population will happily pay more taxes to fund some other programs that benefits the poor. It's an astonishing argument. [...]

Kleinbard writes "A chief executive who earns 200 times as much as her typical employee does not get 200 times the benefit from our investments in highways." That's true. She gets a lot more benefit than 200 times. Without those highways, she doesn't have a job. That applies to the entire oligarchy.

Soak 'em!

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This page contains a single entry by cognitivedissident published on October 12, 2014 5:32 PM.

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