This just in: Rich get richer

It’s hard to say it much more clearly than this bar chart does:

For the richest 1 percent of the population, income grew by 275 percent between 1979 and 2007.
Source: cbo.gov
For the richest 1 percent of the population, income grew by 275 percent between 1979 and 2007.

The rich just keep getting richer, especially compared with the unrich.

The Congressional Budget Office is a nonpartisan operation with about as much credibility on matters like this as anyone can have in a world where if someone doesn’t like your conclusions, they will accuse you of bias. CBO decided to assess the changes in income distrubtion in our great nation during the period 1987-2007 because both endpoints occur at times when the U.S. economy was about to suffer a recession.

You should note that all of the data are based on a measure of income after taxes and after the effect of whatever government transfer programs were in place, which were presumably intended to mitigate somewhat the gap between the richness of the rich and the poorness of the poor.

Here are the first few bullet items from the CBO report:

From 1979 to 2007, real (inflation-adjusted) average household income, measured after government transfers and federal taxes, grew by 62 percent. During that period, the evolution of the nation’s economy and the tax and spending policies of the federal government and state and local governments had varying effects on households at different points in the income distribution: Income after transfers and federal taxes (denoted as after-tax income in this study) for households at the higher end of the income scale rose much more rapidly than income for households in the middle and at the lower end of the income scale. In particular:

• For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007 (see Summary Figure 1).

• For others in the 20 percent of the population with the highest income (those in the 81st through 99th percentiles), average real after-tax household income grew by 65 percent over that period, much faster than it did for the remaining 80 percent of the population, but not nearly as fast as for the top 1 percent.

• For the 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 percent.

• For the 20 percent of the population with the lowest income, average real after-tax household income was about 18 percent higher in 2007 than it had been in 1979.

As a result of that uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979:

The share of income accruing to higher-income households increased, whereas the share accruing to other households declined. In fact, between 2005 and 2007, the after-tax income received by the 20 percent of the population with the highest income exceeded the after-tax income of the remaining 80 percent.

 The full report is available (pdf) here.

Comments (54)

  1. Submitted by Alec Timmerman on 10/26/2011 - 02:13 pm.

    Unsustainable inequality is bad for the country. No one is doing the protests because they hate the wealthy. We protest because our country is crumbling under the weight of our severe inequality. It causes more crime, more baby deaths, more mental illness, and on and on.

    http://mnprogressiveproject.com/diary/10309/why-inequality-matters

  2. Submitted by Dennis Tester on 10/26/2011 - 02:18 pm.

    So what’s your point? The interest earned on Mark Dayton’s trust accounts generate more annual income for him than most families make with two paychecks coming in.

    Is your solution then to outlaw interest-bearing accounts?

    Why wouldn’t the rich get richer? It’s called compound interest.

  3. Submitted by Steve Titterud on 10/26/2011 - 02:53 pm.

    That’s just income.

    In wealth, the top 400 individuals control more than the bottom 150 million people.
    (http://currydemocrats.org/in_perspective/american_pie_chart.html)

    What chance do you think those bottom 150 million have of accumulating any capital?

  4. Submitted by Ray Schoch on 10/26/2011 - 03:04 pm.

    Mr. Tester obviously enjoys the prospect of serfdom for his friends and neighbors, not to mention lefty/socialist wimps, but some of us find the notion of oligarchy somewhat at odds with our traditional national memes of “equality of opportunity” and “democracy.” It’s also *very* difficult to have a functioning “consumer” economy when most of the money necessary for consumption is in the hands of a few hundred families that already own deluxe versions, and often duplicate deluxe versions, of everything necessary to support modern life in luxury.

  5. Submitted by Alec Timmerman on 10/26/2011 - 03:15 pm.

    Dennis,
    The point is, inequality at our levels is bad for our country. There are a lot of things you can do. We could return to the tax code of the ’40’s through 70’s where we saw the greatest expansion of capitalism of all time.

    You see, Dennis, when you tax higher incomes, it encouraged folks to reinvest that back into their company, hire more workers, or just pay better wages.

    When you decide to cut taxes so drastically, you make it an incentive to take all that money as income, which is not re-invested back into the company or the market.

    If you care about the survival of America, you should care about inequality.

    The tax code from 1940-1970 did not kill innovation, or growth. In fact, it was better than now!

  6. Submitted by Jackson Cage on 10/26/2011 - 03:17 pm.

    Let me take Dennis #2’s argument a little farther…..why bar charts? How would these figures look if they were put into a pie chart or a graph. If we did that, then you Liberals would be singing an entirely different song!

  7. Submitted by Thomas Eckhardt on 10/26/2011 - 03:21 pm.

    Dennis, Most of Dayton’s 2010 income was not interest earned on anything, it came from the sale of stock, which is taxed at a lower rate and will become tax free under most Republican plans.

    Taxing the rich at a lower rate than the middle class pays is one of the reasons the top 1% has better after-tax gains in income.

  8. Submitted by Paul Brandon on 10/26/2011 - 03:38 pm.

    Dennis–
    If you think that the top 1% keep most of their money in savings accounts, I’ve got this bridge in Brooklyn ….
    Of course, compound interest in the more general sense should apply to everyone in the top quintile (probably includes you), so it wouldn’t account for the discrepancies seen here.

  9. Submitted by Paul Brandon on 10/26/2011 - 03:43 pm.

    Jackson–
    I hope you’re being facetious.
    A graph would look virtually the same (just connect the tops of the bars). You’d need a logarithmic plot to flatten it out.
    And a pie chart would just show that the rich get most of the pie 😉
    It’s not that the rich are getting richer; it’s that they’re getting richer even faster than the slightly less rich, and a the expense of most of the rest of us who earn compound interest on our savings (and compounding 0.5% interest still doesn’t get you much).

  10. Submitted by Peder DeFor on 10/26/2011 - 04:24 pm.

    Alan, there is so much misleading info in your link that it’s hard to know where to start. Homicide rates have dropped over the last 30 years.
    Infant medical care has gotten dramatically better for everyone. The US lags because it tries to save much younger fetuses than other countries.
    Obesity is a problem that the truly poor of the third world would trade for in a heartbeat. Here in the US it’s at least partly a side effect of lower smoking rates.
    Teen births are down over the last 30 years. They were much higher back in the halcyon days of the 50’s and 60’s. Back when we had much higher tax rates on the wealthy.
    Imprisonment is indeed up but the large majority of that is related to the drug war. I don’t see how that ties to income inequality but maybe you can point the way there.
    Math and Literacy is about even over the past 30 years even though school budgets have doubled in real dollars.
    Life expectancy has climbed steadily over the past 30 years.
    I’ve seen convincing arguments that social mobility has been steady over the past 30 years. I’ve also seen claims of the opposite.
    Not sure what has happened with mental illness rates. I do know that mental health professionals have vastly expanded what they consider to be an illness. I’d need some pretty good convincing that the rich are at fault here.
    With ‘trust’ you may be exactly right though. Many millions have somehow been convinced that 62% increase means nothing if someone else had an increase of 275%. This seems bizarre to me but YMMV.

  11. Submitted by Peder DeFor on 10/26/2011 - 04:31 pm.

    #3 Steve:

    “What chance do you think those bottom 150 million have of accumulating any capital?”

    An excellent chance. You may have met some of them. If not, let me introduce myself, who without the benefit of any inheritance or large gift of money, has accumulated things like a house, two cars and enough electronic goods to make the 1% of 1980 envious. And I’m not that uncommon or lucky. Just about anyone above the poverty level fits this definition. Even some below it.
    The idea that the wealth of the top is somehow oppressing the bottom rungs needs much more clear spelling out then you’re giving it. Otherwise it looks like cheap envy.

  12. Submitted by Dennis Tester on 10/26/2011 - 06:19 pm.

    The problem with operating from a position of envy is that you end up thinking that allowing the government to take more of other people’s earnings will somehow benefit you.

    Whether Mark Dayton gets taxed at 1% or 90% has no effect on me or my earnings. Unless of course I was relying on Mark Dayton’s company to give me a job. He might be more generous in his salary offer to me if he didn’t have such a confiscatory tax burden that made him feel less able to pay me what I’m worth.

    Other than that, what rich people make or how they live their lives should only concern you if you work for a tabloid publication.

  13. Submitted by Lora Jones on 10/26/2011 - 06:45 pm.

    My, my, Dennis. Jackson. Where to begin.

    This entrenched inequality is not only anathema to what we, as Americans, consider to be core values of “meritocracy” and upward social mobility, they are, as has been pointed out, destructive in any measure of societal well-being one can think or imagine.

    One of the many reasons that progressive taxation (and policy) produces positive economic results is that the people who don’t NEED more money and who REAP more benefits from the commons have at least a little bit less money to gamble with on the stock market (or mortgage backed securities market) and the people who actually purchase goods and services with those extra dollars (and who do NOT make as intensive use of the commons) have a little bit more.

    Econ 101. Carleton College, Northfield, Minnesota 1974 or so. And, all these years later, with the Reagan Voodoo Revolution and Clinton’s Giant Sucking Nafta, it still holds true.

  14. Submitted by Greg Kapphahn on 10/26/2011 - 07:49 pm.

    Personally, I have NO problem with certain individuals growing fabulously wealthy because they have provided innovative goods and services to society that are SO useful and of SUCH benefit to all that the wealth they have created for their inventors/developers is completely justified.

    Of course with probably less than ten exceptions (and those are not likely the wealthiest of the top 1%), these gains in income have not been produced by anything resembling what I just described.

    Rather they have been accomplished by people at the top of a system which they, themselves, have gamed to guarantee that they came out as winners in the games of risk that they themselves designed (while the losses were suffered by the other 90%).

    There is a basic issue of inherent human worth that our society is ignoring at its peril: the diligent work of any human individual is worthy of compensation sufficient to support that person and their family including health and retirement benefits.

    In contrast, the cheap-labor “conservatives” so prevalent among America’s business and financial leaders simply don’t believe that humans are inherently worth any minimum level of compensation, let alone compensation which would be anything close to respectful of the dignity of each human being.

    It is also undeniably true that NO human, no matter how diligently he or she might work, no matter WHAT they contribute to society is worthy of the levels of compensation that MOST of the people in the top 10% receive. It is nearly impossible for ANYONE to to ANYTHING of such massive benefit to society that it justifies such compensation.

    Just because those in the top 10% of society have stolen their ill gotten gains from the rest of society through means which they, themselves have arranged to be legal does not mean they are not guilty of that theft, nor does it mean that society does not have the right to re-write the rules in ways that make such theft illegal from that point on (if not retroactively).

    Indeed, if those rules are not soon re-written, the society of the US will collapse because the bottom 90% will not be able to support the morbid, bloated, economic corpulence of the top 10%.

    Occupy Wall Street is nothing but an alarm sounding to call the population of the US to wake up and make needed changes before our society collapses. It remains to be seen whether we will wake up and take action or whether we will be convinced by those who benefit from the system as its rules are currently written and those who fail to see the danger that we should all just roll over and go back to sleep.

    If we DO go back to sleep, however, the next sound that awakens us will be the sound of that collapse arriving suddenly, catastrophically, and with great permanence.

  15. Submitted by Steve Rose on 10/26/2011 - 08:30 pm.

    As of 2008, the top 1 percent of taxpayers paid 38 percent of all income taxes, while the bottom 90 percent of taxpayers paid just 30 percent of the income tax burden. Source: IRS.

    The top 1 paid more than the bottom 90. Yet, that is not progressive enough?

    Eric, for reference, it would be interesting to see bar charts like this for other periods in US history.

  16. Submitted by rolf westgard on 10/26/2011 - 08:41 pm.

    Great article, Eric.

  17. Submitted by Peter Swanson on 10/26/2011 - 08:49 pm.

    The problem with this analysis is that it does not account for mobility. The people in 1979 are not the same as in 2007. People are born, graduate from school, enter the workforce, and begin to make their fortune, all in the space of three decades. Or not. How many people have retired or died since 1979? What was Eric Black doing in 1979?

    Also, _everyone_ is doing better. The old Gov. Michael Dukakis (among others) line about “rich get richer, poor get poorer, and the middle class get squeezed” is only 1/3 right. Everyone is getting richer. The quintiles are not castes where you are stuck for life.

    It may be that you think the graph shows something wrong with America. But don’t characterize it as a 30 year game of Uno cards, where one person’s pile keeps getting larger at the expense of everyone else. We keep adding new decks.

  18. Submitted by Tim Larson on 10/26/2011 - 09:47 pm.

    #1 and #5

    Alec, do you believe that anyone actually paid the 70-90% rates in your 30 year example?

    Because if you do……….

  19. Submitted by Richard Schulze on 10/26/2011 - 10:30 pm.

    I think this understates the state’s support for the upper income group. Not included, for instance, is the work of the Fed. You would never know that the Fed loaned out trillions of dollars to enterprises heavily invested in by the upper income group from this chart. A real chart would reflect the effects of policies favoring the wealthy – from agricultural supports to Fed Reserve actions – to give a real picture of government action. For instance, the Fed loans to banks and businesses in the 2008-2010 period towered above the collected ‘entitlement’ expenditure for the entire past two decades.

  20. Submitted by Patrick Wells on 10/26/2011 - 11:54 pm.

    Income inequality is certainly a problem. Income ineqaulity is a symtom of a greater problem … The politics of distraction.

    Average people are conditioned to focus most of their attention on work and, then, on the Vikings, the Twins, etc. This distraction of modern day people is similiar to the distraction of the Romans, who watched chariot races and gladiators instead of watching their government.

    Average people know that they are being taken advantage of by the financial and political system. Average people have neither the knowledge nor the experience to make confident comments about the financial and political systems.

    A good part of the answer is found in cleaning up the corruption of the financial and political process. Wall Street crooks need to be criminally prosecuted. Congress needs to be put on the same footing as everyone else as Warren Buffet has recently suggested.

    The above problems and solutions are not new. Prior generations went through the same thing. We are repeating the old mistakes.

  21. Submitted by Dennis Tester on 10/27/2011 - 07:39 am.

    Miss Jones, if you took Econ 101 at Carleton, hopefully they told you that in a free society, it’s no one’s business to decide how much someone else NEEDS or whether what they make is TOO MUCH. Certainly not government’s.

    Because even if they “gamble” on the stock market with what little they have left, they’re investing in companies who may then have the necessary capital to offer you a job worthy of that Carleton degree of yours.

  22. Submitted by Steve Rose on 10/27/2011 - 07:49 am.

    The Internal Revenue Service reported in 2010, that the top 1% made 20% of the income and paid 38% of the total tax bill. The top 5% (which includes the top 1%) made 35% of the income, while paying 59% of the taxes.

    The U.S. has the most progressive income tax in the world. Yet for some, it is not enough; they don’t pay their fair share. The question that never gets answered is, how much should they pay. What percent of the total tax bill should the top 1% pay?

  23. Submitted by Steve Titterud on 10/27/2011 - 08:06 am.

    #11, Peder: You’re confusing consumer goods with capital.

    The information cited (the top 400 individual Americans in wealth control more than the bottom 150 million) does not contemplate “wealth” to mean consumer electronics, cars and the like.

    Nor does my question about the unlikelihood of the bottom 150 million accumulating capital have to do with the kinds of things you’re talking about.

    I’m not contradicting your statement that you are a success story, I’m just saying that what you describe is no example of accumulating capital!

  24. Submitted by Lora Jones on 10/27/2011 - 08:14 am.

    Mr. Tester. A totally free society is anarchy. I have to assume, that as a con, you don’t want to go there.

    Government sets the rules by which we order society and protect the common weal. If the Top 1 or 10% hadn’t had all that extra money to gamble with ever since Reagan voodooed the tax code, we wouldn’t have had the series of bubbles and recessions that culminated in this last Bush-fed mega bubble and recession. Economic stability is good, and economic stability was achieved for the years between 1930 something and the mid-80s (it took a little time for the extra cash to float the new bubble), when an under-regulated “free” market did exactly what it had done in the 19th and early 20th centuries, produce a series of bubbles and bubbles bursting with disasterous effects.

    And, BTW, Econ 101 also taught me that people don’t hire people just because they have extra cash lying around. People hire people because enough other people have enough cash purchase their products or services

  25. Submitted by Dennis Tester on 10/27/2011 - 08:26 am.

    @#20
    “Income inequality is certainly a problem.”

    No it’s not, Patrick. Are you suggesting that everyone should make the same amount of money? They have that system in North Korea.

    The problem, Patrick, is that “average people” like those in the “Occupy movement” for example, are victims of educational malpractice from the government school system when most don’t even understand that your labor is only worth what someone is willing to pay for it. There are some exceptions to that, of course, like Chelsea Clinton being given her job as a hedge fund manager because of who her parents are.

    But for the rest of us “average people” though, your objective is to prepare yourself for the labor market with that in mind.

  26. Submitted by Peder DeFor on 10/27/2011 - 08:42 am.

    Lora #24, can you explain the recessions that we had back with lower income equality? And do you really think we wouldn’t have had a housing bubble if the rich had less money? Can you expand on that because I don’t see how that could possibly be right.

  27. Submitted by Peder DeFor on 10/27/2011 - 08:47 am.

    #23 Steve, you’re probably right that I’m talking about goods rather than capital. Do 401k’s count as capital? How about small businesses?

  28. Submitted by Jon Kingstad on 10/27/2011 - 09:34 am.

    @#22: Steve, I highly doubt the US has the most progressive tax system in the world. Most of the taxes that we have are highly regressive. It’s true the income tax code is somewhat progressive but it’s nowhere near the way it used to be in the 1950’s, 1960’s and 1970’s when we still had high marginal rates. The highest marginal rate we now have is 35%. Which means the high income which used to eb taxed at higher rates is taxed at the same rate at lower rates. In other words, if a person has taxable income of $100 million, hey ate taxed at 35%, the same rate as someone with a taxable income of $100,000. I think that’s not p0nloy unfair, its stupid for the government to ignore revenues from the people “earning” millions of $$ while everyone else is forced on bread and water. Of course, hedge fund managers making the $100 million are often taxes at 15%, because it is reported as “carried interest” not income.

    Right wingers like to defend the rich by saying that they pay most of the taxes. Those who pay no income taxes don;t make enought to pay them. I think that’s a disgrace right there. But just looking at income taxes is misleading because those who might pay no income tax pay plenty of taxes through regressive sales taxes and gas taxes.

    But even as to income taxes, the right wing logic falls apart. Right wingers assume that a more progressive system would have the rich pay an even higher percentage. That’s not true. A fairer and more progressive tax system would bring in more revenues and over time enable the government to direct investment into more productive enterprises than banking, insurance and finance that would employ more people and bring incomes and taxes from the people who are not paying income taxes. I’d point out too that one of the arguments made by George W. Bush, Reagan, Laffer and Jude Wanninski for the tax cuts (which included eliminating the progressivity in the system) was that the tax cuts would spur growth and result in MORE government revenues. Right wingers always conveniently forget about that part. Well, it hasn’t worked, has it? Tax cuts and refusal to increase taxes on the rich who benefited the most from the tax cuts has now created a huge deficit and has tied the hands of the government from taking aggressive fiscal measures, i.e. deficit spending needed to move the country’s economy forward. I say it’s time to restore progressivity to the tax system, tax the 1% at the higher marginal rates (50%) and start reclaiming what the tax cut geniuses promised would happen.

  29. Submitted by Paul Brandon on 10/27/2011 - 09:45 am.

    The facts are that:

    1. The United States has functionally (in terms of actual taxes paid as a percentage of total income rather than marginal tax rate) one of the least progressive tax rates in the industrialized world.

    2. Socio/economic mobility in the United States is lower than that in most of the industrialized world. The odds that you’ll die in the same class that you’re born in are greater than in Western Europe.

    Mr. Swift and Mr. Tester most probably benefited from public support of education at some level. Even private colleges typically cover less than half of their costs from tuition. Private primary and secondary educational systems (mostly Catholic) do somewhat better, but still receive some public support (tax exemptions; being able to offload kids with special needs or who are behavior problems to the public schools).

  30. Submitted by Paul Brandon on 10/27/2011 - 09:52 am.

    @#26–

    Income inequality was greater before the 1827 depression than it was until after 1980. Then as now, the problem is that the rich do NOT plow most of their ‘earnings’ back into our economy.

    The housing bubble was a result of mortgage companies (not banks or Federal agencies) making high risk loans. This was pyramiding; they got the capital for new loans from earlier (lower risk) ones.

  31. Submitted by Steve Rose on 10/27/2011 - 10:13 am.

    Jon Erik (#28):

    You may doubt that the U.S. has the most progressive tax system, but it does.

    This link provides the list, the source is the Paris-based Organization for Economic Cooperation and Development, or OECD, which analyzes a variety of economic factors of countries around the world.

    http://www.wnd.com/?pageId=278389

    For reference, I will use France; that seems like a sufficiently progressive country.

    Share of taxes of richest decile:
    U.S. = 45.1%; France = 28.0%

    Share of market income of richest decile:
    U.S. = 35.5%; France = 25.5%

    The link also has an interesting graph that shows the crossover when the top 1% started paying more than the bottom 90%.

    When will the wealthy be made to carry their weight?

  32. Submitted by Peder DeFor on 10/27/2011 - 10:48 am.

    Paul #30, how about the recessions of the 50s and 60s? We has lower income equality then and still had recessions.
    And your point about the housing bubble ignores that one of the leading culprits was Freddie and Fannie, both quasi gov’t mortgage companies. Would they have done so without gov’t pressure to issue riskier loans? And would they have done so if they were really afraid that they would suffer consequences of bad loans?
    And you haven’t pointed out how more money in the hands of the rich created the bubble.

    I need some convincing that any of our current problems (with the possible exception of debt reduction) have anything to do with income inequality. So far no one here has moved the meter at all.

  33. Submitted by Steve Titterud on 10/27/2011 - 11:34 am.

    #27 Pedor:

    A small business’s balance sheet would probably show if it had anything you could call capital. But it might also show the business has no capital. A lot of small businesses have folded because they needed capital to continue, had none, and couldn’t borrow any from those who DO have capital. The paper value of assets oftentimes overstates real value, so in a case where a small businessman THINKS he has capital available, based on a business appraisal or what he thinks his inventory is worth, he might get a rude awakening when a capital source tells him it won’t secure a loan! So does a small business represent capital or not? It depends, I think.

    A 401k SHOULD represent some capital, evanescent though it may be. The problem is it is a prisoner in a fund, subject to the conditions in the stock market or bond market, and generally not fully available except by retirement or early withdrawal (with a penalty). And then, of course, since you can’t get at it to protect it with your own hands, it can lose value.

    A more clear case of having capital would be this: you have your own money. If this is your case, congrats, you’ve got capital.

  34. Submitted by Jon Kingstad on 10/27/2011 - 01:11 pm.

    #31 Steve, When will the wealthy begin to pay their fair share is how I’d put it. Sure, they pay a great percentage of the taxes but they also benefit disproportionately from it. Defense spending is a huge give back to the 1%.

    On your sources: I’m not an economist or a statistician. I usually rely on number crunches and comparisons prepared by experts when I’m satisfied they don’t have some agenda. Disinformation abounds in today’s cyberspace. I’m particularly disbelieving of any “facts” or “studies” that come from think tanks funded by the Koch brothers or Exxon Mobil. It strikes me as very self serving. They have set up or taken over these “think tanks” which are supposedly “non-partisan.” That’s the case with the Tax Foundation which is the source of your link. It’ s a right wing propaganda disinformation organ. I don’t believe a word of it.

    http://en.wikipedia.org/wiki/Tax_Foundation

  35. Submitted by Paul Brandon on 10/27/2011 - 03:15 pm.

    Peder–
    The Freddy and Fanny myth has been debunked too many times to be worth repeating.

  36. Submitted by Steve Rose on 10/27/2011 - 03:22 pm.

    Jon Erik (#34):

    Wikipedia, the encyclopedia that anyone and everyone can write and edit, that strikes you as rock solid?

    The data and charts I have linked in this thread are from the IRS and the OECD.

    In #28, you made the assertion, “I highly doubt the US has the most progressive tax system in the world. Most of the taxes that we have are highly regressive …”

    Provide your source; I’m certain that Wikipedia has a gem that you can cut/paste.

  37. Submitted by Rachel Kahler on 10/27/2011 - 05:33 pm.

    @#31
    I’d be interested to see what the total tax burden to income ratio is. The graph shown in Figure 4 only shows the income tax burden at the federal level. I have my doubts that the comprehensive ratio looks all that similar. But I, quite frankly, don’t have the time to correlate the numbers provided in your article with any real numbers freely available. It’s time consuming, and I’m a productive member of society, even if you prefer to suggest that me and my ilk are fond of having the government “take care of us.”

    Not that it matters. Even if we have “the most progressive tax system in the world,” it doesn’t mean that it’s the most effective, appropriate, or useful one. That is, a high tax to income ratio is not necessarily a bad thing. In case you haven’t noticed, most of the rest of the world is having financial troubles, too.

    And, if you’re going to make fun of sources, please note that World Net Daily isn’t exactly your most respected journalistic institution. Or financial institution. Or…well…anything other than a conservative rag.

  38. Submitted by Steve Rose on 10/27/2011 - 08:56 pm.

    Rachel (#37):

    Do you know who you are talking to this time?

    “even if you prefer to suggest that me and my ilk are fond of having the government “take care of us.”” When did I suggest this? Perhaps that is just the pigeon hole in which you choose to view me.

    As I stated above, the source of the progressive tax list is the Paris-based Organization for Economic Cooperation and Development (OECD); it is not WND. What can you say to disparage them? Perhaps, you might provide a source that refutes it. Or, not.

    I did not make fun of a source; I provided an accurate description of Wikipedia. If you consider that a source, you don’t have an argument.

  39. Submitted by Tom Lynch on 10/27/2011 - 09:28 pm.

    To say that because the top 1% pay X% of all taxes means nothing. Whatever that X amount is should be higher as they have most of the money. And most of the country’s income since 1979 has gone to them.

  40. Submitted by Jon Kingstad on 10/27/2011 - 09:47 pm.

    Steve @ #36: I cited wikipedia as a source for the right wing support of the Tax Foundation. It’s an easy source to cite to but I’d have no difficulty documenting it elsewhere.

    I did not cite wikipedia as support for anything else. A brief survey of the web suggests that it’s difficult, if not impossible to compare the tax systems of different countries.

    I think a better measure of progressivity is the USA’s standing compared to other countries Gini coefficient. The Gini coefficient is a measure of income and wealth inequality. I would posit that countries with more progressive tax rates have less extreme disparities in income and wealth than the USA. The USA does not compare well with many advanced western countries in this regard. The USA has a Gini index of 45 compared to countries like Denmark which has a 24.7. I’ll cite wikipedia again because it cites the CIA as a source, which I’ll assume has no agenda in trying to make the USA look bad.

    “According to Gini coefficient data, income inequality in the U.S., already among the highest in the post-industrial world,[8] has risen considerably between 1967 and 2005 among households[43] and individuals.”

    http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Gini_index

    I’d day based on that measure, either Denmark and most post-industrial nations with Gini coefficients in the mid-20’s to mid-30’s either have more progressive income tax systems or they’re doing something else we’re not and ought to be doing.

  41. Submitted by Tom Lynch on 10/27/2011 - 09:51 pm.

    Supply Side Baby Jesus will save us all! Just have FAITH in the Invisible Hand Job of the Free Market and all will be well. “Trickle Down” worked like a effing charm in the 80’s…and even better since 2001. What could possibly go wrong?

  42. Submitted by Peder DeFor on 10/28/2011 - 08:48 am.

    Steve, I’d give it up if I were you. #40 Jon has posited something else in the face of the figures you’ve given him. #39 Tom thinks that the top 1% should just simply pay more and more or something, even though they already do pay more. And #41 Tom again, has employed undefeatable sarcasm.
    It’s over!

    #35 Paul, no I don’t think it has been debunked. And no one has come close to showing how income inequality brings about anything awful.

  43. Submitted by Paul Brandon on 10/28/2011 - 09:53 am.

    One source of actual numbers on the causes of the housing bubble is at:

    http://www.theatlantic.com/business/archive/2010/06/did-fannie-and-freddie-cause-the-housing-bubble/57664/

  44. Submitted by Steve Rose on 10/28/2011 - 11:42 am.

    Peder:

    I saw what Jon posited, and it did not refute anything that I stated.

    From the CIA website, regarding the Lorenz curve and GINI index “If income were distributed with perfect equality, the Lorenz curve would coincide with the 45 degree line and the index would be zero; if income were distributed with perfect inequality, the Lorenz curve would coincide with the horizontal axis and the right vertical axis and the index would be 100.

    The 2007 U.S. number is 45, which is lower than Argentina, Brazil, Malaysia, and is slightly higher than Russia and China. Is the goal perfect income distribution? Those experiments have been performed and failed in places like the USSR and North Korea.

    Tom’s assertion that whatever the top 1% pay in taxes should be higher, is unsupported. Sarcasm and offensive religious references don’t really buoy an argument; they make the commenter irrelevant.

  45. Submitted by Peder DeFor on 10/28/2011 - 12:21 pm.

    Paul, if I’m reading that right then Fannie and Freddie helped start the problem and then Wall St came in and made it worse. The last point in the comments there is an important one, F+F gave the appearance of gov’t insured mortgages, whatever happened with them. Basically an implied promise that any losses would be socialized. I don’t know how you quantify that effect but it’s not good.

    Circling back to #24 Lora’s point, none of this points to the housing bubble being caused by too much money in the pockets of the rich.

  46. Submitted by Jon Kingstad on 10/28/2011 - 02:43 pm.

    Steve @#44: Nobody said anything about “perfect income distribution.” The point of Gini indexes is to show comparative wealth distribution. You asked if I could cite any source that showed that the US did not have one of the most progressive income tax systems in the world. I responded that i don;t think such a comparison exists but I did show you that there is what I would call circumstantial evidence that countries with lower Gini indexes had more progressive tax systems. Gini index serves as I think a reasonable proxy for the comparison you asked me to cite. If you don’t accept this, why don’t you just say so and explain why.

    Is the goal “perfect income distribution”? No. Disparity of wealth and income exists in most other countries. But nobody is talking about perfect income or wealth distribution. Just a less extreme distribution of wealth and income and a system where there is equal opportunity. And a more democratic one. I’ve been to Sweden, Norway, Denmark, Germany, France, and other European countries (which happen to have lower Gini indexes) and experienced first hand what it’s like to live in a country where social democracy or “welfare state”, if you like, exists. Many very wealthy people live and do well in these countries. I hear they enjoy it. They might crab about the taxes, but they know in the democracies they have, they don’t have the right or ability to buy their governments.

    Just as nobody’s talking about “perfect income (or wealth) distribution”, nobody;s talking about Communism or totalitarianism. It’s hardly fair to talk about Russia, where Communism, a different and totalitarian system, failed. It’s worth mentioning I think that Communism failed because it was not much better than the Tsarist system it replaced. The system that replaced Communism followed our model, but is a more extreme version of it: a more plutocratic kleptocracy which supposedly embraces “free market economics.”

    Peder @ #45: Fannie and Freddie were part of a larger problem with financial deregulation and I suppose you could say “helped start the problem” but I’ve heard many on the right try to claim that it was all Fannie and Freddie and the Community Reinvestment Act which was at the root of the 2008 financial crisis. That would be completely wrong. You’re right that the housing bubble was not caused by too much money in the pockets of the rich but by the rich having too much control over every body else’s money through irresponsible financial practices, “innovative financial instruments” like CDO’s and CDS’s. Very little has been done about these things, including the Dodd-Frank law, a very modest financial regulation bill, which “conservatives” are trying to undo.

  47. Submitted by Paul Brandon on 10/28/2011 - 03:56 pm.

    Peder–
    The point is that most of the high risk mortgages were NOT created by F & F, nor were they Federally insured.

    The housing bubble was created by private corporations making risky mortgage loans.
    The poor don’t have the money to do this.
    You are right to the extent that the loans were made by corporations, not by individuals (Justice Roberts notwithstanding).

  48. Submitted by Steve Rose on 10/28/2011 - 06:33 pm.

    The OECD tax progressiveness table offers direct measures and comparisons of tax progressiveness. The GINI index does not. If you are going to disregard the OECD numbers, you will need to provide justification.

    The CIA website does not state whether the GINI index is based on gross income or after-tax income. Regardless, it is not a measure of tax progressiveness.

    Listen what Barney Frank has to say regarding Freddie & Fannie:

    http://www.youtube.com/watch?v=2UZ9l_AxKjA

    Clueless or a liar? You decide.

  49. Submitted by Jon Kingstad on 10/29/2011 - 11:48 am.

    Steve@ #48: Re: Barney Frank. The poster there feels he has caught Barney Frank is a lie. Barney Frank is probably no different from anyone else and has told his share of lies but I think where Frank is speaking to the House on behalf of his committee, as he was in the clip, I think it is fair to give him the benefit of the doubt that he speaking for his personal position. Which I’m assuming he was to Larry King. At lest Frank is not among the solidly clueless Republicans (and some Democrats)who think the entire 2008 financial debacle was caused by Fannie Mae and Freddie Mac. Frank to his credit tried but did not succeed in bringing CDS’s and other corrupt financial instruments under regulation.

    RE: OECD numbers. I won’t disregard them but I will reject your interpretation of them (and of your Tax Foundation). You compare France and US in your #31 post above:

    Share of taxes of richest decile:
    U.S. = 45.1%; France = 28.0%

    Share of market income of richest decile:
    U.S. = 35.5%; France = 25.5%

    Does this prove that the US’s system is more progressive as you claim? Not really.
    The reason the richest pay more taxes is not because of the tax rates but it’s because they make more of the income than the rest compared to France where it’s spread among the other deciles. Your argument that the richest carry the largest part of the tax burden. It’s not true that the bottom 50% or so pay nothing as you claim because they pay other taxes, but it’s obvious that if people are paying so little in income taxes, it’s because they aren’t making enough money; by the same token if the richest are carrying the biggest part of the income tax burden they are making too much relative to everyone else. The burden is unequal because income and wealth in unfairly distributed. A more progressive tax system would shift that burden more equally and I say fairly.

  50. Submitted by Paul Brandon on 10/29/2011 - 05:23 pm.

    Paul Krugman just posted a link to some numbers about changes in inequality at:

    http://www.cjr.org/the_audit/aeis_myth_of_equality.php

  51. Submitted by Jon Kingstad on 10/29/2011 - 09:00 pm.

    I’m careless in checking my typing but my post at # 49 should read in the second sentence:

    “Barney Frank is probably no different from anyone else and has told his share of lies but I think where Frank is speaking to the House on behalf of his committee, as he was in the clip, I think it is fair to give him the benefit of the doubt that he NOT speaking for his personal position.”

    My point being that Barney Frank as representative of a committee can speak differently than Barney Frank as an individual without being necessarily a liar. Anyway, who are we comparing him to? Michele Bachmann?

    Paul @ #50: I think the link you provide affirms my my point too!

  52. Submitted by Paul Brandon on 10/30/2011 - 12:28 pm.

    And in today’s STrib:

    The 1 percent: How lucky they are they?

    http://www.startribune.com/opinion/132819963.html

  53. Submitted by Peder DeFor on 10/31/2011 - 08:55 am.

    Paul, that Strib article is beyond ridiculous. If you set up a model with randomized outcomes you come back with randomized outcomes. Garbage in, garbage out.
    I’ve personally known two different millionaires (at least). One of them had the most agile mind I’d ever met. He was able to find opportunities that no one else had thought of and develop them. When I knew him he was running about four telecommunication firms in SE Minnesota. There may have been luck in his past but he truly was different then average and had made his own path.
    The other guy owned a restaurant, bar and hotel. He worked about 80 hours a week, no exaggeration. He helped prepare every major meal and all of the events at the hotel. IIRC, he had worked himself up to this point as a cook. Again, it wasn’t luck that got him there. It was a huge work ethic.
    Look around at other success stories and you’ll find the same things. People that work hard, find new approaches and take risks. People that learn from failures and mistakes and rebuild better. This route to mega-success is still there. To write it off as simple ‘good luck’ is obscene.

  54. Submitted by Paul Brandon on 11/01/2011 - 07:13 pm.

    Peder–
    The plural of anecdote is still not data.

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