CNN: 5 reasons GOP will rebound

[Darth Wong]

1980 ---> top 1% earned 7.8% of all income. They paid 19% of all income taxes.
2005 ---> top 1% earned 14.9%, almost twice as much. They paid ~40% of all income taxes, twice as much as in 1980.

Why don't you try looking at the percentage of the nation's wealth held by the richest people?

http://sociology.ucsc.edu/whorulesameri ... ealth.html

In terms of types of financial wealth, the top one percent of households have 36.7% of all privately held stock, 63.8% of financial securities, and 61.9% of business equity. The top 10% have 85% to 90% of stock, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

I would hope that their taxes are proportional to this fact.

[Ziggy Stardust]

1980 ---> top 1% earned 7.8% of all income. They paid 19% of all income taxes.
2005 ---> top 1% earned 14.9%, almost twice as much. They paid ~40% of all income taxes, twice as much as in 1980.

In 2006, 23% of the national income went to the top 1%, the highest concentration since 1928, and the second-highest in the history of the federal income tax. I don't know where you got that 40% figure, as the Congressional Budget Office's report that came out this past April puts the figure at 28.3%, compared with 0.8% and 9.1% for the bottom and middle quintiles of the income distribution, respectively.

The 1980 top taxation rate was 70%.
The 2005 top taxation rate was 35%.

In 1980, the top marginal income tax rate was 70% for "unearned income," and 50% on "earned income," both for figures over over $215,400 (according to a 2003 IRS report). The current top marginal income tax rate is 35% for income over $311,950; however, for the super rich (the top 0.01% of the country), more than half of their income is through capital gains, such as the sale of stock, bonds, and other assets, on which the federal tax rate is only 15%. As Peter Orszag testified to the Ways and Means committee, “creates opportunities for tax avoidance and complicates the tax system.”

So, looking at the numbers again, the top 1% of income earners paid the same proportion of income tax collected in 1980 and 2005, despite the wild variance in tax rates. How does this prove that a higher income tax rate will increase federal income tax revenues? You didn't argue for it, but Darth Wong and Pablo Sanchez have both opined that raising taxes is necessary to pay off the federal debt. Pablo also thinks that the tax increases will have to extend farther down the charts to raise the money needed. I'm not convinced that argument will boost federal revenues either. Page 6 of the Internal Revenue Service's "Special Studies in Federal Tax Statistics, 2006" charts the % of income tax paid by each bracket. The top 10% of income earners in 1980 paid ~31% of all income tax collected. In 2004, the last year for data in the report, the top 10% paid...wait for it...about 32.5%!

Three referenced sources on the percent of income taxes collected by the top 1% and 10% in 1980 and 2004-5 show little to no difference, despite the higher 1980 tax rates. By the numbers, raising income tax rates will not increase federal revenues. Proposing it as a solution is simple-minded thinking and ignores the underlying issue, which has not been denied by anyone posting yet, that the US government is spending money at an unsustainable rate.

I'll try to tie this in a little better to the OP, and answer Pablo on the big ticket items, tomorrow.

Where the hell are you drawing your conclusions from? The richest 1% of the country have been the ONLY income group to see a net decrease in their tax burden since 2005. And, in fact, the tax burden for the richest quintile has remained between 25 and 28% since 1979, even though the average income for that quintile has increased by 86% during the same time period (vs. the national average of 50%). The average income for the richest 1% has more than tripled since 1979. The average income for the richest 0.1% and 0.01% has increased by more than 294% and 384%, respectively, since 1979. Meanwhile, the tax burden has DECREASED for the upper ranges of the income distribution. The total income for the top 0.01% is higher than that for the poorest 20%, and the top 1% get more than the bottom 40%.

Of course increasing the income tax rate will bring in more revenue. The total tax rate as a share of comprehensive income is 14% for the bottom 10% of the country, and increases to 28% when you reach the top 20%. However, the figure is only 22% for the top 10%. That is a regressive, not progressive tax structure. The super-rich are paying less of their average income than they were in 1979, and due to the low capital gains tax rate are getting away with paying even less. I don't know how the fuck you came to the conclusion that increasing the tax rate will not increase revenue.

[Darth Wong]

The reduction in capital-gains tax is especially irksome; it heavily benefits Wall Street and investors: in fact, it particularly benefits that particular class of investors which likes to do a lot of "churning", ie- frequently moving large sums of money from one asset to another in an attempt to make fast profits. Of course, these also happen to be exactly the sort of people who royally fucked over the entire goddamned economy.

[Ziggy Stardust]

The reduction in capital-gains tax is especially irksome; it heavily benefits Wall Street and investors: in fact, it particularly benefits that particular class of investors which likes to do a lot of "churning", ie- frequently moving large sums of money from one asset to another in an attempt to make fast profits. Of course, these also happen to be exactly the sort of people who royally fucked over the entire goddamned economy.

Not only that, but each of the president's with the lowest taxes on capital (Hoover, Reagan, and Bush) managed to fuck up the economy in their own right. Growth has historically been lowest in periods of time with low capital gains tax (the type of people who benefit from the low taxes don't give a flying fuck about the country, and will gladly line their own pockets at the expense of everyone else).

[The Yosemite Bear]

lets not forget the 300% intrest on credit cards and pay day loans. <oh wait, 300% is the reduction that's the maximum they can charge under the democrats, the GOP doesn't want them stifiled in the least.)

[Count Chocula]

Finally got some time to come back to this. I'm still mulling Pablo's question to me, but I will briefly address something Mike said:

The reduction in capital-gains tax is especially irksome; it heavily benefits Wall Street and investors: in fact, it particularly benefits that particular class of investors which likes to do a lot of "churning", ie- frequently moving large sums of money from one asset to another in an attempt to make fast profits. Of course, these also happen to be exactly the sort of people who royally fucked over the entire goddamned economy.

Investors who churn stocks, day traders, institutional traders, hedge funds and the like, pay ordinary income tax on assets held less than a year. Here's a table of 2008 rates, from here:

Short-term capital gains (STCG) One year or less Ordinary income tax rates up to 35%
Long-term capital gains (LTCG) More than one year 5% for taxpayers in the 10% and 15% tax brackets (zero percent starting in 2008)
15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets

According to this 1988 CBO report, page 35, from 1978-1981 the long term cap gains tax was 28%. The 1981 lowering of income tax rates effectively reduced the long term gains rate to 20%; I didn't find any short term cap gains rates, so I'm assuming (yes yes I know) it was taxed as ordinary income as well, which would have been higher for the top brackets in 1978-80. So a brief look at the long term rates may lead one to say, "well hell let's just raise the capital gains tax rates. That'll get more from those who can afford it!" There's one big fly in that ointment, however: the Baby Boomers.

The post-WWII generation is either retiring now, or will be retiring by the millions in just a few years. As Adrian Laguna notes, the oldsters "vote very consistently" and the Boomers are entering that cohort. And unlike in the late Seventies when less than 20% of the population owned stocks, over 50% of Americans now own stocks or mutual funds. If either party proposed an increase in the tax on capital gains, they'd directly and detrimentally affect millions of soon-to-be retirees, who have already been hammered by the market crash but, if they've been investing for 20-30 years still have long term capital gains. If either party proposed this and made it happen, they'd get the enmity of millions of people who will vote.

[Ziggy Stardust]

According to this 1988 CBO report, page 35, from 1978-1981 the long term cap gains tax was 28%. The 1981 lowering of income tax rates effectively reduced the long term gains rate to 20%; I didn't find any short term cap gains rates, so I'm assuming (yes yes I know) it was taxed as ordinary income as well, which would have been higher for the top brackets in 1978-80. So a brief look at the long term rates may lead one to say, "well hell let's just raise the capital gains tax rates. That'll get more from those who can afford it!"

From here:

"In November 1978, the top rate for capital gains was cut from 39 to 28 percent. In the prior 12 months, the economy had grown 5.8 percent; in the next year and a half, it fell one percentage point.

In August 1981, the top rate was again cut, this time from 28 to 20 percent. In the prior 12 months, the economy had grown by 3.5 percent; in the following 12 months, it fell by 2.8 percent. Of course, these tax cuts may have suffered from accidentally bad timing in the business cycle, but many conservatives reject business cycle theory, claiming that tax cuts are more responsible for economic performance. In that case, they have a major refutation to explain.

By contrast, capital gains were raised in 1976, and economic growth jumped up from 3.6 percent in the previous two years to 5.2 percent in the next two years. Capital gains were again raised in 1986, from 20 to 28 percent, and economic growth rose from 2.2% in the previous year to 3.8% over the next two years.

The effect of capital gains tax changes on unemployment is even more striking. The unemployment rate rose sharply after both the 1978 and 1981 capital gains tax cuts. By contrast, the jobless rate fell significantly after the 1976 and 1986 capital gains tax hikes were passed.

Taxes on capital gains were significantly lower in the 80s than in the 70s, but savings and investment did not rise, as conservatives had advertised. In fact, they fell:

Disposable personal savings (4)

1980 7.9%
1984 8.0
1985 6.4
1986 6.0
1987 4.3
1988 4.4
1989 4.0
1990 4.2

National Savings, public plus private (5)

1970 - 1979 7.7%
1988 - 1990 3.0

Private investment (5)

1970 - 1979 18.6%
1980 - 1992 17.4"

(Note: I apologize for the copy-paste, but I am in a hurry and don't have time to paraphrase)

There is more info about the specifics of capital gains here.

[Darth Wong]

<snip>

Sorry, I don't know that much about the US tax code, so I'll concede the one about stock churners. Nevertheless, the point remains that reductions in capital-gains taxes are meant to benefit investors, and do not help anyone else.

So a brief look at the long term rates may lead one to say, "well hell let's just raise the capital gains tax rates. That'll get more from those who can afford it!" There's one big fly in that ointment, however: the Baby Boomers.

They're the ones who have driven the country deep into a debt that they know we'll be paying off long after they're dead. Why the fuck should people continue to mortgage their own asses to make their lives easier?

The post-WWII generation is either retiring now, or will be retiring by the millions in just a few years. As Adrian Laguna notes, the oldsters "vote very consistently" and the Boomers are entering that cohort. And unlike in the late Seventies when less than 20% of the population owned stocks, over 50% of Americans now own stocks or mutual funds. If either party proposed an increase in the tax on capital gains, they'd directly and detrimentally affect millions of soon-to-be retirees, who have already been hammered by the market crash but, if they've been investing for 20-30 years still have long term capital gains. If either party proposed this and made it happen, they'd get the enmity of millions of people who will vote.

I agree about the great power of the Boomers. But the least we can do is publicly show them up for the selfish bastards that they are. The angle that our national debt and tax policies are intended to benefit that generation at the expense of its own children and grandchildren is simply not reported in the news.