Krugman: Taxing the Rich - not surprisingly - reduces inequality

[pampango]

First, over the past three decades we’ve seen a soaring share of income going to the very top of the income distribution (right scale) even as tax rates on high incomes have fallen sharply, with the recent Obama increases clawing back only a fraction of the previous cuts:



Second, there is now a lot of hard empirical work on the incentive effects of high top tax rates. None of it shows the kind of huge negative effects that figure so prominently in right-wing rhetoric. In particular, none of it suggests that we are anywhere close to the point where raising taxes on the rich would reduce revenue as opposed to increasing it.

Finally, you can use the results of these studies to estimate the “optimal” tax rate on top incomes; I think the best way to think about what optimality means is, what’s best for the 99 percent, since the 1 percent will be doing fine regardless. And just about everything points to substantially higher tax rates than we now have.

This has nothing to do with envy, or a desire to punish the rich, or anything other than a recognition of tradeoffs: if we choose to raise less revenue from the rich than we can without hurting the economy, we will be forced either to raise more taxes from or provide fewer valuable services to everyone else.

http://krugman.blogs.nytimes.com/2013/05/28/taxing-the-rich/

[HiPointDem]

1. kr

[hfojvt]

2. that's an odd way to say it

"with the recent Obama increases clawing back only a fraction of the previous cuts:"

I would say that since the Obama "increases" actually made the "previous cuts" PERMANENT. That a better way to say it would be

"With even Obama, most Democrats, and Paul Krugman supporting the recent permanent tax cuts which were passed for the rich."

And inequality, in spite of Krugman's OWS rhetoric, is not all about the 1% and the 99%

http://www.democraticunderground.com/10021824827

The 5% will be doing fine regardless as well.

And the 20% generally does better than the lower 80%.

[dreamnightwind]

3. You make some good points, but

none of that invalidates what Krugman is saying in this blog post, correct?

Personally I welcome Krugman's support of higher taxes on the rich. He's a major voice that plenty of "people that matter" listen to, so good for him. I wonder what he sees as the optimal top tax rate?

[hfojvt]

5. yeah it is about time

I just note that he is a little bit late to the party, and he is kinda contradicting himself here

When he previously claimed that ATRA was reducing inequality (by creating permanent tax cuts for the rich?)

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=2225110

Also, that when we look at inequality, we need to look beyond "the 1%"

In 2008, for example, the top 0.1% had 10% of the income, the 0.9% had another 10% and the next 4% had 14.7% and the next 5% had 11%. Collectively, the 9% has more money than the 1%.

[dreamnightwind]

6. There should be multiple tiers

The top tax rate should be raised as Krugman advocates, then more tiers at descending rates should exist below that, to address your point about the 1% not being the whole problem. I suspect Krugman would also support that, just a guess though.

Thanks for the link you provided, I checked it out and obviously you are correct. The Bush tax cuts literally expired, then the fiscal cliff deal cut the rates, not as much as the Bush tax cuts but still it was a cut. Krugman didn't frame that correctly at all.

This blog post, though, is a rallying cry for the under-represented view that we are nowhere near a top rate that would detrimentally effect the economy, and should determine the optimal top rate with respect to the maximum benefit for the other 99%. That point of view probably has little to no support from anyone that "matters", so better to amplify it than to undercut it, IMHO.

[hfojvt]

7. I might note how little support the idea is getting here

and in my opinion, the idea of higher tax brackets gets undercut more when people like Obama embrace and promote tax cuts for the rich, instead of fighting them, and when people like Krugman carry water for Obama.

I have long been on board for higher tax brackets at the top.
http://journals.democraticunderground.com/hfojvt/129

[dreamnightwind]

8. Yeah, I hear you.

Agree on all counts. Keep preachin' it.

[pampango]

9. Thanks for your support for a return to a more progressive tax system that would do much

to lower the inequality in our society.

[dreamnightwind]

15. And thank you - eom

[dreamnightwind]

4. K & R - eom

[ProSense]

10. And that

doesn't include the additional tax increase from the health care law.

Obama and Redistribution

Some notes for myself: how much impact have Obama’s policies actually had on current and prospective inequality?

The main policies to consider are PPACA (the health reform) and ATRA (the fiscal cliff deal with its associated tax rise).

I’m not a fan of the Tax Foundation’s work, but their analysis of the distributional effects of Obamacare looks about right: significant benefits to the bottom half of the income distribution, paid for largely by taxes on the top few percent (the Medicare surcharge and the extra tax on investment income). The Tax Policy Center — whose work I do trust — has the Act reducing the after-tax income of the top 1 percent by 1.8 percent, the top 0.1 percent by 2.5 percent.

Meanwhile, ATRA raises taxes relative to a continuation of the Bush high-end tax cuts: after-tax income down 4.5 percent for the 1-percenters, 6.2 percent for the top 0.1 percent.

Putting this together, we have a roughly 6 percent hit to the 1 percent, around 9 to the superelite. That’s only a partial rollback of these groups’ huge gains since 1980, but it’s not trivial.

http://krugman.blogs.nytimes.com/2013/01/20/obama-and-redistribution/

Employers already take out 7.65 percent of workers’ wages to support the elderly and disabled. Of that, 1.45 percent goes toward paying Medicare’s hospital bills. Obamacare increases the Medicare hospital tax by 0.9 percent, beginning in 2013, for anyone who earns more than $200,000 ($250,000 for joint filers). It also creates a new, 3.8 percent tax on investment income, setting income thresholds at the same $200,000 and $250,000 levels mentioned above. Taken together, those two provisions are expected to generate $210.2 billion over the next decade.

http://www.democraticunderground.com/10022078875

President Obama has done more to help the poor and middle class than any President since LBJ
http://www.democraticunderground.com/10022660715

[pampango]

11. Every bit of redistribution helps.:)

[hfojvt]

12. and every bit of dishonesty and negative redistribution hurts

this "Meanwhile, ATRA raises taxes relative to a continuation of the Bush high-end tax cuts: after-tax income down 4.5 percent for the 1-percenters, 6.2 percent for the top 0.1 percent."

is just crap. The truth reads like this.

Meanwhile, ATRA LOWERS taxes relative to the AUTOMATIC EXPIRATION of the Bush high-end tax cuts: after-tax income UP 2.3% for the 1-percenters, and UP 3.2% for the 4 percenters.

Redistribution to the top that is spun like it is redistribution away from the top does not do anything to reduce inequality, even if it does allow us to pretend like we won when we lost.

[eShirl]

13. He has to repeat it slowly and often before enough people understand.

[Takket]

14. offer

My offer still stands... if someone with a million dollar + income is too outraged by paying higher taxes, they can switch salaries with me. I am a drgreed mechanical engineer, but if i took on a million dollar salary taxed at 90% I would STILL come out ahead of where i am now in takehome pay after taxes.

So, yes, i am willing to make the sacrifice to spare the rich paying high taxes!!!