Here is a graph made with data from this study:
Graph found on the site of The Center on Budget and Policy Priorities "Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
you are the media you consume.
Those people are not "workers" whose productivity wrt to society welfare is very clear, with the possible exception of entertainers. They are not "producing". Un roi sans divertissement est un homme plein de misères
actually it would be all of the people that have risen to the top in business--the CEO, all of his direct reports which would include staff jobs such as CFO's, all of the division presidents, all of their direct reports such as VP of sales, division controllers, VP manufacturing, the top 20% of the sales force, etc, etc. It would also reach all of those who in their mid '30's had identified themselves as performers and leaders for the future. In other words, it would be the leaders and those reaching peak performance in their careers. It would demotivate those in an economy that have reached their peak performance years. It would cut out the engine of a high performing economy.
Those people - CEO's, wealthy capital owners, essentially set their salary. The market doesn't work for setting the salary of the fortune 500.
Workers are the engine of a working economy. Those are essentially decision maker - who got where they are either by inheritance, or by ability to move around in a hierarchy, not by better productivity. The top ring in any administration are filled by those that can navigate in the politics of an administration, not by the productive people. Un roi sans divertissement est un homme plein de misères
but that's fine. we don't need to agree.
Second, and maybe this could be addressed, but the top 1% includes people that though they have salaries, a hefty percentage of their annual compensation is bonus or income from stock options. So the year to year income variation can be substantial. So the following type of situation happens, and in fact people hope for it--a CEO of a smaller company makes annual cash compensation averaging $750,000 per year. So some years he may make $500,000, other years $1,200,000. This would be someone with a lot of business experience--at least 25 years, worked there way up, outperformed their peers, and often have graduate level degrees. The payout he/she is hoping for is that the company wil grow rapidly, and the stock options end up being worth a whole lot of money. I know of a situation (actually more than one) where this was happening, the growth that is, and then unexpectedly another larger company bought this company. The price was excellent, and the CEO made $30 million, almost all of it being in stock options. If that company is in a high state tax state, the tax rate on that $30 million,,,,depending on what year it occurred over the past 15 years, be 46--51%. So with the current tax code, he/she gets about half of the payout. This is likely the big payout for such a person (maybe not--they may go run another company, or do something else), but basically they have worked hard all their life and are cashing in on the American dream. They would easily be in your 1% that particular year--I'd have to check the income levels, but they are likely in the top 1% in other years as well. Remembering that this is the type of story that American dreams are based on--people work their lives for a shot at this. How would you tax this individual?
Third, if your objective is to raise taxes on the rich, why not use a wealth tax? Why penalize the people working their tails off for these rewards. Why not tax those that have all of the money? and do it directly? I'm not concerned about taking the wealthy, personally, but I'm very concerned about distorting the incentives for performance and results.
I think I had another point, but i forgot and may come back to it.
Secondly, I'd believe that incentives aren't that different when the payout - 15million or 10million out of 30million that are more or less taxed. This form of payout is like winning the lottery - people don't really look at the actual payout, the only important thing being that it is "really high". The incentive won't be that different for that businessman - he wasn't anyway hoping for a specific sum.
The incentive for earning that much money will either be rid of work for the rest of one's life - and 10 million bucks are enough for that -, social status - if it is measured by money earned, since everybody is paying the same taxes and social status is relative, it won't matter much -, or power through having lots of money - as a democrat (not the political party, but the idea that everybody should have an equal say in the direction society takes) that kind of uneven power distribution is inherently bad.
About wealth tax - I want it too :) But the problems of extreme wealth appear as soon as it is formed ; in a political system where money and lobbying exist, wealth once formed is able to distort policies to preserve itself. Un roi sans divertissement est un homme plein de misères
Then what is your tax rate on the top .01%?
It's hard to react to your proposals without an understanding of what you mean at the top levels. Thank you.
Maybe this is a great time for France, or other European countries, who have more socialisti views than the US, to set an example for the rest of the world, and return to those marginal rates of 70% or above. If these higher marginal tax rates spur economic growth, pragmatists such as myself will immediately jump on board, and raise marginal taxes in our countries. With the French elections upon us, it should be a great time to put that idea before the people; and the following years will clearly show the results of those policies.
I love it when one country can learn from another, and can only encourage you in France to lead the way on this economic experiment. <seriously, no snark> it is a great opportunity to prove the philosophy, is it not?
If these higher marginal tax rates spur economic growth, pragmatists such as myself will immediately jump on board, and raise marginal taxes in our countries.
wc, you know perfectly well that "spurring economic growth" as sole criterion of choice of policy is one of the things most of us here reject. The point of progressive taxation is not to spur economic growth but to reduce inequality and increase social cohesiveness.
but I think it would be horrible to not dedicate ourselves to improving the lot of mankind worldwide. and historically that has not happened without growth, and I don't think it will in future. I view dedicating oneself to no growth, which I know is literally the goal of what a thought were a few (no pun intended) on the site, will condemn many in the world to a perpetual life of poverty and misery.
Can you point to a period in history where economic growth has been zero, and people have come out of poverty around the world?
More to the point, in the last two decades the more recent points of growth have been achieved without increase in welfare for most, in the industrialized world. The way our society is set up, growth only goes to the pockets of a small class. If we want to increase the general welfare of the population, growth in our current system has shown to be unproductive. Un roi sans divertissement est un homme plein de misères
I doubt you would get anything close to a majority to go back to the old days.
A majority of whom? The top one hundredth of the top percentile? We all readily understand they wouldn't want to go back... But how do they represent a majority in a democracy?
out of curiosity, since it has been stated in these discussions over the past month or so that the top French marginal tax rate is 40%, and the current American rate is perhaps already higher, why is everyone so hot about raising the american marginal tax rate?
in the US case, a majority of the vote of the elected representatives.
Perhaps politicians are in hock to money everywhere, but nowhere more than in the States, where you can hardly get elected to anything unless you have a private fortune or a fortune to back you.
When you talk about a majority, let's be clear that it's first and foremost a majority among those who are the wealthiest in the nation (and of those who owe their political position to them), in other words those who have a clear interest in the matter.
As for being hot to raise the marginal rate, whether in France or the US, I think mostly people are not convinced by your view of the essential dynamic role played in the economy by a tiny minority of the extremely wealthy. We've heard this before, we hear it all the time, and we're just not looking at things from the same side of the board.
mostly people are not convinced by your view of the essential dynamic role played in the economy by a tiny minority of the extremely wealthy
Maybe to back this point up a little more, if the objective was to make the wealthy pay more tax, I would support a wealth tax. (and of course I already support the reimposition of the so-called death tax.) imho, passing down billion dollar fortunes like the Kennedy's, the Rockefellers, the Forbes,,,is not really consistent with the principles of the US. So with the addition of a wealth tax to get the extra tax dollars, a tax that is even more targeted at the wealth group you think should be paying more taxes, and doesn't have the economic disincentives of high marginal tax rates--doesn't this put us on the same side on this one?
and PS: the top 1000--5000 have a wannabe group below them. and their hopes are not going to be helped by 60--80% marginal tax rates. Nor are all of the entrepreneurs that are starting new companies, and the people they recruit to their managment teams.
You (naïvely?) continue to present a starry-eyed vision of the American way that the rest of us don't see. There's a fundamental myth of the rugged, hard-working individual fighting his way upwards here, combined with the rationalisation that this leads (like the invisible hand of the market) to maximum utility for all, that has a powerful hold on people's imaginations, but doesn't actually produce the goods (ie maximum utility for all). In fact it produces a harshly competitive society with considerable and widening inequality. But then, we'd be back into a debate on inequality, poverty, social mobility, in which neither of us is going to modify their position, isn't that true?
I don't see the problem for the economy of a progressive income tax combining a granular structure - a larger number of income brackets and rates rather than the flattening trend we've seen for a couple of decades - and a higher marginal rate than 40%.
Taxation is a lot less progressive than it is often made out to be due to the lower rates for capital gains and the cap on payroll taxes. Your typical middle class couple is going to be paying a much larger effective top federal marginal rate than the wealthy investor. Compare the 28% income tax rate, plus 15.3% FICA - 43.3% to the 20% capital gains rate or 15% dividend rate. I'll agree with Warren Buffet - there's something seriously wrong when he's paying a much lower rate than his secretary.
