Semi-Daily Journal

Reason 1,567,234 I wish we had an intelligent press corp:

"Mr. President, given the country's falling aggregate demand and rising unemployment, could you please explain why you believe giving away borrowed money to the richest 400 citizens will increase prosperity for all?"

Reason 1,567,234 I wish we had an intelligent press corp:

"Mr. President, given the country's falling aggregate demand and rising unemployment, could you please explain why you believe giving away borrowed money to the richest 400 citizens will increase prosperity for all?"

Top 400 get the money, buy stock. Stock market goes up. People are reassured, start spending again. Happy days are here again...

OK, maybe not.

There is a serious problem in the IRS release Irons is discussing.

( http://www.irs.gov/pub/irs-soi/00in400h.pdf )

The release says:

"Less than 25 percent of taxpayers appear more than once in the top 400 returns over the last 9 years."

That seems to me to be a very bad measure of how fast a group of taxpayers is changing.

Consider the following groups of taxpayers (designated by letters):

Year 1: ABCDEFGH
Year 2: ABCDEFIJ
Year 3: ABCDEFKL
Year 4: ABCDEFMN
Year 5: ABCDEFOP
Year 6: ABCDEFQR
Year 7: ABCDEFST

One could correctly say of this group:

"Just 30 percent of taxpayers appear more than once in the selected group over the last 7 years."

That suggests that there is rapid turnover in the group. But in fact we see that 75% of the taxpayers in the group are the same every year.

I could be misreading the release, so if anyone could help me understand it better, I'd be grateful.

Remember those households earning less than $27,000 that were not given a tax break in the new law? Well, they are still not getting a tax break. Guess what? They also pay taxes, but they are not rich enough not to need a tax cut and so the perfect subjects for a tax cut.

Two reasons why you might want to think twice about using this information to hammer President Bush.

1) the data cover 1992-2000
2) since then, there probably has been a decrease in the share of income of the rich coming from capital gains, which probably means that their tax rates have shot up.

Look, I'm all for giving Bush fair criticism for his policies. But blaming him for the distributional impact of the stock market bubble seems to be a bit of a stretch, don't you think?

Blame the radical-right-pseudo-compassionate-Republicans for doing all that is possible to further enrich the rich at the expense of the middle class. The idea that the rich have had a decrease in share of income coming from capital gains since 2000 is absurd. Since I have been investing for many years, I have all sorts of capital gains to realize and the bear market made scarcely dent.

I don't really care what happens to the tax rates of these Top 400 earners but:

a) the redistributionists seem to think that you can point to statistics such as this as an excuse for hammering the far larger and far less weathly upper middle and, in many metro areas, middle class taxpayers with higher taxes. That is like Reagan's "welfare queen" argument, but in reverse.

b) the complexity of the tax code is tailor made for the top earners, with their expert tax advisers and lobbying efforts, to reduce their tax burden. Flat tax anyone?

We already have a flat or even slightly regressive tax system. Do the math. Good grief.

But more when envy breeds unkind division:
There comes the ruin, there begins confusion.

Henry VI, Part 1

Whenever a friend succeeds, a little something in me dies. - Gore Vidal

The problem is this:

Federal taxes are derived from three main sources: income tax, capital gains tax and payroll tax.

(1) The income tax is a progressive tax, in the sense that your percentage burden increases as your income grows. You don't pay income tax until you reach a certain amount (I think it is ~7000 per individual)

(2) The payroll tax is a 15% regressive tax. You are taxed 15% of your earnings up to something like $85,000. Beyond that you are not taxed. This means the burden is harder on the poor and middle class. For instance, a person earning $85,000 would pay $12,750 each year in payroll tax, or 15% - while someone earning $170,000 would also pay $12,750 each year - or 7.5%.

(3) Capital gains tax applies to those who sold stocks at a profit. In the 90s, revenue from this tax shot up because of the market boom.

So the problem is that, because of income tax and payroll tax, the burden on the poor and middle class is actually, percentage-wise, often larger than the very rich.

A flat tax a la Steve Forbes would make this even worse since many of the "legacy rich" get their wealth from families, and so they pay no income tax on that either. And now they pay no estate tax.

In other words, why should a working stiff be the one on whom the entire tax burden falls, while a guy like Steve Forbes pays nothing and does nothing?

----

If I were king for a day, I would make the payroll tax progressive, exempt the first $20,000 (indexed for inflation, as it currently is) and remove the cap.

I would also means-test social security benefits, which they currently are not.

------

I know many would disagree with this, but why should I be the one who shoulders the burden of funding the government because I have to work for a living and did not have the good fortune of being born into the Forbes family?

The Wall Street Journal editorial page calls low-income earners (the working poor) "lucky duckies". Between the lucky duckies and the welfare queens one wonders why they aren't in line to become poor if they assure everyone it is such a good deal!

As a previous poster quoting Warren Buffet said "This is class warfare, and my class is winning."

This story actually underestimates the extent of the growing income gap. The figures are for adjusted income - after deductions, shelters, etc. So it doesn't even count income that is hidden, untaxable, sheltered, and soon inherited.

"Look, I'm all for giving Bush fair criticism for his policies. But blaming him for the distributional impact of the stock market bubble seems to be a bit of a stretch, don't you think? "

The Clinton-years stock market bubble at that.

However, as the top of the income and wealth distribution tumbles in data released over the next three years, no doubt Democrats will give Bush full credit for the steadily improving distribution picture. ;-)

"Consider the following groups of taxpayers (designated by letters):

Year 1: ABCDEFGH
Year 2: ABCDEFIJ
Year 3: ABCDEFKL
Year 4: ABCDEFMN
Year 5: ABCDEFOP
Year 6: ABCDEFQR
Year 7: ABCDEFST

One could correctly say of this group:

'Just 30 percent of taxpayers appear more than once in the selected group over the last 7 years.'"

Beg pardon??? I look at that distribution, and say:

"Exactly 75 percent appear more than once in the selected group over the last 7 years."

"The group" is the top 400 returns. You have 6 out of 8 (A to F), or 75 percent, appearing more than once in the group.

"As a previous poster quoting Warren Buffet said 'This is class warfare, and my class is winning.'"

Then one wonders how such an idiot as Warren Buffet ever got rich. There's a simple step for him to join the "losing" class...give all his money away to charity.

Just ask yourself, Warren, "What would Jesus do?"

Yup, Jim Glass, the Clenis (Clinton penis) caused all those people that hated his guts to get stunningly, obscenely, wealthy.

Poor little babies. I'll wait til I'm laid off in September to cry for them.

Also, what would possibly make you think that the top income groups in this Plutocracy are going to see their worth decline? Hell, they don't have to pay taxes anymore.

As for you, Mark Bahner, having a conscience doesn't make Warren Buffet "an idiot". Maybe he just doesn't worship greed.

Didn't Jesus say something about a rich man, a camel, and the eye of a needle...

Oops. Sorry akali, about about my post of a few minutes ago. I'm not sure what you're trying to point out, but it wasn't what I first thought.

Mark Bahner writes:

>I look at that distribution, and say:
>
>"Exactly 75 percent appear more than once in the
>selected group over the last 7 years."
>
>"The group" is the top 400 returns. You have 6
>out of 8 (A to F), or 75 percent, appearing more
>than once in the group.

I would think so, but the IRS release seems to suggest it counted taxpayers, not returns as you did. Accordingly, I might say:

"75% of returns were submitted by taxpayers who were within the group more than once in the nine year period."

(Obviously, that doesn't capture the fact that there was absolutely no turnover in that 75% group in my example. I'm not sure what the best way is to summarize this data; maybe the best thing would be to give the raw data:

Number of taxpayers who appeared 7 times: 6.
Number of taxpayers who appeared 1 time: 14.)

"I'm not sure what you're trying to point out, but it wasn't what I first thought."

The point was that although there are 20 individuals on his list (2*7 + 6), only 6 (i.e 30%) appear more than once - which is a slightly misleading way of putting things, given that these 6 appear 7 times each ...

In other words, the summary statistic at issue isn't as informative as it might appear at first blush. I don't know that any other single number would be much more informative, but you're welcome to prove me wrong.

God, I love it when conservatives call Warren Buffet an idiot.

OK, so I'm not sure I know enough about what kind of person would appear in the top 400 returns, and exactly what the income cut-off would be. My guess is, particularly in the time period noted, that many people who appear in this group are executives who had those astonishing incomes in the year(s) they exercised their stock options.
Does this sound right? If so, it would explain why that group might not often repeat.

God, I love it when conservatives call Warren Buffet an idiot. He's probably an evil Commie, too.

Stalinist, no doubt.

And since the server is so slow, or whatever, let me add that Buffet reminds me of Pol Pot.

Think I'll buy some more Berkshire Hathaway.

"... what would possibly make you think that the top income groups in this Plutocracy are going to see their worth decline?"

Oh, I dunno, a few trillion dollars off the value of the stock market during its 50% decline?

"Hell, they don't have to pay taxes anymore."

Then they'll have no way to deduct their losses!

Bush's stock market is restoring egalitarianism to America. As the top of the wealth distribution heads down in the data released over the next three years, remedying the bubble excesses of the Clinton era, y'all just be sure to give him credit for it. ;-)

Jim, the stock market is wiping out a lot of wealth, but my guess is that most of the losses are being incurred by middle and upper-middle class investor retirement funds. If so, the stock market is further exacerbating the growing wealth disparity situation. Bush probably can't even win on this one ;).

The part about wiping out wealth should have been in past tense.

"The stock market is wiping out a lot of wealth, but my guess is that most of the losses are being incurred by middle and upper-middle class investor retirement funds."

Wealthy investors who had long term stock holdings and a diversified asset mix had made huge gains from 1974 to 2000. They also had no need to sell stocks during the bear market. Of course, there were huge losses for some of great wealth, but the losses should have been insignificant given long term holding and asset diversification.

Having just read the latest edition of the Economist, I'm not so sure that this data makes the point John Irons thinks it's making.

It seems to me that the focus shouldn't be so much on the tax structure, as on poor corporate governance. Over the last decade, CEOs have been able to get away with awarding themselves ridiculous salaries at shareholders' expense.

http://www.economist.com/printedition/displayStory.cfm?story_id=1857649

Irons leads with:

"Data from the IRS shows that the average income of the 400 wealthiest US taxpayers was $173.9 million in 2000. On average they paid 22.4% of their income in taxes."

Uhm, I didn't realize the IRS tracked "wealth". So if one of the Walton or Ford heirs ekes out an existance living in the family palace and drawing a modest million a year in salary from the family charitable foundation, (plus travel, clothing, transportation, entertainment, and miscellaneous expense accounts...) that might really bring down the average for the working wealthy like Bill Gates, huh?

All this talk about the rich getting richer ang getting an "unfair" break on account of the Bush tax cut misses one simple point: The rich actually pay more than their share of income in taxes...I believe it is something like 18% of the total tax being paid by the top 1% of income earners. Thus, in any progressive tax system (yes, the US still has a progressive tax system), any tax break will appear to favor the rich !! Krugman and his ilk conveniently ignore this fact when they write their op-ed pieces in the NY Times