9 Things The Rich Don't Want You To Know About Taxes

Hat tip to The Left Coaster for this economic analysis that Oly Mike credits to Critter's Crap.

Economics 101 by Oly Mike.

Critter's Crap breaks down economics for us. It's really quite clear.

Over a long period of time, the numbers show that the economy grows at a rate of 2.1%. We can and should have a discussion about steady state economics in light of resource depletion, but for the purpose of evaluating economic activity, income and wealth growth and distribution, Critter's work is on the money (so to speak).

Here's Critter's Crap:

 

What 30 Years of Reaganomics Has Done For You

Then along came Reagan.  He essentially said, taxes are too high.  It is stifling the economy and stealing money away from those who create jobs and wealth.  We need to cut taxes and shrink government.  Get it out of peoples' way.

Well, we already know what happened to the economy when he did that.  It kept plodding along with about a 2.1% annual growth.  At least he didn't hurt it, but he didn't help it much either.  Over the next 28 years, 1980 to 2008, the GDP roughly doubled again...but what happened to incomes?  Well, let's take a look.  The next figure adds the time period 1980 to 2008 to the figure above.

 (more after the jump, I think)

Critter's Crap has an excellent analysis for your average lay person. For economic policy wonks, Critter's Crap credits The Angry Bear with original charts and an economic analysis piece The Angry Bear posted last year and credits to Scott Sumner II.

Last, but not least, here is a David Cay Johnston post that as far as I can tell, includes all of the above and then some:

9 Things The Rich Don't Want You To Know About Taxes

This relatively simple analysis of one tiny part of the economic picture goes a long way towards explaining why the average voter's opinion of economic issues really should not carry much weight. It also explains why the simple economic cant of the right wing noise machine is so effective. Just repeat and repeat and repeat "Deficits bad, tax breaks for billionaires good!" 

 

Tags: Taxes, economics, Budget Deficits (all tags)

Comments

4 Comments

Correct Angry Bear link

Sorry about that. Here's the actual article link:

Financial And Economic Analysis

by nanobot 2011-05-17 06:08PM | 0 recs
Evolution Disproved By Peanut Butter

Quite logically from a blog called Applesauce.  (has nothing to do with the diary, but quite amusing)

by nanobot 2011-05-17 06:34PM | 0 recs
Couple quick points

1)  The poor not paying tax is a massive massive massive problem.

If you ever reach a point that the voting majority isn't paying taxes your civilization dies.

Its human nature to convince yourself that if something appears to be free and you like it that you want more of it.  The second 50%+1 of the voting public is getting something for free at any political level your system breaks.  I mean either the rich bring out the guns and kill everyone breaks or the poor seize control and start printing worthless money breaks.  Either way civilization as you know it ends.

 

2)  Social security is mostly not a tax.  Its forced savings.  Don't call it a tax.  If it really were a  tax our tax rate would be ~50% of income.  You can't say the rich have all the money, so the poor shouldn't pay any tax and then say the rich don't pay their share of taxes.  It just makes you look like you don't understand reality.

 

3) This may very well be a real thing.  During history there have been periods where we had economic growth.  We should move our taxes for both the rich and the poor towards the rates that occurred during the start of those periods.  I don't personally know where the sweet spot is but it shouldn't be that hard for someone to figure out.

 

4)  I make a lot of money and I don't pay federal tax.  I am using almost all that money to pay a mortgage and maintain rental property.  I drive a 1998 honda civic and have a very basic lifestyle without any big non investment spending.  Am I rich?  If you look at gross income you could argue I am.  If you look at personal consumption I am clearly very poor.  People like me are what drive economies, if I had $50,000 I would invest it and still be driving a 1998 honda civic.  If 75% of america had $50,000 it would be gone in a heartbeat.  I do not however have a lot of assets.

 

I pay a usage tax on my real estate in the form of property taxes.  This is not a tax on income, its a tax on assets.  And its a tax on the typical middle class asset, there is no rich person equivalent.  I support a small tax on total assets for the rich.  Something in line with real estate tax rates in the rich states  IE like 1%.  This would level the playing field so that you can't sit on a billion dollars of non investment money just waiting for future generations to sit idle spending.  

 

5)  Reagan totally destroyed America by selling the idea that we can have a secure future borrowing from Japan and China while pissing away our industry.

 

But I have a question I don't know the answer to.  Did the rich really get richer or did the poor have more kids?   In my line of work I need all 16+ years of schooling and the latter 6 really needed to be pretty focused.  Anyone with a similar background of education and with my same level of abilities can make the same amount of money.  In engineering you don't actually need the formal education, its hard enough that if you can do it you can raise to the top even if you have no college at all.  But its hard enough that very very few can get by without the college.

 

What I am getting at is that I am the product of a lifetime of direction by my parents.  The first 22+ years need to get a certain amount of stuff done or its nearly impossible to catch up.  I have about 6 years of education that have to happen one year after the other from algebra to calculus to physics based on calculas to industry specific physics based on physics with calculus to even more focused industry specific based physics based on industry specific physics.  It would take literally 6 years to replace me with an adult with a different background.  Adults don't have 6 years.  And that would only put you where I was 10 years ago.

 

I support the education initiatives to produce the next generation of industry that will create the value for me to retire on.  Creating real genuine opportunity for people to create shared value is awesome.  But pretending like most of the middle class/rich are just lucky isn't the way to do it.  The rich people who started a business and made it grow really have a skill set that is valuable to all of us.  Knock them down by making it easier for others to join them.  Take half their money when they die.  Let them do their thing while they are alive.  

 

6 Corporation taxes need to match the rest of the world or they will just move.  If I move anywhere in the world I will make about the same amount of money because I am making that value and I take it with me when I leave.  To some extent industry creates the value.  Industry should pay some taxes but all their wealth gets taxed as income at some point in ADDITION to being taxed as corporate taxes.  This isn't some great unfairness if its Rich tax + Corporate tax= plenty of money taxed.

 

7) small job destruction over time is generally a good thing.  Computers destroyed jobs, they let one secretary do the work of two making one lose their job.  They made one accountant able to do the job of two making one lose their job etc.  But there is also a lot of pork in corporate tax breaks and that should all be public info so that normal people can understand what is going on.  Education that makes people valuable and able to start their own business is the kind of jobs we need not on the job welfare in the form of using two secretaries instead of having computers.

 

8)There is a sweet spot for taxes.  I don't know what it is and it likely changes based on the economic situation but its never 0% and its never 100%  People trying to push it up or down often say some pretty stupid things.

 

9)  The only countries that are "doing it better" that I can see are Germany and China.  Singapore does it a lot better but its so small that it doesn't count.  Its like saying united states of Bill gates (population 3) is kicking America's ass because the GDP per capita there is hundreds of millions of dollars per person per year.

 

China is kicking our ass based on industrial capacity

Japan is kicking our ass based on industrial capacity but doesn't have the birthrate to be a factor

EU doesn't have the birth rate to continue to exist as a civilization

Brazile/Russia/India/are generally not kicking our asses long term.

Germany is kicking our ass based on industrial capacity 

Note the author of the report thinks his own reasoning is crap as he didn't count social security as tax when comparing with germany.  USA 30% tax is only possible if you don't count social security and social security payroll taxes.  

 

America has been the strongest civilization in the world for 50+ years.  It has done that with a system of culture and government that is the strongest in the world.  Since the 80s we have overspent and that will catch up with us.  That overspending is not how we got to be powerful.

 

We need to return to the system that created the wealth if we want more.  The clinton years were pretty good.  If we went back to the spending levels per capita then and tax rates then and the demographics then I think we will have the same kinds of results.  Germany, Japan, China all have periods of massive growth also, all of these were caused by industry expansion.

 

Growth is good for the poor.

GOP may be confused about how you get growth.

But growth and education are the only things you can do long term to help the poor.

You either make them into people who are creating value and can take the value with them if they leave the country or you are just pushing welfare off the books and actually hurting everyone.

 

A bus driver making $80,000 in NYC isn't more valuable than a bus driver making $10,000 in China.  They are both bus drivers.  That $70,000 would be better spent on education for an engineer to make a self driving bus that will permanently remove the position of bus driver and instead re-route that money to automated bus driver engineer who would actually make $80,000 if his job were moved to China.

by donkeykong 2011-05-20 01:55PM | 0 recs
RE: Couple quick points

You might want to review the chart at Critter's crap: 

Your concern for America's "wealthy producers" is both touching and misplaced. Two things are very clear: (1.) The top 1% are making out like bandits and (2.) The bottom 90% are getting screwed. 

   You make the claim that:  If you ever reach a point that the voting majority isn't paying taxes your civilization dies.

  That is a very odd conclusion as a result of a logical fallicy known as a slippery slope. We can worry about the end of western civilization as we know it when the time actually arrives.  Everybody pays taxes. Sales taxes, property taxes, gas taxes, utility taxes, etc., etc.  You can't balance the federal budget on the backs of poor Americans making under $25k per year for the same reason you can't squeeze blood out of turnips. 

   I have no idea what a "worthless money break" is or how poor people print them. Are you talking about counterfeiting? In any event, your concern for the end of civilization as we know it is touching. Is the end of western civilization as we know it the inevitable consequence of not doing things your way? 

  Your point about how Social Security "taxes" or "contributions" are defined is non-sensical and irrelevant. Are you the grand arbiter of who understands reality? Oh, wait a minute. It's just a cheap shot to throw at someone who disagrees with you when you run out of stupid things to say. I get it.

   3.  . . . We should move our taxes for both the rich and the poor towards the rates that occurred during the start of those periods.  I don't personally know where the sweet spot is but it shouldn't be that hard for someone to figure out.

  Your "sweet taxation spot" is easy. We should return to the tax rates we had during the 90's, before the Bush tax cuts:

  We do not have a spending problem, we have a corporate tax avoidance problem and a failure to raise taxes enough to finance America's industrial war complex. We don't have a spending problem, we have a disfunctional political system that awards massive amounts of welfare to corporations who make huge campaign contributions. 

  You really have to let me know where you got the shit you were smoking when you came up with this one:

A bus driver making $80,000 in NYC isn't more valuable than a bus driver making $10,000 in China.  They are both bus drivers.  That $70,000 would be better spent on education for an engineer to make a self driving bus that will permanently remove the position of bus driver and instead re-route that money to automated bus driver engineer who would actually make $80,000 if his job were moved to China.

  Your high opinion of yourself and engineers is very amusing, but nobody is going to drive a bus in NYC for $10,000, unless their real goal is to steal the bus. Are you nuts? What does the price of tea in China or the salary of a bus driver in China have to do with anything? Why does a self driving bus need an automated bus driver engineer to operate it? Are you thinking about someone sitting in a futuristic game-boy chair and operating a bus?

  I don't know what kind of engineer you are or what type of end product you job is associated with, but I certainly hope and pray that you are not allowed to make any executive decisions. Your judgment is seriously flawed. Since you seem convinced that your knowledge of economics and taxation are superior to David Cay Johnston, who among other things has written five books, I look forward to reading all of the books you write after you invent a self-writing book program that is published by an automated book writing engineer. 

  Maybe you should stick to engineering and leave economic analysis to those of us who understand that 2+2=4.

 

 

 

by nanobot 2011-05-22 10:09AM | 0 recs

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