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The great tax scam – are we suckers – or what


Recently the IRS released 2006 data on who amongst us pays what in federal income tax. As usually, it was grouped by quintile (20% increments). It showed what we all know. The 40 percent of us with relative low incomes paid essentially no taxes. The middle paid about 6 % and the top 40% paid most of the bill. The New York Times took the report and editorialized that just increasing the rates for those with incomes above $250,000 will not be enough given the size of the deficit Mr. Obama is creating with his program. They want those at $100,000 and below to contribute more.

What was not discussed is the income tax take by dollar income. I made a chart from the IRS tables. I could not upload it so a description will have to do. I think it is very interesting!

The graph shows that what progressivity there is in our income tax system exists mostly for incomes below $150,000. Remember our federal income tax system is considered by experts to be our most progressive tax. All other taxes fall more heavily on those with lower incomes (particularly egregious here in Kansas). For those with incomes less than $8,000 the federal marginal tax rate is 10% and by the time you get to an income of $100,000 the marginal rate is 28%. For the next gazillion dollars in income, the rate increases by 7%. How come all the progressivity is in the first $100,000 of income - falling heaviest on the middle class? If we had a truly progressive system, the marginal rates should go up by about 15% for every additional $100,000 in income as it does for the first $100,000 in income. As it is the rich pay essentially a flat tax,

This is important, not because changing it would bring in a lot of additional revenue, but because it is unjust. The fact that we have not even whimpered about it suggests just how stupid we all are. The LJW reports how the East side of town is pitted against the West side. Income disparity plays a role in that. So, while we are at each other’s throats the really rich walk away with the prize. This reminds me of our own “Wizard of Oz”. While most of us are caught up in the histrionics, the real wizards sneak off to their private islands.

Sour grapes – you bet. I rather resent paying essentially the same marginal tax rate as Mr. Gates at Microsoft. I sure would love to have the billons he has to give away because in part he does not pay a truly progressive rate on his income. I wonder why the leaders of both parties seem to think this is just great! I would point out that a married couple in New York City, where one spouse is a teacher and the other a police officer, makes more than $100,000 a year – and they really need it to live there. Should we be demanding they pay as much in marginal taxes as Mr. Gates?

By the by, you can see why Mr. Obama is targeting those above $250,000. However, even with his proposed fix their rate would only increase by 3% more – all the way to an income of a gazillion. We have the ability to change this travesty. Not by joining the tax revolt but by demanding a truly progressive tax system (or a truly flat one). You know what to do!


Brian Laird 8 years, 8 months ago

"If we had a truly progressive system, the marginal rates should go up by about 15% for every additional $100,000 in income as it does for the first $100,000 in income."

That would make the tax rate on a 600K income 103% - I really don't think that is what we want to do. The turn-down point of the Laffer curve is probably at a higher top rate than we currently have, but we can be pretty certain that it is less than 103%. I agree that there should be more progressivity in the tax code, but one has to be very careful how to construct it.

The problem really is that Bill Gates' income comes primarily from capital gains, so in reality he pays closer to a 15% rate on the vast bulk of his income.

Ryan Neuhofel 8 years, 8 months ago

Progressivity in the tax code is largely irrelevant . In terms of overall economic output - the main determinant of wealth and living standard for everyone (rich and poor) - discussing what is fair for each "bracket" is useless. A tax on any person (rich, average or poor) is a tax on everyone - we all share the tax burden. Tax a consumer and he can't buy as much from the producer, or tax a producer and it raises the prices of the consumer. In reality, anyone with a job is both a producer and consumer.

Politicians have convinced us that we can target specific groups with taxes to improve our society without affecting the "average" person. While a seductive notion, it really is just a way to hide taxes (mostly on the poor).

Boltzman, while I am not sure it is possible to determine the ideal "tax rates" to maximize "tax revenues", the Laffer curve is essential to understanding the relationship of tax rates vs. revenues. However, the Laffer curve is a theoretical curve based on the overall tax burden and not specific to any "level of income".

Hi George! So basically what you are advocating is a 100% tax at some level? a cap on income? What amount of yearly earnings do you think is "enough" for any one American?

George Lippencott 8 years, 8 months ago


You are correct, Gates is an example. Most people in his bracket earn a substantial portion of their income from capitol gains and so pay even less.

I kind of understand the notion that you tax the middle class because that is where the money is and there are a large number of them.

What I am really advocating is a mildly progressive system that does not max out with the middle class. How about for discussion purposes we max out at 60% on $2M and above with a straight-line increase to that point. Probably would not raise enough revenue but it would be just.

I understand economic theory but find it horribly unjust to soak the middle class while excusing the rich because of economic theory. The 30% we whack the middle class with, hurts. The 30% we whack the rich with is a mild bother.

Ryan Neuhofel 8 years, 8 months ago

George says, "Probably would not raise enough revenue but it would be just.". . . "horribly unjust"

What is the purpose of taxation? to administer "justice"? Once you go down that road, you are arguing your view of ethics or morality, not economics or prosperity. Can someone explain to me how oppressively taxing "Bill Gates higher incomes, capital gains (double-taxation), etc." will actually help me, a middle-class guy? other than providing a false-sense of equality or fairness?

As a simpleton, I thought taxes were for the government to provide essential services and build infrastructure for commerce. The common polarized view of "fair taxation" from the so-called "left and right" misses the larger picture - we are all connected and money "trickles" up, down, left, and right! It is a myth that any targeted tax can "soak" one group or another.

The real debate should be how to fully reform the tax system - which has been used by politicians (left, center, and right) for their social engineering projects for nearly 100 years - and resulted in 60,000+ pages! Who do you think that unfairly targets? The average middle-class family or Bill Gates with a team of tax accountants?

George Lippencott 8 years, 8 months ago

They target me and I squeak! In a democracy tax policy must not only make economic sense it must be acceptable to the populace - i.e. perceived as just or maybe not bothering most. Right now about 60% pays little federal income tax. The 40% that does, pays essentially a flat tax.

You know the matter of economic theory that you have suggested could be read that the only way American style capitalism works is if the rich are taxed only lightly. That leaves only the upper middle to pay for our welfare state.

Personally, I would tax Mr. Gates to the max and reduce my taxes so I can help drive the engine of capitalism.

Yes, there are way too many pages of tax code bestowing all kinds of special benefits on various individuals and groups. Prey someone fixes it.

Perhaps a lot of people might consider it unjust to tax the couple in New York at the same rate as Mr. Gates. Apparently that is OK with you but you may not represent the majority - hence my attempt to educate!

Ryan Neuhofel 8 years, 8 months ago

George, to debate what "the populace perceives as just" is a pointless exercise . . . and not much of an "education" in anything of intellectual value. Our politicians largely run the country on focus groups and polling data, but please let us not stoop to their level.

While it is true that nearly half of American do not directly pay Federal income taxes . . .they DO indirectly pay a large "tax" every time they purchase goods and services. The masses have been duped by this hidden tax . . . and the politicians turn around and blame the "rich companies" for charging too much!

Further more, you can "tax Mr. Gates to the max" and you likely could lower the middle-tax class burden in the short-term. But what will "Mr. Gates" or his company do in response? . . . what businesses always do when overhead expenses are raised (taxes or otherwise). . . raise their prices for their goods/services . . . paid for by whom? . . . you and I. In the long-term, Mr. Gates and other "greedy rich people" will eventually disappear . . . and then who do we tax?

Most "rich people" have nearly half of their income taken by some government entity when you combine federal income/payroll (half of which is hidden as "employer paid"), state/local income, property/real estate, various fees, sales tax, etc. etc. I don't think working 6 months of the year to pay your tax bill is "taxed only lightly".

George, not to be insulting, but what you are advocating is NOT capitalism or free-market economics (even in a Keynesian sense) regardless of the labels you use. . .which is a perfectly legitimate point-of-view but we are obviously discussing two different systems.

Godot 8 years, 8 months ago

My federal income tax rate is about 10%. My state income tax rate is around 4%. My payroll tax rate is over 15%. My property tax rate is around 11%. Local sales tax rate was 7.3%, now is over 8 %, of my expenditures. Then there are the tax surcharges for phone and cell phone use; surcharges for the smoking spouse at, I am guessing, 50%, maybe more. Utility surcharges. Satellite surcharges. Gasoline tax surcharges. Fees to use so-called public property. Fees to register a vehicle. Fees to own personal property. Fees to own business equpment. Fees to be a landlord. Fees to be a professional. Fees to register a business. The extra costs tacked on to my health insurance so the company can comply with onerous government filings and regulations. Fees for the privilege of living (proposed carbon tax). It never ends.

Dismissing the cry about taxation because, except for the 5% of the highest earners who have not hried accountants with a criminal mind or moved their accounts off shore to hide their income, federal income taxes are lower than they have been since the introduction of the income tax, is a misdirection. The discussion about taxes must include the tax burden as a whole.

Godot 8 years, 8 months ago

I am afraid that now we are getting government before we pay for it, and our children, and theirs, will be left holding the tab.

jafs 8 years, 8 months ago

Taxes are a difficult subject.

I'd just like to point out a funny aspect of them.

When you get paid, income taxes are taken out. When you spend your after-tax income, sales taxes are taken out. When the business gets your money, income taxes are taken out again. When the employees spend the money, sales taxes are taken out again.


It seems like the same money is being taxed over and over again.

tin 8 years, 8 months ago

Good post Godot & Jafs, I'm getting a little off track here but when people gathered together to raises there voices about high tax's aka tea parties, they were attacked and ridiculed for speaking out. Makes no sense to me.

Seems odd we all know that we are taxed to death yet your a terrorist if you protest high tax's and spending, yet who other then the government or people profiting from the government would view the tea party goers as racist, terrorist, ignorant, those are just a few unjust words that I have heard them called.

Stephen Roberts 8 years, 8 months ago

Sure tax Bill Gates to the max, as long as other people start paying more tax (low income). There are too many people who receive Earned Income Credit. The EIC needs to bve modified to induce workers to woork.;

Also, there are too many people who are living off the government. People who live in Section 8 is an example. This was design as a temporary solution but there are way too many people who use it for a permanent basis- I am excluding the elderly and disabled. Ther are people who will quick a job instead of getting a raise from the employer -so their federal entitlements won't decrease.

Hey what would I know anyway. I am only a CPA who has audit section 8 housing for over 10 years. I seen the same names every year for the most part.

jaywalker 8 years, 8 months ago

Doesn't just seem that way, jafs, it happens time and time again.
I urge everyone to read up on The Fair Tax, by John Lender. It could eliminate alot of what's wrong with our economy and our citizenry, and even more eliminate the IRS. There are some holes, but I sure would embrace it.

Ryan Neuhofel 8 years, 8 months ago

Agnostick, we were using "Mr. Gates" (as started by Moderate) as a "figurative" example of a "wealthy business man" . . . it would be sort of difficult and pointless to debate each individual's "fairest" taxation.

But I'm glad you brought up THE Bill Gates charitable aspect. Do you think the Gates Foundation would exist if Bill Gates + Microsoft's income was "limited" (for the sake of fairness) before he had acquired his massive amount of wealth? The same can be said for hundreds of charitable causes started by wealthy people.

I think the main issue you raise is very important to consider: income and wealth are two different issues. There are many "wealthy" people who have low income . . .and people with relatively high income with very little wealth. Our current tax code is primarily targeted at "income" (production) and not wealth (for better or worse).

George Lippencott 8 years, 8 months ago

Boy have we wandered.

I never used a definition for what I suggested. We certainly are not a free market capitalism and have not been for as long as I can remember.

I tried to point out that the federal income tax, our so-called progressive tax, is not.

It is simply a two-step flat tax where many pay very little and the rest pay essentially a flat rate. What little progressivity exists is canceled out by all our other taxes.

I reject the notion that we cannot tax the rich more - a lot more. At a simple level, we could reduce the middle class burden by the amount gained. In the aggregate the government gains no income

That said, we cannot continue to run the deficits we are so somebody has to pay.

I reject the notion that we (the electorate) cannot use government for anything we want. That is our choice and there are consequences.

I would suggest that over commitment to government has usually led to a backlash that reduced that commitment.

It does not surprise me that we are moving toward government solutions after the not so sterling demonstration of “capitalism” last fall. Did the market work?

Ryan Neuhofel 8 years, 8 months ago

George, are you seriously debating yourself?! "We certainly are not a free market capitalism and have not been for as long as I can remember." . . 8 sentences later . . . . "It does not surprise me that we are moving toward government solutions after the not so sterling demonstration of “capitalism” last fall. Did the market work?" While it's difficult to rationally respond to such bipolar statements, your first point is most likely correct . . . unless you born before Teddy Roosevelt's administration. Also, economies and their corresponding outputs take decades and lifetimes to develop and nothing just happens "last fall".

Nobody has ever said we "cannot" tax the rich more. It is just counterproductive regardless of your intentions. . . ALL TAXES ARE SHARD BY ALL . . . Do you disagree? And high-taxation will not achieve prosperity or improve living standards for anyone.

Regarding the debt, here is a crazy idea . . . . STOP printing and spending money! Would you continue to put charges on your credit card if you had no conceivable way of making the payments? Did you realize that you could take every dollar earned (produced) by every single American for two years, 14 trillion dollars (GDP) per year and we still could not pay off our national debt (public,private), war debt, unfunded programs (Medicare/SS) - which some estimates to be 45+ trillion dollars. We CANNOT "tax" our way out of this mess!!! Why is this so difficult to understand? This is "unsustainable", unethical and should NOT be a partisan issue . . something a "moderate" like you can appreciate.

George says, "I reject the notion that we (the electorate) cannot use government for anything we want. That is our choice and there are consequences." . . . I think our Founding Fathers and their silly old Constitution (with its protection of unalienable rights) would disagree. Not that high taxation or outright socialism is "unconstitutional". . . just a pet peeve when people mis-portray our form of government. We are a Republic and NOT a "full" Democracy (mob-rule). . . at least were.

yankeelady 8 years, 8 months ago

Or flat tax--everybody pays 15-20%. No more no less. And no exceptions.

George Lippencott 8 years, 8 months ago

neuhofel (Anonymous) says:

I am not debating myself - I try to express complicated things in short comments.

Note that capitalism in the second quote was in quotes.

I am not debating the size of government - that is a different debate.

If I am taxed as I am under a progressive system I want that progresivity to continue to those above me. You keep ducking that argument.

Flat tax is fine with me - only we tax everybody at that flat rate. Excusing 50%, as the Republican plan did, does not produce a flat tax.

Less government is also fine but I think the electorate voted for more

Of course we are a Republic: Are you suggesting that our elected officials are ignoring our demands?? Just maybe they are responding to people who think differently from those in the rest of Kansas

I grow tired of people arguing "market" when much of our system is not one - sometimes because of the government sometimes as the result of business decisions.

4getabouit 8 years, 8 months ago

"Hey what would I know anyway. I am only a CPA who has audit section 8 housing for over 10 years. I seen the same names every year for the most part."

You are correct: You know nothing.

Commuter is a CPA? What a laugh. CPA ....Can't Post Accurately (yet do an effective audit).

Ryan Neuhofel 8 years, 8 months ago

George, . so basically . . .

You are "fine" with an "across the board flat tax", but also think the highest income bracket should be taxed at 60% (80-90% total) under our current system in the name of "fair progressivity"????? Huh? This is populist, "moderate" thinking with no ideological foundation.

I'm not "ducking any argument". . . I think taxing higher income bracket to increase the "progressivity" (erroneously) of the tax for any reason is bad economic policy. How many different ways can I say the same thing?

"The size of government" and "taxation" are inherently linked . . . not a "different debate". The government is "the people". When government spends money .. . .it is OUR money! They are not picking berries in the summer to earn spending cash.

Not to be insulting, but do you understand what the difference between a Republic and Democracy? . . .it has nothing to due with "ignoring demands" . . . A Republic primary duty is to protect the "rule of law" and guard inherent personal freedoms regardless of what the majority may vote. "We are an empire of laws, and not of men" John Adams.

Steve Jacob 8 years, 8 months ago

Someone brought up the fact that the 65 cent tax hike on cigarettes is basically a tax hike on the poor.

Anyway, I voted for Obama, knowing no taxes on people making under 250K was a joke. You can only tax the rich so much.

And the flat tax is great (on paper). I am sure our current tax code had "no exceptions" when it was made. And people are dreaming if it would under 30%.

Centerville 8 years, 8 months ago

Pilgrim2 is correct. Abandoning withholding would go a long way toward educating taxpayers.

George Lippencott 8 years, 8 months ago

It is clear to me that you want to debate the size of government. I don't - it leads nowhere.

Your last comment is confusing "rule of law and". What does that have to do with tax policy, democracies or protection from overzealous populism?

I challenge your economic theory- it talks consequences not absolutes. If we want a progressive system, then let us be progressive - and take the consequence. Calling it progressive when it is not is disingenuous.

I doubt the old Republic will fall apart if we did that. We progressed just fine before the Regan tax cut when the marginal rates were much higher - I got to pay those! Did not like it but I paid them - and found ways to reduce them. That too is part of a truly progressive system.

If we are progressive, and we claim to be, then Bill Gates should pay a lot more then my couple in New York – and we live with the economic consequences.

Ryan Neuhofel 8 years, 8 months ago


How can anyone believe that taxation and "size of government" are NOT inherently related?

Of course my "economic theory" is based in "consequences" . . . isn't the entire point of debating theory and resultant policy to achieve the best possible outcomes (consequences of our decisions)? Your "theory" is apparently based on subjective valuations of intentions or "absolutes" .

So the primary rationale for you wanting a "more progressive" tax is because we have a "disingenuous" progressive tax? . . . .regardless of outcomes or consequences?

I explicitly said that high taxation is NOT contrary a republican (small "r", not the phony political party) style government. You originally said the electorate "can use the government for whatever we want". I was merely pointing out that there are "limitations" to what the electorate wants based on Constitutional rights.

So under your proposal of "60% fed tax above $2M/yr", how would your "absolute" theory tax someone making $50M versus an income of $5M? This would obviously be "unfair" to the person making $5M as they would be paying a very similar effective rate as someone making 10x as much. . . .making a "disengenuous" progressive tax for the top 1% of incomes. Let me guess. . . . they are both "rich", so your absolutes don't apply?

George Lippencott 8 years, 8 months ago

How can anyone believe that taxation and “size of government” are NOT inherently related?

I can. How you raise revenue is relatively independent of how much you raise. We could go to a sales tax and raise the revenue- of course that would be very hard on the poor.

Of course my “economic theory” is based in “consequences” … isn't the entire point of debating theory and resultant policy to achieve the best possible outcomes (consequences of our decisions)? Your “theory” is apparently based on subjective valuations of intentions or “absolutes” .

No, it is willing to accept the consequence of having tax revenues start to fall off as we increase taxes. We still, for a while, increase the take. I, off course, did not propose to increase revenues but to reduce taxes on the middle and increase them on the top. The curve you love to quote is an aggregrate not an individual curve.

So the primary rationale for you wanting a “more progressive” tax is because we have a “disingenuous” progressive tax? … .regardless of outcomes or consequences?

I said accept the outcomes, if there are any! I used various tax avoidance schemes back before Regan. One can avoid that by eliminating most deductions and increasing enforcement. Kind of like the "Clinton tax" How much do you make, send it in!

I explicitly said that high taxation is NOT contrary a republican (small “r”, not the phony political party) style government. You originally said the electorate “can use the government for whatever we want”. I was merely pointing out that there are “limitations” to what the electorate wants based on Constitutional rights.

Absolutely, but raising taxes on the rich is fair game

So under your proposal of “60% fed tax above $2M/yr”, how would your “absolute” theory tax someone making $50M versus an income of $5M? This would obviously be “unfair” to the person making $5M as they would be paying a very similar effective rate as someone making 10x as much… .making a “disengenuous” progressive tax for the top 1% of incomes. Let me guess… . they are both “rich”, so your absolutes don't apply?

That was just a for example. You can tax the guy at 50M at 70% and so on! Remember, we did that once! The country prospered.

I personally do not like "spin". If we have a progressive tax system, then we should be. If not, fine. Flat works for me. I am not sure it works for most people who would pay more.

I reject out of hand the notion that your tax contribution should be based on how much money you contribute to whatever party you give it to. Rule of law, you know!

Richard Heckler 8 years, 8 months ago

Meanwhile the new commission like the previous commission is like have foxes in the chicken coop when it comes to costing local taxpayers money.

Bodies who refuse to use economic tools to make decisions are ripping us local taxpayers. No commissioner is smart enough to make decisions without demanding economic impact studies attached to each project new or old and a cost of community services study every two years to check what projects are paying back or not paying back the taxpayer.

Instead of ONLY reading newspapers and watching mainstream news I would suggest reading the following to get a better handle on the national scene. Free Lunch Perfectly Legal House of Cards Economic Hit Man Selling Out which is all about how congress does in fact sell their votes Democracy NOW In These Times Common Dreams * antiwar.com - which provides news accounts from around the world . Having our military taking over the mideast is costing trillions and making enemies at the same time. Trillions of dollars this country cannot afford and should not be spending anyway because no country attacked the USA.

Ryan Neuhofel 8 years, 8 months ago

George, I'm sure you are a very nice gentlemen, but it is pointless to debate someone who has purely populist, so-called "moderate" opinions with no economic principles or ideologic framework. Any who can be supportive of income caps (effectively) . . . and a flat-tax obviously has no basic economic theory guiding your decisions. Discussion of this or that president's tax code is an exercise in futility if you have no understanding of Economics 101.

You can certainly read the modern political diatribes suggested by Merrill, but if you want to critically think about economics - read basic and classic macroeconomic texts from all across the spectrum .....

Communist Manifesto, Marx Capitalism and Freedom, Friedman General Theory. . ., Keynes Road to Serfdom, Hayek Basic Economics, Sowell (a great introduction) Commanding Heights (especially part 1), PBS documentary

George Lippencott 8 years, 8 months ago

neuhofel (Anonymous) says patronizingly....

Are we talking economic theory or economic theory by neuhofel. To every point I make you cite economic theory without specificity (except the Laffer Curve) - only you know what you mean. I have even refuted your stated economic theory argument (Laffer) and you come back with economic theory.

What economic theory refutes a progressive tax system that is in fact progressive? Don't throw the Laffer Curve- it doesn't really address that - see many articles about this from many sources – webs full of them – so are papers from learned economists!

Ryan Neuhofel 8 years, 8 months ago


This discussion has become counterproductive. I am not patronizing you, but anyone who can be supportive of a "progressive tax system with effective income capatation" OR a "flat tax" has no fundamental beliefs in any system of macroeconomics (laisse-faire, Keynesian, Marxist, or otherwise).

"What economic theory refutes a progressive tax system that is in fact progressive?"

What in the heck are you talking about? My entire belief (based on my study of economics) is that "progressive and high" taxes (on rich or poor) stifles economic growth and lowers the standard of living of everyone (rich and poor)!

Have a nice day.

jafs 8 years, 8 months ago


During the Clinton presidency, tax rates on the wealthy were higher.

We also had low unemployement, a generally heatlhy economy, and he left office with a budget surplus.

In fact, the only 4 years in the last 35 without a deficit were during his presidency.

And, he won re-election by asking "Are you better off now than you were 4 years ago?"

Aren't these facts in direct opposition to your economic theory?

Ryan Neuhofel 8 years, 8 months ago

jafs, A nation's wealth and subsequent standard of living develop over decades and lifetimes. The markets may go up and down and employment fluctuate, but true wealth of a nation does not typically change year to year. Partisan arguments about the causes of "good times" and "bad times" are typically very short-sided and narrowly focused. A typical Republican would respond to you with something like "we had a tremendous economic growth in the 1980's under Reagan after he inherited inflationary, high-unemployment economy from Carter" . . . all basically true statements, but mostly a false causation based on party preference.

The United States went from a group of mostly poor, uneducated refugee farmers in 1800 to arguably the most prosperous, powerful nation in the world by 1900. However, the federal government did not have constitutional authority to levy individual income taxes until 1913.

jafs 8 years, 8 months ago


Your claim was that progressive and high taxes stifle economic growth and lower the standard of living of everyone.

That clearly was not true during Clinton's administration.

Are you now claiming that it is over some extremely long time frame that it would do so? If so, there's no way to test that claim, since policies change from administration to administration.

During the 8 years of Clinton's presidency, the deficit shrank consistently - the first 4 years or so eliminated it, and the next 4 showed an increasing budget surplus.

Again, the only 4 years in the last 35 we haven't had a deficit. That must mean something.

Also, until recently, the worst deficits by far were under Reagan.

Ryan Neuhofel 8 years, 8 months ago


I'm not really interested in partisan back-and-forth or quoting our "go-to statistics" but I'll offend both parties because I'm an equal opportunity offender. Sorry if I "speak down" to your level of knowledge, but my pea-sized brain must define terms to keep my thoughts straight.

There are dozens of factors that determine a government's yearly budget, but it basically boils down to "money in" (tax REVENUES, bonds, etc.) and "money out" (expenditures). Tax REVENUES are certainly not solely determined by tax rates - history has proven this time and again in both directions. To say that Clinton raising top marginal tax rates (more progressive). . . spurred economic growth and raised tax revenues . . .therefore causing a budget surplus. . . . is a very linear, short-term view of macroeconomics. As is the typical Republican talking point "Bush's tax cuts are the only thing that caused economic growth and increased tax revenues."

In my view there weren't many significant differences between the economic or tax policies of Clinton or Bush Jr. Party loyalists (donkephants) will argue for hours about 3-5% marginal tax rates on 1/4 (or less) of all Americans! But, the basic tax code/structure were nearly identical and they each funneled a little extra taxpayer money to their respective interest groups.

It is also true that we had a period of "growth" and high tax revenues under each administration (and most of the past 40 years). The real underlying economic question is "was this "growth". . .

1) True, sustainable economic growth created by increases in production secondary to increased efficiencies? 2) False, unsustainable growth spurred by increased consumption due to government borrowing (directly, treasury bills, etc.) and spending AND increased private borrowing (due to "easy" money) and spending?

I think our current economic protraction is starting to answer that question. . . and both parties are to blame.

jafs 8 years, 8 months ago


I think your argument is untestable.

Policies change from administration to administration, and therefore we cannot test a certain philosophy over a non-linear long term.

Also, there are many other factors at work other than the ones you mention - for example, deregulation and the non-regulation of the "shadow banking" industry, which clearly was a major factor in our current troubles.

I believe that Clinton's policies were clearly better for our economy than Reagan or Bush's. The numbers will probably support that belief.

As far as long-term sustainable anything, unless we had the same policies in place for many years and no other mitigating factors, there's simply no way to know.

Ryan Neuhofel 8 years, 7 months ago


I'm merely saying that declaring a direct causal relationship between a minor economic policy (3-5% tax rate change) and complex measurements of economic output/growth (GDP, deficits, debt, etc) is a very simplistic view, especially in a relatively short period of time.

You are absolutely correct in that government "regulation" (or intervention of any type) strongly impacts economics. The banking industry certainly can be "shadowy" and has obviously made horrible business choices in the past 2 decades. But to make this issue uni-partisan is absurd. The majority of politicians in Washington have directly benefitted (campaigns, employment) from this industry. Chelsea Clinton works for a hedge-fund for goodness sakes! I'm sure that her job is totally unrelated to her parent's political connections. And the same thing can be said for countless Republicans working for banks, financial groups, etc. after leaving office.

I think many of the "poor" decisions made by financial institutions, especially in the lending industry, were largely due to government intervention. But not typically a result of "deregulation", "lax rules" or "lower taxes". The largest problem was "socialization of risk" in Corporate America . . . a semi-Corporatization. The left's rant about "corporate welfare" in recent history certainly has some validity (in a skewed kind of way). But now that their guy is in power and directly giving trillions of our hard-earned dollars to failed business and financial institutions, most of those ranters have suddenly gone quiet.

The mortgage industry is a prime example. Banks obviously originated many horrible loans to just about anyone who walked through the door to "buy" a $200k house. But, why? Would you lend someone money if you honestly thought they couldn't pay it back. . . and you would be left holding the balance? Obviously not. But would you take that risk if you knew you could make a quick buck on "fees" and then pass the risk off to some quasi-government (taxpayer) funded institution?

As far as "proving my theory", there are countless historical examples to prove that "less government" (economically and socially, which are inherently related) results in increased national wealth and improved standard of living. Read anything about 20th Century development of Hong-Kong versus China, very interesting. History of India is also very enlightening.

I can tell from your few posts that you will likely continue to "ride the donkephant" and fight your evil, stupid Republican strawmen, just like most Republicans will continue to do, I just pray that we realize we are all riding the same stinky animal before it carries us off a cliff.

George Lippencott 8 years, 7 months ago

Neuhofel says

"What in the heck are you talking about? My entire belief (based on my study of economics) is that “progressive and high” taxes (on rich or poor) stifles economic growth and lowers the standard of living of everyone (rich and poor)!

I personally agree with you that economic activity is impacted negatively by high taxes. I am not sure that generally accepted economic theory rejects progressive tax systems - just high taxes. Unfortunately we have elected to take a large amount from a few people. Unfortunately, the existing system violates your economic beliefs!

I argued two points that are not related to economic theory but to the politics of who pays for our current very large government expense - that I agree violates your beliefs!.

  1. We claim our system of federal income tax is progressive - it is not.

  2. If my NY couple pays disproportionately more than people who make half what they make I think the people who make twice what they make should be so afflicted

Of course such high taxes will impact economic activity. If the electorate wants all the goodies then they should get to pay for them by having fewer jobs and all the other wonderment of reduced economic activity - the impact I referenced and accepted on their behalf.

All the economic theory in the world does not trump the politics of who pays when the bill is large!

Let us just agree to disagree and move on.

Ryan Neuhofel 8 years, 7 months ago


Thanks for the reasonable discussion. I apologize again if I spoke in a patronizing manner. I would say in parting that you are 100% correct that the "politics of economics" largely trumps sound macroeconomic theory/knowledge - mostly because it is much easier for the public to comprehend "boogeymen" than complex systems and secondary/tertiary/etc. impact of "well meaning" policy. However, regardless of popular perception, basic economics (and human nature itself) dictates that it is a false notion that the government can tax a specific group (based on income, in this case) to pay the "tax bill" while the remainder of people remain "unaffected".

We are all sitting at the same table whether we recognize it or not.

jafs 8 years, 7 months ago


Interesting that you think you know me so well based on a few rather short posts.

I agree that most, if not all, politicians are too closely connected to corporate interests, and I'd like to see that changed.

There are some clear differences in policy generally between the parties though, and so I vote accordingly.

You believe that government involvement and taxes have a negative impact - that clearly tends toward the Republican view.

I believet that unchecked greed and self-interest have a negative impact - that tends towards the Democratic one.

As are many people, I am uncomfortable with the huge bailouts of financial institutions, etc. But it's hard to see what would be better at this point.

As far as the causes of the problem, it is clear to me that a lack of regulation and oversight combined with some new financial instruments is a major factor.

"Shadow banking" is a term used by Paul Krugman, a well-known economist, to describe a number of entities that functioned as banks but without the regulations. He says this is the biggest cause of the meltdown.

The bundling and sales of mortgages as securities is another reason that banks and mortgage companies didn't care about the borrowers' ability to pay back the money.

In fact, if you're being foreclosed on, ask them to "produce the note" - it's extremely likely they won't be able to, and simply don't know who has it.

Those kinds of abilities to bundle and securitize mortgages are clearly also at fault.

I agree, though, that if businesses think they can simply turn their problems over to the government, that's a bad idea. For example, corporate re-structuring that turns over responsibility for pensions to the government.

These bailouts are not the way to prevent future problems, they simply stem the tide right now - we obviously need some changes in our policies.

I vote for more oversight and regulation, not less.

Ryan Neuhofel 8 years, 7 months ago


I agree that the bundling and sales of the bad mortages complicated and likely further componded the problem. But, why would all of these "securities entities" (regardless of who originated the loans) buy up a bunch of risky "bad assests" (bogus mortgages)? That doesn't seem like a great way to make money . . . assuming the mortgage would need to be paid back in order to retain it's value or return a profit.

Also, has there ever been governement oversight or prohibitions on private "mortgage securities" until now? (I honestly don't know)

And who is the largest purchaser/owner of mortgage-backed securities with approximately 2/3 of total US debt? I will give you a hint, it's not a private institution. find answer at Wikipedia.... http://en.wikipedia.org/wiki/Mortgage-backed_security

As far as my "Republican view" . . .you couldn't be more wrong. Very few leaders of that phony "small government" party represent any of my views. They give lip service to "tax cuts" when required, but certainly increased the size and scope of the federal government under GWB. I think most current Republicans and Democrats (politicians) represent choices of "larger government" both fiscally (D>R) and socially (R>D) . . .and ironically will lead to the same place. . . despite their insistance on being mortal enemies.

jafs 8 years, 7 months ago


The reason they were able to sell the bundled mortgages is that the rating agencies weren't doing their job correctly.

They rated these bundles as a much lower risk than they actually were, according to someone in the industry that I saw testifying before a Congressional committee.

Everyone involved was making money, and didn't care about the outcome as soon as they were done taking their cut.

And, the rating agencies are paid by the issuers of the securities, which leads to obvious conflicts of interest.

How exactly would less government oversight and regulation solve problems like these?

Ryan Neuhofel 8 years, 7 months ago


You are 100% correct that many layers of people in private industry (banks, securities, investors, etc.) and politicians were profiting off of this bogus system and passing off the risk. But the fact remains that "someone" at the end of the day was left holding the "empty bag" (bad debt) . . . and who was the largest holder of these mortgage-backed securities? (you failed to answer the first time)

Government-sponsored enterprises (GSEs) Freddie and Fannie. In fact, MBS "industry" was invented by the government! The growth of GSEs (as a percentage of mortgage-debt) slowly increased since their inception in 1938 but sky-rocketed the past 20 years. For more info go to......


GSE growth mostly spurred by Community Reinvestment Act of 1977...... http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Despite all of the terminology, this issue is not entirely complex to understand from an economics standpoint (politically is another story). Whenever "risk" or "fear of losses" is removed or minimized in a system (socialized by the taxpayer via GSEs in this case), "reckless" business practices will ensue . . . but this was not caused by "unchecked greed" among "free-market" private individuals.

How much would you gamble in Vegas if you knew that most of your losses would be covered by some faceless "rich man"..... and you could take home all of your winnings? In fact, you would be crazy NOT to gamble all night long!

With regards to your proposal for "increased government oversight and ratings of assets to prevent risky lending practices", whom do you propose would be best to monitor private "unchecked greed" in the mortgage industry? Freddie Mac? Congress? Their influence has been mighty helpful thus far! Or maybe some other group of altruistic, intelligent, non-biased government institution?

jafs 8 years, 7 months ago


From your link, the GSE's are protected from, among other things, SEC oversight.

They are private institutions which are allowed to operate without proper oversight as well as being subsidized by the government.

Clearly a big problem - one of the financial officers of one of these just committed suicide recently.

I'm against government subsidies of private industry also.

jafs 8 years, 7 months ago

And, when you subsidize businesses like this, and remove oversight, that allows the greed to run unchecked.

Fear of loss can and should curtail greed.

Proper oversight can and should prevent meltdowns like these - for example, if the SEC had investigated our recent Ponzi scheme billionaire sooner and more thoroughly, they could have minimized the damage he caused.

jafs 8 years, 7 months ago

And, when the folks at the top manage to get contracts with guaranteed severance packages even if fired for running the company into the ground, they are protected from the fear of loss as well.

When companies restructure, the CEO's, banks and lawyers all do just fine. The average worker and/or creditors get screwed.

Ryan Neuhofel 8 years, 7 months ago

jafs says, "They (GOVERNMENT-sponsored entities) are PRIVATE institutions which are allowed to operate without proper oversight AS WELL AS BEING SUBSIDIZED BY THE GOVERNMENT (taxpayer)."

hahahah. I will just let you re-read your own statement as my response. Something obviously isn't jiving!

With regards to "lack of SEC oversight" of Fannie Mae, read history at http://en.wikipedia.org/wiki/Fannie_Mae

In summary, Congress was directly responsible "for setting capital-reserve requirements for the company and to determine whether the company is adequately managing the risks of its ballooning portfolios". In 2003, Bush actually proposed changing oversight to Treasury Department (most likely an irrelevant proposal), but was opposed by most Democrats . . . read Barney Frank's quotes (the same man who wants us to believe he knows how to fix the problem!)

But, I would also say that the majority of both parties supported GSEs or did very little to raise concerns. In fact, both of the previous 2 administrations (Clinton and Bush) grew the size/scope of Fannie Mae through a variety of "Acts". I can specifically remember Bush promoting the success of his "economic policies" by quoting statistics about the "all-time high homeownership rates among poor and minorities". The fact is that Bush was pro-Business (at the expense of the taxpayer) in this matter - which is in stark contract to a free-market.

Also, your rampant use of the word "greed" makes me curious? How do you define "greed"? (philosophically)

jafs 8 years, 7 months ago

I agree that these GSE's seem to offer the worst of both worlds - it would be better if they were either private companies or government departments.

That's probably right that both parties share the blame for this situation.

It's hard to define greed, but I certainly know it when I see it, don't you?

When a CEO runs a company into bankruptcy and then walks away with their guaranteed severance package in the millions (regardless of performance) while there are massive layoffs and retirees watch their pensions shrink when the government takes them over (because of a different formula), I'd say that's an obvious combination of greed and self-interest combined with absolutely no concern for the effects of one's actions on others.

How would you describe it?

georgeofwesternkansas 8 years, 7 months ago

"Income disparity plays a role in that. So, while we are at each other’s throats the really rich walk away with the prize."

Only a couple of small pesky facts overlooked in this article. Brains, hard word , and dedication. I really sucks when you don't get that CEO job after dropping out of high school.

Ryan Neuhofel 8 years, 7 months ago


Greed is a very difficult thing to define. In my personal life, I think 'greed' would be defined as a desire for more money just for the mere sake of having more. Basically, the Biblically teaching of "love of money". However, I want to work hard, start an honest business and provide a service that people are freely willing to buy (with their hard earned money!) . . . hopefully that makes me a "rich" man so that I can provide for my family, travel the world and be charitable how I choose. If a reach that goal of being a multi-millionaire, does that make me 'greedy'? I think not.

Defining 'greed' in others is nearly impossible in my estimation because it is based on intent, not amount of dollars and cents. I think the vast majority of wealthy people are not greedy. Bill Gates? John Huntzman? both some of the wealthiest men in the world, but also kind/charitable/noble. I have also met people who make a modest wage whom cling to every last dollar so they can take it to the grave whom I would consider 'greedy'.

Your description of 'greedy CEOs' is very murky in reality. Businesses in a free-market do NOT work from the top down - profits for the owners/shareholders/CEOs are not the beginning of the chain, rather the end (the leftovers after paying everyone else below them). Which is why the term "Trickle Down Economics" displays a complete distortion of true free markets (sorry for the side note)

Having said that - there are certainly plenty of dishonest people in corporate America. I fully support using the full force of the law if they have broken the law. But just pointing to CEOs and determining greed is a very slippery slope.

Also, i would point out that 'greed' is typically more rampant (and allowable) when power is consolidated into the hand of a few - as in central planning. In fact, you should research the past executives of Fannie Mae (again, directly monitored by Congress - now the arbiters of greed).

jafs 8 years, 7 months ago


You should re-read my post.

I described a specific scenario, which has unfortunately occurred a number of times.

I didn't just point to CEO's.

The problem is that many of these people did not break any laws, because many laws/practices are skewed and/or written by the rich to protect themselves.

For example, as I mentioned, corporate restructuring favors the guys at the top at the expense of those in the middle and at the bottom.

Contracts which have guaranteed severance packages regardless of performance are clearly absurd, yet common practice. Why/how is that?

Just for fun, Webster's defines greed as "excessive or reprehensible acquisitiveness". Seems pretty subjective, but my examples illustrate that, in my opinion.

Ryan Neuhofel 8 years, 7 months ago


I'm not sure your very broad example of "little guy gets screwed" illustrates 'greed'. Usually, when a company fails (loses money/bankruptcy), typically all employees, owners/shareholders "lose" - lose a job, makes less money than they expected (per their incentives/stock). Of course, the people "at the bottom" are harmed more than "executives" (in large business especially) - they are obviously living on a thinner margin than someone making millions of dollars. However, many employees (including executives) have legally binding contracts for guaranteed parts of their salary/income (usually the smallest portion for 'big wigs' actually). These contracts must legally be honored regardless of the level of the employee (janitor or executive) - they are the cornerstone of our entire civil legal system! I think "guaranteed severance packages regardless of performance" are usually bad business practice, but I don't want a bureaucrat to determine what is a 'just' contract for anyone. Bad business practices lead to failed businesses .. . . if we allow them to fail.

So I am assuming that you are fully against the current financial "stimulus" plan, since it falsely propping up the stock price of companies (the primary means of income for most executives).

jafs 8 years, 7 months ago


I am very concerned about these bailouts.

If we could allow all of these businesses to fail without harming the innocent, I would be all for it.

Unfortunately, again, letting them all fail would mean massive unemployment of many who bear no responsibility for the mistakes.

So, what should we do?

jafs 8 years, 7 months ago


I would say that the huge disparity in income between the top wage-earners and the rest of us shows "excessive" acquistiveness, and that guaranteed severance packages show "reprehensible" acquisitiveness.

But, at the end of the day, I don't care what we call it - something is dreadfully wrong in corporate America.

Ryan Neuhofel 8 years, 7 months ago


i'm getting ready for vacation so will respond shortly regarding "income gap/disparity" .....

there is a fantastic book called "The Progress Paradox" I highly recommend - it basically address the larger picture of "rich versus poor" throughout history and how it relates (or doesn't) to inomce.

very nice speaking with you. see you around.

jafs 8 years, 7 months ago


Have a nice vacation.

There's an interesting AP article in the paper today about CEO compensation.

The average CEO salary in the S&P 500 is DOWN to $7.6 million/year.

CEO's make about 48 times as much as average workers.

Even with the decrease in salaries, boards are finding other ways to enhance overall CEO compensation.

This is true despite the fact that these companies' stock prices have dropped by about 30%.

Interestingly, the CEO of Southwest Airlines, which is one of the best customer service airlines with very reasonably priced tickets, only takes home about $400,000/year. And, as far as I know, Southwest is doing just fine, unlike other airline companies.


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