dajo9 said:

---

concordtom said:

---

How?

---

Strong civic engagement, high voter turnout, worker solidarity, taking on the Supreme Court, and exerting the power of democracy over the power of money.

They raised taxes, built universities and highways, empowered labor unions, and redistributed money through programs like social security and Medicare. They did things they were told could not be done.

---

DiabloWags said:

---

Are you saying that you had a "problem" with Barack Obama being President for 8 years?
Did you not like him or his policies?
They didnt "trickle" down to you?

---

wifeisafurd said:

---

concordtom said:

---

My comments were not meant as an attack.
These are philosophical questions on the nature man man, and our times.

I added the personal stuff for the reader's context.

I don't need people's criticism of me in response, and yes, I had responsibilities for the performance of $20B AUM. I don't know why you keep coming back to that. It must impress you. But it was just a job.

Look, guys, I'm quite similar to you. I want my castle and island, too.
But I'm also just pondering these things in order to question our societal assumptions - we take much for granted as fact. But much of our notions are "social constructs", beliefs passed down. Where does innate behavior end and culture begin?

I'm sorry if I offended either of you. I didn't mean to.

I just meant that I'm more fascinated with the questions of how to create more wealth equality (better societal psychological health) than how to keep more of mine - without killing motivation, which is the engine, as Odonto and others allude to.

Conclusion: change the reward from being a multi multi millionaire to something else.

And happiness studies reveal the same - after so much, there is a diminishing return. Yes, money buys happiness - to a point. The first $100k is huge! But if you have $10M, the next 100k is nothing. So, at that level, money can't buy happiness. Love, respect, friendship… but by then we've conditioned ourselves to always be on the hunt for that next dollar. Then we become like ebenezer Scrooge.

I didn't get to read in any post by Juarez. Anyone on the hunt to help support others is on a good hunt. Castle and island not necessary.

---

When you make it personal, it comes off as you are the better person for wanting to spend on society and the guy complaining about his tax hit or trying to save on taxes is selfish. I don't think that is what you intended, but the tone is condescending. A higher road approach is discussing policy, trends, aggregate results and aspirations. Dajo's responses to you is well suited as examples. We have been down this road before where a good discussion has degenerated into the personal, and candidly I'm been guilty before of that.

---

dajo9 said:

---

DiabloWags said:

---

Are you saying that you had a "problem" with Barack Obama being President for 8 years?
Did you not like him or his policies?
They didnt "trickle" down to you?

---

Anything Obama did is just scratching at the surface of the trickle down policies Reagan gave us 40 years ago

---

dimitrig said:

---

Cal88 said:

---

Good thread overall, with (relatively) limited acrimonious partisanship and thoughtful content.

This is the problem essentially, in a few graphs:

---

This is what MAGA means to the wealthy people that hold their noses and vote for the GOP.

---

DiabloWags said:

---

Hopefully he can reply back in his own words and not use a TikTok video as a surrogate.

---

Cal88 said:

---

Good thread overall, with (relatively) limited acrimonious partisanship and thoughtful content.

This is the problem essentially, in a few graphs:






https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality

Note that the stagnation in middle class income is all the more glaring because it took place starting in the 70s/80s, while technology was just taking off, resulting in large and consistent gains in productivity, which should have translated in greater wealth for the middle class. I was in a long-distance relationship in the late 80s, and my monthly phone bills were $300-$500, $1,200 in 2023 dollars, vs $40/mo for unlimited Whatsapp today. A decent 486 PC in 1990 cost around $3,000, which translates to $7,250 today adjusted for inflation.

That period, the 70s-80s, was the start of globalization, and the outsourcing of the US industrial base, part of a general shift in the economy from an industrial capitalism to financial capitalism. Countries like China, S. Korea or Germany are still primarily practising the former type of capitalism, while the US, UK have moved on to the latter. The loss of high-paying middle class jobs that followed is at least in part responsible in the economic decline shown above, with more wealth being generated by capital, and less by labor.

One of the main structural problems leading to the general mismanagement of the American economy is the near-complete capture of the regulatory process. US health policy is set by corporate health providers, insurers and big pharma, US foreign policy by the MIC etc. Along the same lines, Wall Street drives the uber-wealthy tax structure.

Some possible solutions:
-Tax financial transactions (Warren's initiative)
-Eliminate payroll taxes for small businesses, and for lower/middle incomes employed by large companies
-Tax wealth for very high-wealth individuals, starting for example at 0.1% for wealth above $10M, scaling up to 1% above $100M.
-Tax imports at a higher rate. The US has had a large trade deficit, and is in a good position vs its main trading partners (China, Canada, S Korea, Germany etc)

---

dimitrig said:

---

Cal88 said:

---

Good thread overall, with (relatively) limited acrimonious partisanship and thoughtful content.

This is the problem essentially, in a few graphs:

---

This is what MAGA means to the wealthy people that hold their noses and vote for the GOP.

---

Cal88 said:

---

dimitrig said:

---

Cal88 said:

---

Good thread overall, with (relatively) limited acrimonious partisanship and thoughtful content.

This is the problem essentially, in a few graphs:

---

This is what MAGA means to the wealthy people that hold their noses and vote for the GOP.

---

"Ultra-Wealthy

While Democrats lose support as income increases, there seems to be a tipping point where the ultra-wealthy begin leaning Democratic. The most famous example would be the entertainment industry, where star-studded events have become a significant part of Democratic culture.

But this phenomenon is not limited to Hollywood. A review of the 20 richest Americans, as listed by Forbes Magazine, found that 60 percent affiliate with the Democratic Party, including the top three individuals: Bill Gates, Warren Buffett and Larry Ellison. Among the riches families, the Democratic advantage rises even higher, to 75 percent."

https://www.debt.org/faqs/americans-in-debt/economic-demographics-democrats/

---

concordtom said:

---

dajo9 said:

---

concordtom said:

---

How?

---

Strong civic engagement, high voter turnout, worker solidarity, taking on the Supreme Court, and exerting the power of democracy over the power of money.

They raised taxes, built universities and highways, empowered labor unions, and redistributed money through programs like social security and Medicare. They did things they were told could not be done.

---

And so then what happened?
Why is that no longer the way things are today?

---

dajo9 said:

---

wifeisafurd said:

---

In any event, the "socialist" economists get this, and they don't blame income tax rates per se (with the exception of capital gains rates) for income inequality. The reality is that marginal federal tax rates have not changed that much since the 1980s (particularly in comparison to prior time periods), nor have effective tax rates despite all the noise you see in people reposting tweets with any providing any analyst or thought.

---

---

dajo9 said:

---

wifeisafurd said:

---

concordtom said:

---

DiabloWags said:

---

Are you saying that you had a "problem" with Barack Obama being President for 8 years?
Did you not like him or his policies?
They didnt "trickle" down to you?

---

I suppose I'd argue this point by pointing out that the trickle down concept has largely continued since Reagan, and the nation has become addicted to the new lower rates.

Anyone who raises taxes will be voted out. It's a national belief - low taxes.

I asked the question in my prior posts, what creates the greatest good for society while maintaining the motivation engine?




It's an open question, feel free to offer your solutions.

---

I would argue that those tax numbers have no relevance given how taxable income was calculated. Every time I hear some nimrod professor wanna be economist like Reich start talking about the those tax percentages that no one really paid, I hear my partners at the then Big 8 firm where I was a lowly senior accountant during the early '80s cranking out tax returns, laughing from their graves or retirement homes. In fact, the real "socialist" economists like Saenz and Pikettery actually disagree with politicos like Reich about tax rates causing income inequality.

Before Ronald Reagan's election in 1980, the top income tax bracket stood at or above 70 percent, where it had been since the Great Depression, sort off. The 1930s stated with rates in the 70s,, introduced income tax rates as high as in the 80% to pay for stimulus, and also started with the tax code being rewritten so no one actually paid that full amount. Even in the 30's and early 40s, rates jumped dramatically. After output plummeted in 1936, max rates went down to 24% and then in 1941 went to 90 plus percent for the war effort. And the rates went up and down a lot depending on the state of the economy or the federal government's needs. Where sometimes the top rate was so low many people would shake their head today, and so high even the very liberal would start using the word confiscatory. But the point was there were less extremes of income so almost everyone paid similar rates, and the super wealthy had their ways built into the system to not pay an "effective rate" that was anywhere near maximum rates.

The 1960s and 1970s were a time of massive inflation, with government deficits continuing to grow. The problem for taxpayers was taxes weren't indexed for it. This meant that although the real value of people's incomes was being decreased, they were also required to pay more taxes. Rather than rolling back rates, the tax code was was rewritten to allow deductions, lower tax rates were provided to private foundations, and a new animal was introduced into legislation called the tax shelter. The other thing that came out of the era was the negative income tax, where people below a certain income after receiving tax credits, got money back from the federal government they never put in. (Poli Sci majors will also point out that this is a period where lobbying for the wealthy and poor escalated dramatically).

But marginal tax brackets are misleading, as Wag's OP infers when it tells you who pays taxers. They tell you only the rate on the last dollar earned. The percentage of total income that you actually pay in taxes is known as the effective tax rate, and high wage earners have a large effective tax rate now. That calculation looks at income taxed at various rates as you move from one bracket to the next; it figures in taxes on capital gains and pensions; most economists are it figures in "imputed taxes" such as corporate and payroll taxes paid by your employer (on the theory that if your employer didn't give this money to government, it give it to you, which is somewhat a debatable point); and it removes from the total any money the federal government paid you in Social Security, welfare, unemployment benefits, or some other benefit. (The Congressional Budget Office does look at these factors to various degrees).


Reagan lowered top marginal tax rates (with Democratic help) a lot. He lowered top effective tax rates much less, because of the tax system he inherited that was changed. Start with Reagan dropped the top bracket from 70 percent to 50 percent, and eventually pushed it all the way down to 28 percent. Since then, it has hovered between around 30 to 40 percent, through GOP and Democratic Presidents. In 1979, the effective tax rate on the top 0.01 percent was 42.9 percent, according to the Congressional Budget Office. By Reagan's last year in office it was 35.2 percent. From 1989 to 2005, as income inequality continued to climb, the effective tax rate on the top 0.01 percent largely held steady; in most years it remained in the low 30s, surging to 41 during Clinton's first term but falling back during his second, where it remained. The change in the effective tax rate on the bottom 20 percent (i.e., poor and lower-middle-class people) was more dramatic, but not in a direction that would increase income inequality. Under Clinton, it dropped from 8 percent (about where it had stood since 1979) to 6.4 percent. Under George W. Bush, it fell to 4.3 percent. And it kind of bumps around in similar ways as you move on to Obama and Trump.

But what changed was pre-tax income and asset valuations, along with how we taxed. Starting with the latter, Congress (with Reagan's help) and the IRS in the early 1980s undertook an ambitious attack to combat the persistent tax shelter market and other ways the wealthy then sheltered income. It was quite common to be able to "write-off" vast multiples of an investment (e.g.. invest $10K, deduct $100K) by assuming non-recourse debt, and not being taxed on negative tax basis (if your not accountant, just take my word that this is huge). And the IRS never really knew the size of the original investment due to only one number came through on a tax return, in the example above, the $100k loss. Attacking tax shelters and other devices required more stringent reporting requirements, which is where new Treasury Regs came in. The IRS didn't even know how much revenue was being avoided. So what happened in the 1980s is due to tax reforms, is taxable income started going up because more income was being captured from the wealthy, though rates of that income went down. Which is why the effective rate starts straight-lining from President to President. There was also tax reform for abusive trusts and foundations and a surprisingly number of ways the wealthy avoided those 90% tax rates. One can presume that there was less pressure from the affluent because of rate reduction.

In any event, the "socialist" economists get this, and they don't blame income tax rates per se (with the exception of capital gains rates) for income inequality. The reality is that marginal federal tax rates have not changed that much since the 1980s (particularly in comparison to prior time periods), nor have effective tax rates despite all the noise you see in people reposting tweets with any providing any analyst or thought.

What the socialist eonomists do blame is that pre-tax national income going to the top 1 percent is going up as are asset asset values controlled by the wealthy. Now if that is true and why that is the case can be debated, and in the blame game you see such factors as immigration, increase in the return to capital versus labor, decline in labor strength due to waning union influence, capital gains preference, globalism, freer trade, etc. They also see it in imprerfections in our society (this is a big Krugman one), such as failures or unfairness in our education system. I'm not trying to argue their points for or against, I'm just saying read their stuff, and realize when it comes to income inequality, they are not pointing fingers at taxation under any specific recent President, or all the other rhetoric you often see in some uninformed retweet. (Though I can tell you the more inflation you have, the more Joe Biden's tax proposals are going to be met with resistance by more people absent indexing - see above).

---

It is not a coincidence that high end incomes blew up right after punitive high end tax rates went away. It is also not a coincidence that Federal deficits became a consistently huge issue after Reagan started reworking the tax code.

We have gone down this rabbit hole before and found that the big change in the pre-Reagan era and post-Reagan era is that corporate taxes have gone down and payroll taxes have gone up. Reduced corporate taxes mostly benefit high income earners and asset prices (sound familiar?) and higher payroll taxes mostly impact everyone else. We have all seen and lived through the impacts of the Reagan changes. We know what has happened - it can be sliced and diced and specific points analyzed in minutiae but it doesn't change the overall picture.

---

Sen. Markwayne Mullin is a multi-millionaire who got $1.4 million in PPP loans forgiven.

He should sit this one out. https://t.co/PvMbKaBDEA

— Public Citizen (@Public_Citizen) March 8, 2023

Multiple celebs including Kanye West, Diddy, Jay-Z & Tom Brady granted loan forgiveness after receiving millions in PPP loans pic.twitter.com/CW5OkaBXAn

— SAY CHEESE! 👄🧀 (@SaycheeseDGTL) August 19, 2022

LudwigsFountain said:

---

dajo9 said:

---

It is not a coincidence that high end incomes blew up right after punitive high end tax rates went away. It is also not a coincidence that Federal deficits became a consistently huge issue after Reagan started reworking the tax code.

We have gone down this rabbit hole before and found that the big change in the pre-Reagan era and post-Reagan era is that corporate taxes have gone down and payroll taxes have gone up. Reduced corporate taxes mostly benefit high income earners and asset prices (sound familiar?) and higher payroll taxes mostly impact everyone else. We have all seen and lived through the impacts of the Reagan changes. We know what has happened - it can be sliced and diced and specific points analyzed in minutiae but it doesn't change the overall picture.

---

Not sure how you're defining income, but if it's taxable income, that's probably because the tax shelter rules changed so dramatically. To see what was truly happening, you'd have to perform quite an analysis. Probably compare income prior to deductions less taxes paid between the two rate eras. I too was a lowly big 8 staffer in the 70s and saw first hand the multiplied deductions Wife was talking about and the huge impact they had on reported taxable income. Have no idea how much 'available income' (to coin a phrase) increased, but I bet it wasn't has much as the increase in taxable income.

With respect to corporate taxes, I was taught that the burden of those taxes (vs. the incidence) depended on the elasticity of supply and demand for a particular product. That would be a complicated analysis with a lot of assumptions. I imagine the burden of gasoline taxes falls more on the poor guy commuting from Tracy than on Chevron.

---

wifeisafurd said:

---

dajo9 said:

---

wifeisafurd said:

---

concordtom said:

---

DiabloWags said:

---

Are you saying that you had a "problem" with Barack Obama being President for 8 years?
Did you not like him or his policies?
They didnt "trickle" down to you?

---

I suppose I'd argue this point by pointing out that the trickle down concept has largely continued since Reagan, and the nation has become addicted to the new lower rates.

Anyone who raises taxes will be voted out. It's a national belief - low taxes.

I asked the question in my prior posts, what creates the greatest good for society while maintaining the motivation engine?




It's an open question, feel free to offer your solutions.

---

I would argue that those tax numbers have no relevance given how taxable income was calculated. Every time I hear some nimrod professor wanna be economist like Reich start talking about the those tax percentages that no one really paid, I hear my partners at the then Big 8 firm where I was a lowly senior accountant during the early '80s cranking out tax returns, laughing from their graves or retirement homes. In fact, the real "socialist" economists like Saenz and Pikettery actually disagree with politicos like Reich about tax rates causing income inequality.

Before Ronald Reagan's election in 1980, the top income tax bracket stood at or above 70 percent, where it had been since the Great Depression, sort off. The 1930s stated with rates in the 70s,, introduced income tax rates as high as in the 80% to pay for stimulus, and also started with the tax code being rewritten so no one actually paid that full amount. Even in the 30's and early 40s, rates jumped dramatically. After output plummeted in 1936, max rates went down to 24% and then in 1941 went to 90 plus percent for the war effort. And the rates went up and down a lot depending on the state of the economy or the federal government's needs. Where sometimes the top rate was so low many people would shake their head today, and so high even the very liberal would start using the word confiscatory. But the point was there were less extremes of income so almost everyone paid similar rates, and the super wealthy had their ways built into the system to not pay an "effective rate" that was anywhere near maximum rates.

The 1960s and 1970s were a time of massive inflation, with government deficits continuing to grow. The problem for taxpayers was taxes weren't indexed for it. This meant that although the real value of people's incomes was being decreased, they were also required to pay more taxes. Rather than rolling back rates, the tax code was was rewritten to allow deductions, lower tax rates were provided to private foundations, and a new animal was introduced into legislation called the tax shelter. The other thing that came out of the era was the negative income tax, where people below a certain income after receiving tax credits, got money back from the federal government they never put in. (Poli Sci majors will also point out that this is a period where lobbying for the wealthy and poor escalated dramatically).

But marginal tax brackets are misleading, as Wag's OP infers when it tells you who pays taxers. They tell you only the rate on the last dollar earned. The percentage of total income that you actually pay in taxes is known as the effective tax rate, and high wage earners have a large effective tax rate now. That calculation looks at income taxed at various rates as you move from one bracket to the next; it figures in taxes on capital gains and pensions; most economists are it figures in "imputed taxes" such as corporate and payroll taxes paid by your employer (on the theory that if your employer didn't give this money to government, it give it to you, which is somewhat a debatable point); and it removes from the total any money the federal government paid you in Social Security, welfare, unemployment benefits, or some other benefit. (The Congressional Budget Office does look at these factors to various degrees).


Reagan lowered top marginal tax rates (with Democratic help) a lot. He lowered top effective tax rates much less, because of the tax system he inherited that was changed. Start with Reagan dropped the top bracket from 70 percent to 50 percent, and eventually pushed it all the way down to 28 percent. Since then, it has hovered between around 30 to 40 percent, through GOP and Democratic Presidents. In 1979, the effective tax rate on the top 0.01 percent was 42.9 percent, according to the Congressional Budget Office. By Reagan's last year in office it was 35.2 percent. From 1989 to 2005, as income inequality continued to climb, the effective tax rate on the top 0.01 percent largely held steady; in most years it remained in the low 30s, surging to 41 during Clinton's first term but falling back during his second, where it remained. The change in the effective tax rate on the bottom 20 percent (i.e., poor and lower-middle-class people) was more dramatic, but not in a direction that would increase income inequality. Under Clinton, it dropped from 8 percent (about where it had stood since 1979) to 6.4 percent. Under George W. Bush, it fell to 4.3 percent. And it kind of bumps around in similar ways as you move on to Obama and Trump.

But what changed was pre-tax income and asset valuations, along with how we taxed. Starting with the latter, Congress (with Reagan's help) and the IRS in the early 1980s undertook an ambitious attack to combat the persistent tax shelter market and other ways the wealthy then sheltered income. It was quite common to be able to "write-off" vast multiples of an investment (e.g.. invest $10K, deduct $100K) by assuming non-recourse debt, and not being taxed on negative tax basis (if your not accountant, just take my word that this is huge). And the IRS never really knew the size of the original investment due to only one number came through on a tax return, in the example above, the $100k loss. Attacking tax shelters and other devices required more stringent reporting requirements, which is where new Treasury Regs came in. The IRS didn't even know how much revenue was being avoided. So what happened in the 1980s is due to tax reforms, is taxable income started going up because more income was being captured from the wealthy, though rates of that income went down. Which is why the effective rate starts straight-lining from President to President. There was also tax reform for abusive trusts and foundations and a surprisingly number of ways the wealthy avoided those 90% tax rates. One can presume that there was less pressure from the affluent because of rate reduction.

In any event, the "socialist" economists get this, and they don't blame income tax rates per se (with the exception of capital gains rates) for income inequality. The reality is that marginal federal tax rates have not changed that much since the 1980s (particularly in comparison to prior time periods), nor have effective tax rates despite all the noise you see in people reposting tweets with any providing any analyst or thought.

What the socialist eonomists do blame is that pre-tax national income going to the top 1 percent is going up as are asset asset values controlled by the wealthy. Now if that is true and why that is the case can be debated, and in the blame game you see such factors as immigration, increase in the return to capital versus labor, decline in labor strength due to waning union influence, capital gains preference, globalism, freer trade, etc. They also see it in imprerfections in our society (this is a big Krugman one), such as failures or unfairness in our education system. I'm not trying to argue their points for or against, I'm just saying read their stuff, and realize when it comes to income inequality, they are not pointing fingers at taxation under any specific recent President, or all the other rhetoric you often see in some uninformed retweet. (Though I can tell you the more inflation you have, the more Joe Biden's tax proposals are going to be met with resistance by more people absent indexing - see above).

---

It is not a coincidence that high end incomes blew up right after punitive high end tax rates went away. It is also not a coincidence that Federal deficits became a consistently huge issue after Reagan started reworking the tax code.

We have gone down this rabbit hole before and found that the big change in the pre-Reagan era and post-Reagan era is that corporate taxes have gone down and payroll taxes have gone up. Reduced corporate taxes mostly benefit high income earners and asset prices (sound familiar?) and higher payroll taxes mostly impact everyone else. We have all seen and lived through the impacts of the Reagan changes. We know what has happened - it can be sliced and diced and specific points analyzed in minutiae but it doesn't change the overall picture.

---

And I have agreed with a fair amount of that.

The effective tax rate for people who actually pay tax has essentially flat lined. If you talk with accountants, it is because of AMT and other devises which basically crawl back a lot of devises used to lower taxable Income. None of this helps with wealthy guys that have no taxable income (sorry for being so repetitive). Yet, you alway hear about the top marginal tax rate in discussions which misses the point.

The corporate tax is really political and the effective corporate rates do go up and down because we want business to do stuff through loopholes, or we want to stimulate the domestic economy (or presently de-stimulate?), or we want to raise taxes to finance government spending, or a bunch of other reasons often having nothing to do with economics. But since Reagan, and especially due to globalization pressure, the US tax policy is for reducing corporate tax burdens to protect domestic industry, and I might add, the beneficiaries are large corporations (especially those in in finance), because your entrepreneur types are usually using pass through entities.

I didn't get into this in the prior post, but we also have this cycle where we raise payroll taxes and particularly income caps, and then have the federal government provide people on the low end with more credits and stuff, which sounds both regressive and redistributive at the same time, and we wonder why everyone complains about complexity. But again, we end-up with wage earner bearing more of the burden, and I'm willing to concede that has to a certain degree impacted income distribution, as have had increasing asset values. The part I'm not as sure about is that reduced corporate taxes and higher payroll taxes benefits high income earners disproportionately. I think guys in the tech industry for example, where there is huge corporate tax avoidance through devises such as off-shoring money through royalty payments, get paid a lot because of supply and demand (they are highly educated and skilled) and they add value. Now they may benefit if they have options (or similar comp) because the company value is enhanced by paying less taxes - maybe. But tech stock values tend by influenced by a lot of factors that have nothing to do with cash flow (the primary benefit from saving taxes). There are similar situations in finance where the employee may have a piece of the deal or fees, but the primary beneficiary of less tax hit is equity.

But taking a step back, the discussion here is beyond the OP, as we dealing with taxing big business, not individuals. Congress could cream the Apples of the world on taxes if it wanted to, but in a global competitive environment is that what is good for the country? Does Apple just conduct its business elsewhere, because movement of capital and jobs is elastic in the long run, and raising effective taxes as some point go over some internal guard rail, where they pick-up a go to Austin (state tax issue) or Switzerland or some other place with a sophisticated work force and zoom capabilities due to higher federal taxes?

Being competitive or able to manipulate corporate conduct through tax incentives is the way our government (and I mean both parties) have decided to handle big business, with help no doubt from lobbyists. It doesn't change what Wags said, which is a disproportionate level of income taxes falls on affluent individuals who actually pay taxes.

---

dajo9 said:

---

This is the kind of income I am talking about
https://www.epi.org/publication/ceo-pay-in-2021/#:~:text=In%202021%2C%20the%20ratio%20of,%2Dto%2D1%20in%201989.

---

DiabloWags said:

---

dajo9 said:

---

This is the kind of income I am talking about
https://www.epi.org/publication/ceo-pay-in-2021/#:~:text=In%202021%2C%20the%20ratio%20of,%2Dto%2D1%20in%201989.

---

So if you are concerned about the growth of CEO and C-suite pay, what kind of corporate governance change do you propose?

A similar analogy would be the "arms" race that we see with D-1 football teams constantly upgrading practice facilities, stadiums, weight rooms, and now offering NIL money. Why would the NCAA go about "restricting" that? They clearly havent.

Publicly traded companies have compensation committees.
They set the compensation of their Executives based on other executives pay in the same industry.
Clearly it's been an arms race over the years.

Sounds like you want some kind of government regulation?

How would you do that?
Based on what metrics?

At the end of the day, it is the SHAREHOLDERS that wind up voting on these pay packages.
Is that not a democratic solution by the people most impacted by CEO compensation?

Why should you care how much USC or Texas spends on their football program?
Why should you care how much shareholders (ultimately) decide on what to pay their CEO?

---

DiabloWags said:

---

dajo9 said:

---

This is the kind of income I am talking about
https://www.epi.org/publication/ceo-pay-in-2021/#:~:text=In%202021%2C%20the%20ratio%20of,%2Dto%2D1%20in%201989.

---

So if you are concerned about the growth of CEO and C-suite pay, what kind of corporate governance change do you propose?

A similar analogy would be the "arms" race that we see with D-1 football teams constantly upgrading practice facilities, stadiums, weight rooms, and now offering NIL money. Why would the NCAA go about "restricting" that? They clearly havent.

Publicly traded companies have compensation committees.
They set the compensation of their Executives based on other executives pay in the same industry.
Clearly it's been an arms race over the years.

Sounds like you want some kind of government regulation?

How would you do that?
Based on what metrics?

At the end of the day, it is the SHAREHOLDERS that wind up voting on these pay packages.
Is that not a democratic solution by the people most impacted by CEO compensation?

Why should you care how much USC or Texas spends on their football program?
Why should you care how much shareholders (ultimately) decide on what to pay their CEO?

---

DiabloWags said:

---

So if you are concerned about the growth of CEO and C-suite pay, what kind of corporate governance change do you propose?

Publicly traded companies have compensation committees.
They set the compensation of their Executives based on other executives pay in the same industry.
Clearly it's been an arms race over the years.

At the end of the day, it is the SHAREHOLDERS that wind up voting on these pay packages.
Is that not a democratic solution by the people most impacted by CEO compensation?

---

dajo9 said:

---

DiabloWags said:

---

dajo9 said:

---

This is the kind of income I am talking about
https://www.epi.org/publication/ceo-pay-in-2021/#:~:text=In%202021%2C%20the%20ratio%20of,%2Dto%2D1%20in%201989.

---

So if you are concerned about the growth of CEO and C-suite pay, what kind of corporate governance change do you propose?

A similar analogy would be the "arms" race that we see with D-1 football teams constantly upgrading practice facilities, stadiums, weight rooms, and now offering NIL money. Why would the NCAA go about "restricting" that? They clearly havent.

Publicly traded companies have compensation committees.
They set the compensation of their Executives based on other executives pay in the same industry.
Clearly it's been an arms race over the years.

Sounds like you want some kind of government regulation?

How would you do that?
Based on what metrics?

At the end of the day, it is the SHAREHOLDERS that wind up voting on these pay packages.
Is that not a democratic solution by the people most impacted by CEO compensation?

Why should you care how much USC or Texas spends on their football program?
Why should you care how much shareholders (ultimately) decide on what to pay their CEO?

---

Thank you for articulating the values of unrestricted capitalism so well.

I have almost entirely stopped following college football because it only works for the few. Your analogy is very well said.

---

Unit2Sucks said:

---

I think we need to start by taxing corporations again. I used to be a fan of very low taxes for corporations on the assumption that the taxes are better born by stockholders but in reality ~40% of US corps are foreign-held and we are essentially giving foreign nationals tax breaks for no good reason. We should unwind Trump's corporate tax cuts and go from there.

---

DiabloWags said:

---

Unit2Sucks said:

---

I think we need to start by taxing corporations again. I used to be a fan of very low taxes for corporations on the assumption that the taxes are better born by stockholders but in reality ~40% of US corps are foreign-held and we are essentially giving foreign nationals tax breaks for no good reason. We should unwind Trump's corporate tax cuts and go from there.

---

Although I tend to agree with you, that's a slippery slope given that U.S. multinational corporations see 43% of their overseas profits come from three low-tax countries: The Netherlands, Ireland, and Luxembourg. Add in the UK and Bermuda and that net income as a share of total climbs to 59%

Despite the enactment of the 2017 Tax Cuts and Jobs Act which reduced these "incentives", current rules still encourage US multinational firms to earn and report profits in low-tax foreign countries., enable both US and foreign based firms to shift profits earned in the U.S. to other countries, and encourage companies to incorporate in foreign jurisdictions.

It's obviously a complicated slippery slope.


What are the consequences of the new US international tax system? | Tax Policy Center

---

Unit2Sucks said:

---

I think our tax system first and foremost should work for the US but what Trump did disproportionately benefited wealthy foreigners like his buddies in Saudi Arabia who turned around and gave Kushner $2B to "invest".

---

concordtom said:

---

wifeisafurd said:

---

dajo9 said:

---

wifeisafurd said:

---

concordtom said:

---

DiabloWags said:

---

Are you saying that you had a "problem" with Barack Obama being President for 8 years?
Did you not like him or his policies?
They didnt "trickle" down to you?

---

I suppose I'd argue this point by pointing out that the trickle down concept has largely continued since Reagan, and the nation has become addicted to the new lower rates.

Anyone who raises taxes will be voted out. It's a national belief - low taxes.

I asked the question in my prior posts, what creates the greatest good for society while maintaining the motivation engine?




It's an open question, feel free to offer your solutions.

---

I would argue that those tax numbers have no relevance given how taxable income was calculated. Every time I hear some nimrod professor wanna be economist like Reich start talking about the those tax percentages that no one really paid, I hear my partners at the then Big 8 firm where I was a lowly senior accountant during the early '80s cranking out tax returns, laughing from their graves or retirement homes. In fact, the real "socialist" economists like Saenz and Pikettery actually disagree with politicos like Reich about tax rates causing income inequality.

Before Ronald Reagan's election in 1980, the top income tax bracket stood at or above 70 percent, where it had been since the Great Depression, sort off. The 1930s stated with rates in the 70s,, introduced income tax rates as high as in the 80% to pay for stimulus, and also started with the tax code being rewritten so no one actually paid that full amount. Even in the 30's and early 40s, rates jumped dramatically. After output plummeted in 1936, max rates went down to 24% and then in 1941 went to 90 plus percent for the war effort. And the rates went up and down a lot depending on the state of the economy or the federal government's needs. Where sometimes the top rate was so low many people would shake their head today, and so high even the very liberal would start using the word confiscatory. But the point was there were less extremes of income so almost everyone paid similar rates, and the super wealthy had their ways built into the system to not pay an "effective rate" that was anywhere near maximum rates.

The 1960s and 1970s were a time of massive inflation, with government deficits continuing to grow. The problem for taxpayers was taxes weren't indexed for it. This meant that although the real value of people's incomes was being decreased, they were also required to pay more taxes. Rather than rolling back rates, the tax code was was rewritten to allow deductions, lower tax rates were provided to private foundations, and a new animal was introduced into legislation called the tax shelter. The other thing that came out of the era was the negative income tax, where people below a certain income after receiving tax credits, got money back from the federal government they never put in. (Poli Sci majors will also point out that this is a period where lobbying for the wealthy and poor escalated dramatically).

But marginal tax brackets are misleading, as Wag's OP infers when it tells you who pays taxers. They tell you only the rate on the last dollar earned. The percentage of total income that you actually pay in taxes is known as the effective tax rate, and high wage earners have a large effective tax rate now. That calculation looks at income taxed at various rates as you move from one bracket to the next; it figures in taxes on capital gains and pensions; most economists are it figures in "imputed taxes" such as corporate and payroll taxes paid by your employer (on the theory that if your employer didn't give this money to government, it give it to you, which is somewhat a debatable point); and it removes from the total any money the federal government paid you in Social Security, welfare, unemployment benefits, or some other benefit. (The Congressional Budget Office does look at these factors to various degrees).


Reagan lowered top marginal tax rates (with Democratic help) a lot. He lowered top effective tax rates much less, because of the tax system he inherited that was changed. Start with Reagan dropped the top bracket from 70 percent to 50 percent, and eventually pushed it all the way down to 28 percent. Since then, it has hovered between around 30 to 40 percent, through GOP and Democratic Presidents. In 1979, the effective tax rate on the top 0.01 percent was 42.9 percent, according to the Congressional Budget Office. By Reagan's last year in office it was 35.2 percent. From 1989 to 2005, as income inequality continued to climb, the effective tax rate on the top 0.01 percent largely held steady; in most years it remained in the low 30s, surging to 41 during Clinton's first term but falling back during his second, where it remained. The change in the effective tax rate on the bottom 20 percent (i.e., poor and lower-middle-class people) was more dramatic, but not in a direction that would increase income inequality. Under Clinton, it dropped from 8 percent (about where it had stood since 1979) to 6.4 percent. Under George W. Bush, it fell to 4.3 percent. And it kind of bumps around in similar ways as you move on to Obama and Trump.

But what changed was pre-tax income and asset valuations, along with how we taxed. Starting with the latter, Congress (with Reagan's help) and the IRS in the early 1980s undertook an ambitious attack to combat the persistent tax shelter market and other ways the wealthy then sheltered income. It was quite common to be able to "write-off" vast multiples of an investment (e.g.. invest $10K, deduct $100K) by assuming non-recourse debt, and not being taxed on negative tax basis (if your not accountant, just take my word that this is huge). And the IRS never really knew the size of the original investment due to only one number came through on a tax return, in the example above, the $100k loss. Attacking tax shelters and other devices required more stringent reporting requirements, which is where new Treasury Regs came in. The IRS didn't even know how much revenue was being avoided. So what happened in the 1980s is due to tax reforms, is taxable income started going up because more income was being captured from the wealthy, though rates of that income went down. Which is why the effective rate starts straight-lining from President to President. There was also tax reform for abusive trusts and foundations and a surprisingly number of ways the wealthy avoided those 90% tax rates. One can presume that there was less pressure from the affluent because of rate reduction.

In any event, the "socialist" economists get this, and they don't blame income tax rates per se (with the exception of capital gains rates) for income inequality. The reality is that marginal federal tax rates have not changed that much since the 1980s (particularly in comparison to prior time periods), nor have effective tax rates despite all the noise you see in people reposting tweets with any providing any analyst or thought.

What the socialist eonomists do blame is that pre-tax national income going to the top 1 percent is going up as are asset asset values controlled by the wealthy. Now if that is true and why that is the case can be debated, and in the blame game you see such factors as immigration, increase in the return to capital versus labor, decline in labor strength due to waning union influence, capital gains preference, globalism, freer trade, etc. They also see it in imprerfections in our society (this is a big Krugman one), such as failures or unfairness in our education system. I'm not trying to argue their points for or against, I'm just saying read their stuff, and realize when it comes to income inequality, they are not pointing fingers at taxation under any specific recent President, or all the other rhetoric you often see in some uninformed retweet. (Though I can tell you the more inflation you have, the more Joe Biden's tax proposals are going to be met with resistance by more people absent indexing - see above).

---

It is not a coincidence that high end incomes blew up right after punitive high end tax rates went away. It is also not a coincidence that Federal deficits became a consistently huge issue after Reagan started reworking the tax code.

We have gone down this rabbit hole before and found that the big change in the pre-Reagan era and post-Reagan era is that corporate taxes have gone down and payroll taxes have gone up. Reduced corporate taxes mostly benefit high income earners and asset prices (sound familiar?) and higher payroll taxes mostly impact everyone else. We have all seen and lived through the impacts of the Reagan changes. We know what has happened - it can be sliced and diced and specific points analyzed in minutiae but it doesn't change the overall picture.

---

And I have agreed with a fair amount of that.

The effective tax rate for people who actually pay tax has essentially flat lined. If you talk with accountants, it is because of AMT and other devises which basically crawl back a lot of devises used to lower taxable Income. None of this helps with wealthy guys that have no taxable income (sorry for being so repetitive). Yet, you alway hear about the top marginal tax rate in discussions which misses the point.

The corporate tax is really political and the effective corporate rates do go up and down because we want business to do stuff through loopholes, or we want to stimulate the domestic economy (or presently de-stimulate?), or we want to raise taxes to finance government spending, or a bunch of other reasons often having nothing to do with economics. But since Reagan, and especially due to globalization pressure, the US tax policy is for reducing corporate tax burdens to protect domestic industry, and I might add, the beneficiaries are large corporations (especially those in in finance), because your entrepreneur types are usually using pass through entities.

I didn't get into this in the prior post, but we also have this cycle where we raise payroll taxes and particularly income caps, and then have the federal government provide people on the low end with more credits and stuff, which sounds both regressive and redistributive at the same time, and we wonder why everyone complains about complexity. But again, we end-up with wage earner bearing more of the burden, and I'm willing to concede that has to a certain degree impacted income distribution, as have had increasing asset values. The part I'm not as sure about is that reduced corporate taxes and higher payroll taxes benefits high income earners disproportionately. I think guys in the tech industry for example, where there is huge corporate tax avoidance through devises such as off-shoring money through royalty payments, get paid a lot because of supply and demand (they are highly educated and skilled) and they add value. Now they may benefit if they have options (or similar comp) because the company value is enhanced by paying less taxes - maybe. But tech stock values tend by influenced by a lot of factors that have nothing to do with cash flow (the primary benefit from saving taxes). There are similar situations in finance where the employee may have a piece of the deal or fees, but the primary beneficiary of less tax hit is equity.

But taking a step back, the discussion here is beyond the OP, as we dealing with taxing big business, not individuals. Congress could cream the Apples of the world on taxes if it wanted to, but in a global competitive environment is that what is good for the country? Does Apple just conduct its business elsewhere, because movement of capital and jobs is elastic in the long run, and raising effective taxes as some point go over some internal guard rail, where they pick-up a go to Austin (state tax issue) or Switzerland or some other place with a sophisticated work force and zoom capabilities due to higher federal taxes?

Being competitive or able to manipulate corporate conduct through tax incentives is the way our government (and I mean both parties) have decided to handle big business, with help no doubt from lobbyists. It doesn't change what Wags said, which is a disproportionate level of income taxes falls on affluent individuals who actually pay taxes.

---

I think I'm going to just shut up and hire you to do my taxes and advise on tax avoidance strategy.
Thanks. I look forward to being rich!

---