The impact of adjusting taxes for the top 1%

It has been one of the underlining aspects of talking about the economy and taxes. What impact would tax increases for millionaires and especially the top 1% have on the economy and also other issues? Many led by Warren Buffet have called for those with more money being committed to helping others and giving a little more back financially. It has divided both parties and in a watershed bipartisan moment a couple years there was agreement on ending tax cuts for the top tier of the tax bracket. There was an article recently that took a deeper look at the impact of a slight increase on taxes for the top 1% and what it could lead to.

Here is that piece from Patricia Cohen from the New York Times:

When it comes to paying taxes, most Americans think the wealthy do notpay their fair share.

There is a sharp divide, however, between Republicans and Democrats when it comes to taxing the rich, who provide most of the cash for political campaigns.

All the Republican tax proposals, in fact, cut taxes for the wealthiest Americans. Democrats, on the other hand, are prepared to raise taxes at the top, though they have not been very specific about how they would do so.

“Right now, the wealthy pay too little,” Hillary Rodham Clinton said at this week’s Democratic debate in Las Vegas, “and the middle class pays too much.”

But what could a tax-the-rich plan actually achieve? As it turns out, quite a lot, experts say. Given the gains that have flowed to those at the tip of the income pyramid in recent decades, several economists have been making the case that the government could raise large amounts of revenue exclusively from this small group, while still allowing them to take home a majority of their income.

It is “absurd” to argue that most wealth at the top is already highly taxed or that there isn’t much more revenue to be had by raising taxes on the 1 percent, says the economist Joseph E. Stiglitz, winner of the Nobel in economic science, who has written extensively about inequality. “The only upside of the concentration of the wealth at the top is that they have more money to pay in taxes,” he said.

The top 1 percent on average already pay roughly a third of their incomes to the federal government, according to a Treasury Department analysisthat takes into account the entire menu of taxes — including income tax, payroll taxes that fund Medicare and Social Security, estate and gift taxes, excise and custom duties as well as investors’ share of corporate taxes. The tax bite on the top 0.1 percent is a bit higher. Most of those taxpayers insist they are already paying more than enough.

By comparison, the band of taxpayers right below them, in the 95th to 99th percentile, pay on average about $1 out of every $4. Those in the bottom half pay less than $1 out of every $10.

Sidestepping for the moment the messy question of just which taxes would be increased, how much more revenue could be generated by asking the rich to pay a larger share of their income in taxes?

To get the most accurate picture possible, throw in all the scraps of income, from the most obvious (like wages, interest and dividends) to the least (like employer contributions to health plans, overseas earnings and growth in retirement accounts). According to that measure — used by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution — the top 1 percent includes about 1.13 million households earning an average income of $2.1 million.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion. Even taking account of state and local taxes, the average household in this group would still take home at least $1 million a year.

If the tax increase were limited to just the 115,000 households in the top 0.1 percent, with an average income of $9.4 million, a 40 percent tax rate would produce $55 billion in extra revenue in its first year.

That would more than cover, for example, the estimated $47 billion cost of eliminating undergraduate tuition at all the country’s four-year public colleges and universities, as Senator Bernie Sanders has proposed, or Mrs. Clinton’s cheaper plan for a debt-free college degree, with money left over to help fund universal prekindergarten.

A tax rate of 45 percent on this select group raises $109 billion, more than enough to pay for the first year of a new $2,500 child tax credit introduced by Senator Marco Rubio, Republican of Florida.

Move a rung down the ladder and expand the contribution of those in the 95th to 99th percentile — who earn on average $405,000. Raising their total tax rate to 30 percent from a quarter of their total yearly income would generate an additional $86 billion. That’s enough to cover the cost over eight years of repealing the so-called Cadillac Tax on high-cost health plans, which Senator Sanders and Mrs. Clinton have endorsed.

A 35 percent share produces $176 billion — roughly the amount that the Federal Highway Administration has estimated is needed each year to improve conditions significantly on major urban highways.

Alternatively, those tax increases could be used to help reduce government borrowing: Some combination of those raises could go a long way toward wiping out this year’s estimated federal deficit of $426 billion.

“Most economists today would agree that raising taxes modestly would bring in more revenue” without doing any serious damage to the economy, said Roberton Williams, a fellow at the Tax Policy Center. The big question is how much is too much, because at some point, higher tax rates would discourage extra investment and work.

All the Republican candidates share the party’s traditional opposition to raising taxes on the wealthy, arguing that it would ruin the economy by sopping up money that would otherwise be used to create jobs. Lowering taxes, they say, will unleash a torrent of economic activity that will in the long run spur growth and revenue.

But most mainstream economists, including some on the conservative side of the divide, concede that even with optimistic projections about growth and spending cuts, the Republican plans would leave a whopping budget gap, requiring more borrowing, not less. Revamping the tax code along these lines would also decrease the share paid by those at the top.

The argument for raising tax rates on the rich tends to focus on the vastgains that this group has enjoyed in recent years compared with everyone else. The top 0.1 percent of American families — each with net assets greater than $20 million — own more than 20 percent of the all the household wealth in the country. In the 1970s, that same sliver of the population controlled 7 percent.

That shift is behind Senator Sanders’s repeated vow to compel Wall Streeters and others in the Rolex-and-Maserati set to pay more than they do now.

“Let me tell you, Donald Trump and his billionaire friends under my policies are going to pay a hell of a lot more in taxes today — taxes in the future than they’re paying today,” he declared in Las Vegas.

Middle-income families make substantially less money than they did 15 years ago, once inflation is taken into account. The economist Thomas Piketty blames, among other things, “the spectacular lowering of top income tax rates” for the sharp rise in inequality.

The lower rate — generally a maximum of 23.8 percent — on capital gains, or profits from investments, is particularly problematic, Mr. Piketty argues. Estimates show that nearly 70 percent of capital gains benefits go to the top 1 percent. A recent study by Adam Looney at Brookings and Kevin B. Moore at the Federal Reserve found that “the reduction in the long-term capital gains rate is the primary reason” that the income tax system had become less effective in reducing wealth inequality.

Aided by a phalanx of lawyers and accountants, the rich have become adept at figuring out ways to shift earnings that would normally be taxed at the top 39.6 percent rate on ordinary income into capital gains, said the economist Gabriel Zucman of the University of California, Berkeley, who is researching the link between widening inequality and tactics — legal and illegal — used by the wealthy to sidestep taxes.

Shifting earnings from one tax category to another is part of the reason that even the top 0.1 percent pay on average no more than a quarter of their income in federal individual income taxes — despite that top tax bracket of 39.6 percent, according to a Treasury Department analysis.

“Why give a blank check to all of these guys?” Mr. Stiglitz, the liberal economist, asked. He pointed out that current tax law makes no distinction between, say, investing abroad, speculating in land or building a new factory. A better approach, he said, is to say: “We’ll give you generous deductions if you invest in America.”

Eliminating the preferential rates on capital and dividends would generate $1.34 trillion over the next 10 years, according to the nonpartisan Congressional Budget Office.

Other breaks that critics say subsidize wealth inequality include one that allows people to avoid capital gains taxes on inherited assets. Getting rid of that adjustment would generate $644 billion over a 10-year period, according to the Congressional Budget Office.

Ending the deferral on corporate profits kept overseas — a boon for the wealthy that Robert S. McIntyre, the director of Citizens for Tax Justice, calls “the biggest corporate loophole” — would generate $900 billion over 10 years. (Mr. Trump also supports shutting down that deferral.)

Although an overwhelming proportion of Americans complain that many wealthy people don’t pay their fair share in taxes, Democratic voters are more likely to be upset about it than Republicans. According to the Pew Research Center survey, nearly three out of every four Democrats said it bothers them “a lot” compared to 45 percent of Republicans.

Yet the problem that any president — Democrat or Republican — is going to face in altering the tax code is getting Congress to agree. Researchershave repeatedly found that a top priority of the wealthy is reducing their tax burden and that they largely prefer, unlike a majority of the general public, to cut spending rather than raise taxes.

Senator Ron Wyden, the top Democrat on the Finance Committee, said maneuvering any tax overhaul “through that gauntlet of special interests is a herculean task.”


For a chart that examines incomes/taxes: http://www.nytimes.com/2015/10/17/business/putting-numbers-to-a-tax-increase-for-the-rich.html?emc=edit_au_20151016&nl=afternoonupdate&nlid=60735184&_r=0

The shooting aftermath carousel

When you go to a carnival or an amusement park, there might be a carousel. Each time you ride it, it is a similar story: you get on, go in a circle, and get off. Nothing tends to change. You might sit on a different horse. But the same story repeats itself. While not exactly the same but unfortunately a repetitive story is the headlines about gun shootings in this country. There are different factors and events but the end result is still the same. From Virginia Tech to Tucson to Aurora to Newtown to now Rosenburg. One could feasibly make a list as long as listing the colors in one of those large Crayola boxes of shootings throughout the year. This issue is complex and there is no ultimate solution or 24 hour fix but the fact that there has not been any movements to limit the growing list from occurring is beyond ridiculous. It is not often that 90% of the country can agree on something and there has been that high of support for some type of reforms to take place. When young children are impacted by the lack of efforts, those against doing anything have to take a hard look at their conscience. When anyone is senselessly killed, there should be a serious conversation about to prevent that from happening again.

This week the New York Times took a look at what has become a sad repetitive story with gun violence and a lack of action.

The piece outlines:

The Republican presidential candidates were quick to offer sympathy but little else to the nation, to the grieving families and to the terrified town where the latest in American gun carnage took 10 lives on Thursday at an Oregon community college.

“We have to really get to the bottom of it,” Donald Trump, usually the most voluble candidate in offering quick-fix certainty about national challenges, told The Washington Post. “It’s so hard to even talk about these things.”

Now, as the presidential campaigns intensify, is precisely the time that he and the other candidates must talk about these things — about the horrendous toll the mass shootings have inflicted on the nation, with no end in sight. Like other Republican politicians, and many Democrats, too, Mr. Trump simplistically narrowed the topic of the gun massacre to “another mental health problem.”

This has become the standard political line, particularly among Republicans, for ducking the crucial fact that easy access to powerful arsenals — the Oregon murderer reportedly had 13 firearms, six of which he brought with him — is the great modern enabler for individuals, mentally ill or not, to massacre the innocent in shooting sprees.

The contrast could not be greater between the bromide-driven slate of Republican candidates promising thoughts and prayers after “this senseless tragedy” and President Obama in his understandable fury and near despair over the political cowering to the gun industry and its lobbyists. Mass shootings have become an unsurprising part of American life, with lame public rituals in which politicians express grief and then retreat quickly into denial about this scourge.

The gun lobby has such a grip on Congress that it has successfully squelched most federal research on the problem. It wasn’t until last year that the Federal Bureau of Investigation, prompted by the White House, issued a report confirming that mass shootings have been rising significantly in recent years.

In a 13-year study, analysts found that while the average number of annual shooting sprees with multiple casualties was 6.4 a year from 2000 to 2006, that number jumped to 16.4 a year from 2007 to 2013. The study found that many of the gunmen had studied previous high-profile shootings and were attracted to the attention that mass killers received when they staged lethal attacks.

Modern high-powered weapons, adapted from war and unscrupulously marketed on the home front, have unfortunately provided the means for a shooter to act out his anger and despair in a matter of minutes. The state-sponsored citizens report on the gun massacre of 20 schoolchildren and six workers in Newtown, Conn., in 2012 concluded there is “no legitimate place in the civilian population” for fast-firing rifles and large-capacity magazines that were invented for the military but have flooded the American marketplace.

These are the problems that political leaders should be discussing after the latest gun tragedy. Democratic presidential candidates have not ducked the issue. Hillary Rodham Clinton has repeatedly called for greater gun safety, telling voters, “We have to take on the gun lobby.” Bernie Sanders, who as a senator from Vermont has been criticized for not being strong enough on the issue, firmly endorsed President Obama’s gun control agenda after the Oregon massacre. He said he is tired of sending condolences to grieving families after these brutal murders.

Republican candidates should be no less tired of sending condolences. In the presidential debates, they should not be allowed to retreat behind the mental health issue and avoid confronting the grim reality. They should explain what actions they will take, if elected, to avoid being the nation’s serial griever-in-chief.

Are lies and discrimination what the GOP electorate want?

This election cycle has been more complex in various ways than the last few that provided their own series of complex twists and turns. It seems that when a candidate says something outrageous they don't lose 10 points in the polls; they gain 10 points. They might be challenged by some but still continue to stretch lies and that too can be rewarded as some would call out "media biases". This week, Paul Waldman of the Washington Post provided his take on what seems be presidential candidates discriminating and lying their way to the top of polls.

Waldman's piece:

A new NBC News/Wall Street Journal poll shows a remarkable result: Ben Carson has moved into essentially a tie for the lead, with Donald Trump scoring 21 percent and Carson scoring 20 percent. They are followed by Marco Rubio and Carly Fiorina at 11 percent. Carson and Fiorina’s rise comes at a time when one of them is getting large amounts of media coverage for his ignorant, even bigoted remarks about Muslims, and the other is getting lots of coverage for a lie about Planned Parenthood videos she keeps stubbornly repeating no matter how many times it’s debunked.

While the details of these two cases are important, what’s even more important is the fact that the controversies may be helping Carson and Fiorina in the primaries, not hurting them. Welcome to the GOP, circa 2015.

Let’s start with Carson. Last weekend, Carson told Chuck Todd on Meet the Press that no Muslim should be elected president. Given the chance to clarify his remarks, he didn’t back off at all, saying: “Muslims feel that their religion is very much a part of your public life and what you do as a public official, and that’s inconsistent with our principles and our Constitution.” He did allow that a Muslim could be president if he or she “publicly rejected all the tenets of sharia,” explaining that Muslim politicians are particularly dangerous because “Taqiyya is a component of Sharia that allows, and even encourages you to lie to achieve your goals.” This is complete nonsense, but it reflects Carson’s level of understanding of Islam.

You might think that at this point, someone close to the candidate would say to him, “Gee, Dr. Carson, you’re getting a lot of questions about Islam. Maybe you should read something about it, or, I don’t know, talk to a scholar who can answer questions you might have. What do you think?” If anyone did suggest that, it appears that Carson would have replied with something like, “That’s okay — I listened to Glenn Beck talk about Islam on his radio show one time, so I’m all good. I’ve got everything I need to know.”

This weekend, Carson appeared on CNN’s State of the Union and ABC’s This Week and stuck to his guns. He and CNN’s Jake Tapper went back and forth over the issue, with Carson insisting repeatedly that for a Muslim to be president, “you have to reject the tenets of Islam.” To ABC’s Martha Raddatz, he said, “what I would like for somebody to show me is an improved Islamic text that opposes sharia,” by way of explaining why Islam is so suspect. Carson seems to think that “sharia” (which just means “law” in Arabic) is a specific, agreed-upon set of governing instructions that all Muslims who haven’t expressly denounced it believe in. But it’s nothing of the sort. The Taliban have their idea of what Islamic law is, just as David Koresh had his idea of what Christian law is, but the idea that we should assume barring any public disavowals that every Muslim believes what the Taliban believe makes no more sense than assuming that every Christian shares Koresh’s views.

Now to be clear, my position has long been that candidates should be asked detailed questions about their religious beliefs in proportion to the degree they say those beliefs will impact what they would do as president. If a candidate says, “My faith is a source of comfort and contemplation,” then the details aren’t particularly important. But if he says, “My faith is the foundation of everything I do every day and everything I believe about the world,” then we need to know a lot more about the specifics of what he actually believes.

But Carson argues that unlike people of other faiths, Muslims are inherently suspect because of something he heard somebody say about Islam, and therefore that Muslim politicians have a special responsibility to publicly disavow every interpretation anybody anywhere has made of any passage in the Koran that might be shocking to someone who knows nothing about Islam.

So what if we applied the same principle to Christians and Jews? After all, the Bible is full of very concrete and specific commands that could relate directly to governing — commands that in many cases, only a complete lunatic would believe in — and if Carson is right, then people whose religions are based on that scripture should be required to make a public statement of disavowal for every one of them.

For instance, Deuteronomy 22 states that if a man rapes a virgin, he must give her father 50 shekels and marry her. I would be shocked if any of the current presidential candidates thought that prescription should be enshrined in American law, but just in case, perhaps we ought to make all of them publicly disavow it. Ditto for Exodus 31’s insistence that anyone who desecrates the Sabbath must be put to death, and anyone who works on that day must be exiled from his people. A campaign to cast out every American who has answered work emails on a Sunday would be even harder to achieve than Donald Trump’s idea to round up 11 million undocumented immigrants, but we need to know if, as believers, the candidates are planning such a thing.

If you think I’m being ridiculous, you’re absolutely right. So why is it that Ben Carson is being any less ridiculous? And more to the point, why is it that so many Republican voters hear what Carson is saying, and respond, “Hey, he’s right! That’s who I’m voting for!”

Before we answer that question, let’s turn to Fiorinia. In the last Republican debate, the topic of secretly recorded Planned Parenthood videos came up, and Fiorina said passionately, “I dare Hillary Clinton, Barack Obama, to watch these tapes. Watch a fully formed fetus on the table, its heart beating, its legs kicking, while someone says ‘We have to keep it alive to harvest its brain.'” While it received huge applause, the line was false. The Planned Parenthood videos contain someone describing a similar scene, but not what Fiorina claimed was in them.

Which might not be a big deal — afterward, Fiorina could have said, “I mixed up something in those videos with things I had seen and heard elsewhere,” and we could still have a reasonable debate about the merits of fetal tissue research. But that’s not what she said. Instead, after practically every single fact-checking enterprise declared her claim false (here’s Politifact, here’sFactCheck.org), her campaign released its own cobbled-together video, using footage not from Planned Parenthood of a fetus kicking on a table, in an attempt to claim that Fiorina was actually telling the truth. Even in their phony video, which includes a photo of a stillborn baby being passed off dishonestly as a photo of an aborted fetus, there isn’t anyone saying, “We have to keep it alive to harvest its brain.” This is, as Dahlia Lithwick says, “trying to doctor doctored videotapes and still failing to produce an image that corresponds to Fiorina’s narrative. It’s truthiness elevated to almost cosmic levels.”

But most remarkably, Fiorina continues to insist, no matter who asks her, that she never said anything untrue about the original Planned Parenthood videos. When Chris Wallace asked her on Fox News Sunday last week, “Do you acknowledge what every fact checker has found, that as horrific as that scene is, it was only described on the video by someone who claimed to have seen it?”, she answered, “No, I don’t accept that at all. I’ve seen the footage.” Yesterday she appeared on Meet the Press, and Chuck Todd asked her, “There is no evidence that the scene you described exists. Are you willing now to concede that you exaggerated that scene?” She replied, “No, not at all. That scene absolutely does exist. And that voice saying what I said they were saying, ‘We’re going to keep it alive to harvest its brain’ exists as well.”

There’s no reason why a conservative couldn’t say to her, “Look, I agree with everything you believe about abortion and Planned Parenthood, but you just need to admit you misspoke and move on.” But Fiorina has seemingly decided that the proper strategy is to just keep lying about what is in the end just a detail related to a larger policy issue, no matter how many people point out that she’s lying.

And why not? It’s working. While not long ago her support was too small to measure, she’s now in double-digits in the polls, while other candidates are faltering. The people rallying to support her don’t seem to care. Quite the contrary — they may be looking at this controversy and concluding that Fiorina is standing up to all those media bullies with their “facts” and their “evidence,” just like Ben Carson is telling it like it is on why the Constitution is for people like us, not people like them.

However this primary race turns out, at the moment more than half the Republican electorate is supporting either 1) a spectacularly xenophobic candidate who wants to round up 11 million people and build a wall around America; 2) a candidate who thinks that we ought to have religious tests for high office; or 3) a candidate who evinces few qualms about lying repeatedly even after her lies have been carefully documented. This is a party with a lot to be proud of.