Zombie_Pundit
Member
- May 12, 2014
- 286
- 23
- 16
There was a strange phenomenon in the 1980s called the "Tax Bubble" by which someone earning $50k suffered a greater marginal tax rate than someone earning $300k. This wasn't a trick involving "capital gains" or loopholes or deductions. The tax burden was, at least prima facie, placed unduly on average income earners.
Here are some links on the subject:
see nytimes 1990/09/25 "Here's How the 'Tax Bubble' Works"
see latimes 1990-07-08 "Push to Pop the Tax Bubble Sparks Debate"
I would post actual links but the site tells me You are only allowed to post URLs to other sites after you have made 15 posts or more.
I have never been able to understand how this system was justifiable. The articles above demonstrate how the bubble works and give some historical context. There is even a quote from Bill Bradley...
"Many people believe--incorrectly--that taxpayers subject to the 33% rate are being treated unfairly compared to higher-income taxpayers whose marginal rate is 28%," Sen. Bill Bradley (D-N.J.), one of the key architects of tax reform, pointed out in a recent letter to his Senate colleagues. "In fact, the 'bubble' does not reward the rich . . . it enhances the tax system's progressivity."
I don't get it, Senator Bradley. That makes no sense!
I understand that the tax rate as a function of income, due to the break points in the function, may have some "corner cases" that cause a slightly lower wage earner to be taxed at a slightly higher rate than a slightly higher wage earner. What I don't understand is why that point would be designed (Was it deliberate? I'm assuming Congress knows what it is doing.) to be in the center of wages for middle income families. And why such a steep discontinuity for such a long period of incomes (the period of incomes in question is rather long if one considers the density of people in that bracket or a log scale of incomes).
Can anyone help me understand the logic behind the 1986 tax bubble? I would love to hear some explanations. I am baffled by this event in history.
This bubble was popped decades ago. This is old news. I can't help it. I am made of reanimated flesh, you know.
Here are some links on the subject:
see nytimes 1990/09/25 "Here's How the 'Tax Bubble' Works"
see latimes 1990-07-08 "Push to Pop the Tax Bubble Sparks Debate"
I would post actual links but the site tells me You are only allowed to post URLs to other sites after you have made 15 posts or more.
I have never been able to understand how this system was justifiable. The articles above demonstrate how the bubble works and give some historical context. There is even a quote from Bill Bradley...
"Many people believe--incorrectly--that taxpayers subject to the 33% rate are being treated unfairly compared to higher-income taxpayers whose marginal rate is 28%," Sen. Bill Bradley (D-N.J.), one of the key architects of tax reform, pointed out in a recent letter to his Senate colleagues. "In fact, the 'bubble' does not reward the rich . . . it enhances the tax system's progressivity."
I don't get it, Senator Bradley. That makes no sense!
I understand that the tax rate as a function of income, due to the break points in the function, may have some "corner cases" that cause a slightly lower wage earner to be taxed at a slightly higher rate than a slightly higher wage earner. What I don't understand is why that point would be designed (Was it deliberate? I'm assuming Congress knows what it is doing.) to be in the center of wages for middle income families. And why such a steep discontinuity for such a long period of incomes (the period of incomes in question is rather long if one considers the density of people in that bracket or a log scale of incomes).
Can anyone help me understand the logic behind the 1986 tax bubble? I would love to hear some explanations. I am baffled by this event in history.
This bubble was popped decades ago. This is old news. I can't help it. I am made of reanimated flesh, you know.
