Should the United States go back to a top federal tax rate of 70%?

[Lesh]

As a thought experiment, Id like to see someone flesh this out using an average income and living an average life with averages used for all taxes and fees, and then if they havent done this math, I'd like to see them stop imagining arbitrary numbers to fit into the pessimistic view regarding life, in general.

I've done the math with my personal situation factoring in my income then adding up all the taxes I pay annually. Many taxes are hidden, or hidden as "fees", but they are still taxes if they come from government, or quasi government. I think you'd be shocked at the total tax burden many pay that are even just middle income earners.

I believe in reducing the tax burdens on the lower and middle classes because doing so translates into increase consumer spending which helps the economy. The problems is with income and wealth above 100,000 dollars. Rates for them should stay the same and then gradually increase as you go up the economic later with the top rate needing to be increased from 39% to 70%.

that system is exactly what we have today. the top 5% already pay most of the tax burden. Tax them more and they will take their businesses and money to another country.

Bullshit. They make their money HERE...they ain't goin anywhere. Put away that dog eared copy of Atlas Shrugged

 

[Lesh]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

raising it from 39% to 50% would not raise enough money to make any difference in the federal budget. In the days of very high tax rates we also did not have massive social spending, and we were not supporting tens of millions of illegal aliens with our tax dollars.

the real answer is to reprioritize federal spending, eliminate waste, and demand efficiency in every federal agency, including congress. Will that ever happen-----------------when pigs fly.

We either increase taxes...cut military spending...or live with deficits

 

[presonorek]

We either increase taxes...cut military spending...or live with deficits

but but but but but but but Rush Limbaugh says you can cut taxes and the economy will grow to such measures that the tax revenue will eliminate the deficit.

No? That don't work? lol

 

[Lesh]

We either increase taxes...cut military spending...or live with deficits

but but but but but but but Rush Limbaugh says you can cut taxes and the economy will grow to such measures that the tax revenue will eliminate the deficit.

No? That don't work? lol

It never has. They keep pretending but they know it won't work.

But they WANT those tax cuts and that's all that matters to them

 

[U2Edge]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

 

[Toddsterpatriot]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

 

[Lesh]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

And I think it ought to be between 45-50%.

Hmmmm

 

[Toddsterpatriot]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant.

To be fair, she is flaky and ignorant.

 

[U2Edge]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

 

[Toddsterpatriot]

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

 

[boedicca]

With a 21 trillion dollar debt it is inevitable that tax rates will rise. Trickle down economics has never worked. 70% tax rate seems over the top, but raising the top marginal rate to between 45 to 50% may be in the offing if the national debt continues to spiral out of control.

Why is it over the top? Americans were just fine with a top federal tax rate of between 70% and 94% from 1940 to 1980. The United States was a superpower without all the funding and debt problems we have today.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

Krugman is a blithering moron.

 

[U2Edge]

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

no one paid those rates back then, there were exemptions and deductions that allowed high earners to write off much of their income, so no one actually ever paid 70% or 94%, no one, ever.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

 

[Toddsterpatriot]

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started.

How long did the debate go on before he finally caved?

So the tax increase did not hurt the economy,

I don't think you've proven that claim.

President Clinton raised taxes again after he became President, again not impacting economic growth.

I don't think you've proven that claim either.

THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all.

I think the economy would have been stronger if rates had remained at 28%, disprove my claim.

 

[22lcidw]

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

I must concede that I have been wrong on this issue. I did so after looking at each year of revenue collection and level of spending from 1940 to 1980. Over those 41 years, only 8 of them actually saw a surplus. For most years, the country was still running a deficit. This to me strongly suggest that few people were actually paying 70% to 94% at the top federal tax rate.

But the deficits are smaller. Several of the surpluses, years 1951, 1956, 1957, 1960, occurred when the reported top federal rate was above 90%. But still, those surpluses were small.

Someone else posted in here a while back a site that said the "effective top federal tax rate" back then was more like 42% or 43%. That's higher than today, but not by a lot, and not nearly as much as 70% or 94%.

So the question is what is the maximum rate you can tax higher incomes, before you start to see negative economic effects or the flight of capital out the country?

I don't think spending can really be cut, in any significant way. I actually think that the defense budget needs to be increased to adequately meet our national security priorities around the world. I don't think there is anyway to cut Social Security and Medicare, unless you raise the age at which you can receive such benefits.

I still think there is room for some tax increases on the rich. But probably more in the range of 45% to 50% for the top federal tax rate.

The other way of course to solve these financial and funding problems is through some sort of economic miracle where the economy was growing at a steady 5% every year. But the average since the year 2000 as been a rather anemic slightly below 2% rate. The tax cuts for the wealthy under Bush and Trump have not led to any real increase in GDP. Its only made U.S. debt and funding problems more difficult.

Bottom line, I think I was wrong about the 70% top federal tax rate, but I still think there is room to raise the top federal tax rate from where it is now, without hurting the economy. I think a top federal tax rate of between 45% to 50%, could bring in more revenue to help with the country's budget problems without hurting the economy.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

You are conveniently omitting that the Baby Boomers were in their most prosperous years of spending also. The 1990's was their zit popping decade. You also forget the stock market collapsed in the Spring of 2000. Clinton's last year in office. The Boomers started to spend less and Wall Street which can be fragile as we know, sensed it. W. Bush stated multiple times for people to spend money. I would think that tax increases in some things can be beneficial. But it only seems to be yours that is important. Trump in a way is increasing taxes a bit by losing a bit of growth which has been outstanding to put tariffs on certain products to help manufacturing increase in our nation. That is beneficial as those jobs pay more then others can.

 

[U2Edge]

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started.

How long did the debate go on before he finally caved?

So the tax increase did not hurt the economy,

I don't think you've proven that claim.

President Clinton raised taxes again after he became President, again not impacting economic growth.

I don't think you've proven that claim either.

THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all.

I think the economy would have been stronger if rates had remained at 28%, disprove my claim.

Well, Bush becomes President in 2001 and slashes the top federal tax rate from 40% to 35%. Average real GDP growth while George W. Bush is President for 8 years comes in at 1.87%! That's down from the average of 3.62% during the Clinton years. So cutting the top federal tax rate did not help the economy at all.

The rich who pay the top federal tax rate do NOT change their consumer spending when they get a tax cut, especially at those levels. That's why the Bush tax cuts for the rich had no impact on economic growth and ended up just making the Budget deficit worse than it had to be.

Tax cuts targeted at those in the lower middle class are the type of cuts that boost economic growth. Most of the Bush tax cuts were directed at the very wealthy. The middle class spends the extra money they get, the rich do not.

 

[U2Edge]

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

Well, I just read a new article by Economist Paul Krugman that has sort of swung by thinking back again towards the 70% rate for the top federal tax rate. I'm not totally convinced though because I still see problems with the old marginal top tax rates of between 70% and 94% because while growth was still good, revenue collection was not all that impressive considering most years still saw a budget deficit from 1945 to 1980.

So I'm not convinced 70% is something that can really be achieved as others have said that there were many deductions when the rates were that high. But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

Here is Krugman's article. I'll highlight in bold the important points:

The Economics of Soaking the Rich
What does Alexandria Ocasio-Cortez know about tax policy? A lot.

By Paul Krugman

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

​

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

​

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.

And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

Opinion | The Economics of Soaking the Rich



1. Its clear that tax cuts for the rich do not increase growth. Most of the tax cuts since 2000 have been for the rich.

2. Average annual quarterly real GDP growth since the year 2000 has only been about 1.9%.

3. This average rate of growth since the year 2000 is the LOWEST since World War II.

4. Having some of the lowest top federal tax rates on the rich since World War II over the past 18 years has not helped economic growth.

5. The question you should ask about where to set the top federal tax rate, is what top federal tax rate will generate the most revenue.

6. It is possible for the top federal tax rate to be too high, where it starts to hurt growth and there by reduce revenue collection.

7. But the evidence suggest that the current top federal tax rate of 37% or 39% is way too low. I'm not convinced that 70% is the magic number, but I think its a lot higher than 39%. Maybe its 50% to 60%.

8. There have been studies done which show doubling the tax rate on the top 1% could bring in an extra $3 Trillion dollars in revenue per decade. That is an extra $300 Billion dollars EACH YEAR!

​

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

You are conveniently omitting that the Baby Boomers were in their most prosperous years of spending also. The 1990's was their zit popping decade. You also forget the stock market collapsed in the Spring of 2000. Clinton's last year in office. The Boomers started to spend less and Wall Street which can be fragile as we know, sensed it. W. Bush stated multiple times for people to spend money. I would think that tax increases in some things can be beneficial. But it only seems to be yours that is important. Trump in a way is increasing taxes a bit by losing a bit of growth which has been outstanding to put tariffs on certain products to help manufacturing increase in our nation. That is beneficial as those jobs pay more then others can.

Tariffs are a disaster for the economy. Its Tariffs that turned the 1929 recession into the GREAT DEPRESSION.

Its the Middle Class that spends new money received from a tax cut. The Rich do not increase or decrease their consumer spending based on the tax rate. There for, the reduction in the top federal tax rate yields no economic growth or benefit, at least at these levels. We see this in 2001 when Bush cuts the top federal tax rate from 40% to 35% and the economy for the next 8 years only averages 1.87% growth per quarter, the slowest of any President since World War II. Cutting the top federal tax rate did not help the economy at all during the Bush years and made the country's budget problems worse.

As the nation went to war in 2001, Bush should have increased the top federal tax rate to help pay for all the new government spending, just like Truman did during the Korean War. It wouldn't have hurt economic growth as the history shows and would have helped the country with its Budget problems. In fact, there should have been an increase in the top federal rate to help pay for a tax cut among the lower middle class. That would have helped drive consumer spending to the levels Bush wanted to see.

 

[Toddsterpatriot]

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

But I think Krugman is right that we should try to set the top marginal tax rate as high as possible without hurting growth in order to maximize revenue collection.

I agree. I think that top rate is about 28%.

28% is the lowest it has ever been over the past 85 years. That was the rate in 1988,1989, and 1990. That rate proved to be too low. The budget deficits during those years really worsened. Bush Sr. raised the rate in 1991. The economy actually improved in 1992 every quarter above 4% growth, the last time in the country's history that there were four consecutive quarters of real GDP growth ABOVE 4% in the same calendar year. Then when Clinton took office, he raised the top margin rate all the way up to 39%-40%. Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II. The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Bush Jr. then cut the top marginal rate down to 35%, but it did not lead to better economic growth. In fact, economic growth overall through the 8 years of the Bush administration averaged just 1.87% compared to Clinton's 3.62%. Revenue collection suffered as a result of both lower economic growth and lower top federal tax rates. Had the top federal tax rate remained at 40% or increased a little, many of the budget deficit problems of the early to mid 2000s would have been solved or reduced in size.

So the bottom line is 28% is way to low for the top federal rate. The evidence shows this. You can increase the top federal rate well beyond 40% without doing any damage to the economy. The question is what is the upper limit beyond 40%. Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high. I think that upper limit is probably between 60% and 65%.

So, for the country to be putting its best foot forward on tax policy, revenue collection for the government combined with economic growth, the top federal tax rate should probably be 62%. Even at 62%, the richest Americans will continue to work hard and not flee the country. The country would greatly improve its ability to solve the budget problems it is facing while continuing to provide the strongest national/global defense to protect the country's interest.

28% is the lowest it has ever been over the past 85 years.

Yup.

That rate proved to be too low. The budget deficits during those years really worsened.

Nah. If Bush had kept his backbone, and controlled spending, we'd have been fine.

The economy actually improved in 1992 every quarter above 4% growth,

I agree, after the tax-hike induced recession, the economy improved.
Don't you wish we'd have had some decent growth under Obama, instead of the weakest recovery since WWII?

Over the mid to late 1990s the economy expanded at one of the fastest rates since World War II.

I know, the Internet Bubble was cool!

The Budget Deficits grew smaller, and finally you had four years of Budget surpluses, 1998, 1999, 2000, and 2001.

Newt Gingrich rocked!!

Paul Krugman sited several economist who think that upper limit might be some where between 75% to 85%. I think that is a little high.

A little? You think? DURR!

The George H.W. Bush tax hike occurred AFTER the United States had already been in a recession for a month. The 1990/1991 recession started on October 1, 1990 and ended by April 1, 1991. Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started. The recession was caused by SADDAM HUSSIENS invasion of Kuwait on August 2, 1990 which caused disruption in global oil supplies and markets.

So the tax increase did not hurt the economy, and generally excellent economic growth occurred following the tax hikes. President Clinton raised taxes again after he became President, again not impacting economic growth. THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all. The economy had some of its best growth rates during the 1990s since the end Of World War II. So its obviously ok to have a top Federal Tax rate of 40%. That 1990s proved that. Lots of revenue was generated thanks to the tax increase and stronger economy growth which produced 4 consecutive years of Budget Surpluses.

So the question is then how much above 40% should the top federal tax rate go. We know 40% is ok and does not hurt the economy. I think the top federal rate can be increased to at least 60% without hurting the economy in any way.

Congress and the President did not agree to a tax hike until October 27, 1990, nearly a month after the recession had started.

How long did the debate go on before he finally caved?

So the tax increase did not hurt the economy,

I don't think you've proven that claim.

President Clinton raised taxes again after he became President, again not impacting economic growth.

I don't think you've proven that claim either.

THE LESSON: Going from a 28% top federal rate in taxes up to 40% top federal rate in taxes did not hurt the economy at all.

I think the economy would have been stronger if rates had remained at 28%, disprove my claim.

Well, Bush becomes President in 2001 and slashes the top federal tax rate from 40% to 35%. Average real GDP growth while George W. Bush is President for 8 years comes in at 1.87%! That's down from the average of 3.62% during the Clinton years. So cutting the top federal tax rate did not help the economy at all.

The rich who pay the top federal tax rate do NOT change their consumer spending when they get a tax cut, especially at those levels. That's why the Bush tax cuts for the rich had no impact on economic growth and ended up just making the Budget deficit worse than it had to be.

Tax cuts targeted at those in the lower middle class are the type of cuts that boost economic growth. Most of the Bush tax cuts were directed at the very wealthy. The middle class spends the extra money they get, the rich do not.

Was Clinton's top tax rate responsible for the Internet Bubble?

 

[Care4all]

how is it moral for any government to confiscate 70% of your INCOME? Remember, income is not even "profit."

taxable income is considered profit in the eyes of the tax collectors and the supreme court....

this is why if you file the long form, it allows all of those deductions...

and the 70% tax rate is not and never has been on their whole income.... we all pay different tax rates on all of our income... it is a graduated rate system....

as an example, for everyone, they would only pay 10% on earned income up to 30k, then income over that 30k up to say 50 k they could pay 15% on that taxable income, then over 50k to 80k, 20% on that taxable income.. we pay a certain tax on each income tax bracket....

so if the 70% tax bracket were brought back, it would be the tax rate for a certain bracket of taxable income...

say, for taxable money earned over 10 million a year.... all the money earned below that would be taxed at the lower tax bracket rates and NOT at the 70%....

NOT that I am for doing something like that! though I have not completely ruled it out.... I would just need to study the plusses and minuses of it more, before making a decision....

 

[Hutch Starskey]

None of these fools get that you're talking about the uber wealthy. Those who over the last forty years who have pulled an obscene amount of money out of circulation. Taxation and govt spending put it directly back into circulation causing growth.

After Reagan started the trend of tax cuts, the uber wealthy have been pulling a larger and larger share of cash out of the economy.
View attachment 238770

Those who over the last forty years who have pulled an obscene amount of money out of circulation.


Hate that greedy duck.

It's really not surprising that you use cartoons to express your ideas.

I agree, your moronic claim that wealthy people "pull money out of circulation" is cartoonish at best.

Where does it go, fool?

How does it leave circulation, fool?

Tied up in a $120m yacht registered and moored in Monaco?

Answer the question. Where does it go?

 

[Hutch Starskey]

You blithering babbling moron. NOBODY paid that rate on their incomes. They had more tax deductions and exemptions.

Well, then no one should mind going back to those rates.

You are a babbling fool. We don't have the deductions and exemptions they had back when those rates were in effect. And your advocacy for the increase does not include restoring them.


View attachment 238630

So what. The government can get more money out of rich without hurting the economy. It will benefit the rest of the country. Its good policy and should be implemented. It will help pay down the national debt and provide for vital government programs including national defense. The rich are living high off the hog. A higher top federal tax rate is coming whether you like it or not. There is simply no other solution.

None of these fools get that you're talking about the uber wealthy. Those who over the last forty years who have pulled an obscene amount of money out of circulation. Taxation and govt spending put it directly back into circulation causing growth.

After Reagan started the trend of tax cuts, the uber wealthy have been pulling a larger and larger share of cash out of the economy.
View attachment 238770

Are you completely ignorant?

Are you seriously suggesting that the wealthy have vaults of money all over the place?

By the way, you are wrong about the Reagan tax cuts causing this. The super wealthy, were super wealthy, long before the tax cuts.

Of course I suggested no such thing.

Yes, yes they were super wealthy. Just not like today. It was Reagan who started the trend of tax cuts on the wealthy. It was at 70% before he halved it.