Paul L. Caron

Friday, June 14, 2019

NY Times: Yes, Taxing The Rich Is Possible

New York Times op-ed:  Yes, Taxing the Rich Is Possible, by David Leonhardt:

For a long time, there was a predictable response to any proposal for increasing taxes on the rich: It will wreck the economy. You don’t hear this response quite so often anymore, however, because it’s become so obviously false. If anything, the economy in recent decades has grown more quickly when Washington taxes the rich more, not less.

Instead, you often now hear a new argument: There’s no point in trying to tax rich people, because they’ll just figure out a way to avoid paying taxes.

The Washington Post ran a big news article recently making this case (and parts of the argument have appeared elsewhere too, including in The Times). The Post article claimed that Elizabeth Warren’s plan to introduce an annual wealth tax relies on a set of “assumptions that defy a long history of U.S. policymaking”: namely, “that the country’s wealthiest taxpayers won’t find ways to evade the targeted tax hike she proposes.”

But this claim is wrong, too. The long history of American policymaking actually shows that raising taxes on the wealthiest taxpayers is entirely possible. ...

NY Times

Over the last few decades, the total federal tax rate paid by the very rich has tended to hover between 30 percent and 40 percent. It’s been closer to 30 percent after a Republican president has cut taxes and closer to 40 percent after a Democratic president has modestly raised them.

The chart above shows the longer version of this history: the average federal tax rate — spanning income taxes, estate taxes and more — for the top 0.01 percent of earners over the past century. (The data comes from Gabriel Zucman, an economist recently profiled in a cover story for Bloomberg Businessweek.)

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Let's repeal the tax exemption of universities that favor their own legacies as a first start.

Posted by: Mike Livingston | Jun 14, 2019 4:08:38 AM

This would be a more useful chart if state and local taxes were included. Use New York City since the article was in the NY Times.

Also, why choose the top 0.01 percent? Because choosing 0.1 percent or 1 percent would show a much lower peak rate? Because 0.01 percent is the fraction of people who are rich but didn't yet hire tax advisers? Remember the Beatles' song Tax Man?

Posted by: AMTbuff | Jun 14, 2019 9:15:28 AM

Mike: You and Richard Reeves (and myself). Of all the wrong practices in college admissions, legacy admissions are surely close to the top; the same for the granting of tax exemptions for those admissions.

Posted by: Gerald Scorse | Jun 15, 2019 12:14:51 PM

So it's true, even Old Lady Grey admits that even the superwealthy never paid that 90% top rate back in the old days! Earth to Bernie supporters, the revolution never happened, and likely won't again.

The way this looks to me is, no matter which party controlled the White House and Congress, and it's been the Democratic Party for most of those years from 1950 to the present, the trend has been down.

Posted by: MM | Jun 17, 2019 7:07:34 PM

AMT: "Also, why choose the top 0.01 percent?"

They're especially despised by the left, even though most of them are probably registered Democrats. Just look at the top 3 wealthiest Americans today, they aren't supporters of the GOP, even before Trump came along.

I suspect that if you reproduced this graph but looked at the top 20% of households, the ones who may ALL net federal taxes, you very well might see a much flatter trend, and perhaps even an uptick in their effective rates during the Obama and Trump years. That whole tax code change on SALT deductions had a lot of weathly blue state residents squealing in CA, NY, etc.

Posted by: MM | Jun 17, 2019 7:11:09 PM