10/14/2011 7:17 PM ET|
Why US should spread the wealth
America sacrificed equity for the false promise of efficiency and growth, and society is now more unequal than at any time since the early part of the last century.
Many economists worry that making societies more equal through income redistribution or other means reduces economic growth.
This big trade-off between equality and efficiency, which is supported by comparisons of capitalist and socialist countries, implies that there's a limit to how much redistribution a society should pursue. At some point, the trade-off of more equality for less output -- which worsens as we push toward more and more equality -- becomes intolerable.
However, while the trade-off is quite unfavorable as we push to extremes, recent experience suggests there is a wide region where the trade-off is hard to detect. Thus, worries about this trade-off appear to be overblown.
For example, the Bush tax cuts were justified, in part, by the assertion that equity had overshadowed efficiency in tax policy. Taxes on the wealthy, and the inefficiencies that come with them, were much too high, it was argued, and lowering taxes would cause output to go up enough to lift all boats substantially.
Accordingly, the lower end of the income distribution would fare much better after income trickled down than it would under redistributive policy.
The economy did grow after the Bush tax cuts, but the rate of growth was unremarkable, especially for jobs, and there's little evidence that they caused large increases in output growth, as promised.
In fact, there's little evidence that the Bush tax cuts had any effect at all. The trade-off simply wasn't there.
And the tax cuts at the upper end of the income distribution did nothing to correct for the fact that although worker productivity was rising, wages remained flat -- a problem that began in the mid-1970s.
This was an indication that something was amiss in the mechanism that distributes income to different members of society. Workers were helping to increase the size of the pie, but income did not trickle down, and their share of the pie was no larger than before.
This is not the only way in which the distribution of income has become disconnected from productivity. While some argue that those at the top of the income distribution earn every cent they receive, and hence deserve to keep all of it, there is plenty of evidence that the compensation of financial executives, CEOs of major corporations and others at the top of the pyramid far exceeds the value of what they contribute to society.
That holds true even without the 2008-09 financial crisis, but how, exactly, can we justify the extraordinarily high income of this group when the result of their actions was to ruin the economy?
If those at the top of the income distribution receive far more than the value of what they create, and those at lower income levels receive less, then one way to correct this is to increase taxes at the upper end of the income distribution and use the proceeds to protect important social programs that benefit working-class households, programs that are currently threatened by budget deficits.
This would help to rectify the maldistribution of income that is preventing workers from realizing their share of the gains from economic growth.
And there is another reason why taxes on the wealthy should go up. Someone has to pay taxes, and the question is how to distribute the burden among taxpayers. Many believe, and I am one of them, that progressive taxes are the most equitable way to do this. In particular, the guiding principle is that the last dollar of taxes paid should cause the same amount of sacrifice for rich and poor alike.
There has been an attempt to make it appear that taxes are mostly paid by the wealthy; the deceptive claim that half of the people pay no taxes is part of this. But taxes are less progressive than before the Bush tax cuts, and when all taxes at all levels of government are taken into account, "the U.S. tax system just barely qualifies as progressive," according to a 2010 report from Citizens for Tax Justice.
We face a choice between cutting key benefits for the middle class and creating an ever more unequal society, or raising taxes on the wealthy to preserve the social programs that lower-income households rely upon.
We hear that raising taxes is unfair and that tax increases will harm economic growth. But there's nothing unfair about correcting the maldistribution of income that we've seen in recent decades, or about making sure the burden from paying taxes is more equitable than it is now.
And there's no reason to fear that economic growth will be lower if taxes are increased. Cutting taxes on the wealthy during the Bush years didn't stimulate growth, and raising taxes back to the levels we've had in the past -- when growth was quite robust -- won't have much of an effect either.
VIDEO ON MSN MONEY
This crap is typical of what you hear on MSNBC. Mark Thoma should put this kind of writing into paperback books. That way fools that feel good when they read it can pay for the privilege!
This is not the work ethic that built America. Fact is we have fought wars to stop this philosophy from spreading.
THE PROBLEM WITH INCREASING TAXES IS THAT INCREASED MONEY GOES TO OUR CONGRESS TO SPEND.
DO YOU THINK CONGRESS HAS SHOWN ANY SENSE OF RESPONSIBILITY AS TO WHO GETS THE MONEY WE PAY IN TAXES? iF A CORPORATION HANDLED MONEY THE WAY CONGRESS DOES, THE OFFICERS OF THAT CORPORATION WOULD BE FOUND GUILTY OF CORRUPTION AND SENT TO FEDERAL PRISON.
The writer was not honest. These numbers come from the IRS site breaking down taxes paid by income levels (GO CHECK!) 2009 data: 51% of all 'wage earners' (people that actually got a paycheck) did NOT pay any income taxes or received more back than they paid in. There is nothing 'deceptive' about saying half of all people don't pay taxes when literally half of 'wage earners' don't.
As for the claim that the rich aren't paying their 'fair share'............ Households making between $20,000 and $30,000 paid 5.7%.
between $40,000 and $50,000 paid 12.5%
1 million dollars or more paid 24.4%
These are 2009 tax year numbers from the IRS. Go Look! And then confront the people that tell lies about it like the author of the above article.
Since when have we become a socialist country? So should a offensive lineman make as much as the quarterback? Should a janitor make as much as the CEO? How about the President making just as much as I do? Or better yet should the President make as much as an E-1 in the military? I lived such 'pay equality' in the military and it is inherently unfair. Why, as a highly trained computer expert, should I make the same wage as a painter who had zero schooling? Why, when I busted my (@$ I got paid just as much (or as little) as the someone who did the least they could get away with? And if you state "Yeah, but you could advance in pay grade". Doesn't that negate your argument for equality? The CEO of a company didn't start at the CEO level in their career, they worked their way up, they went to school, hired on as a sales person where they excelled, became marketing director where they, again, excelled and so on up to CEO (an example track for CEO). The CEO is not hired because he is "average" he is hired because he excells and can run the company and make a profit. He is paid for the value he brings to the company. The value a CEO brings to a company is not the same value the janitor brings and they should be compensated according to that value.
I don't know about the rest of you, but I am very tired of spreading my wealth to people who won't work to better themselves. Now I'm not talking about recently unemployed, or the disabled. I'm talking about the ones who were on welfare at the end of the last century and have done NOTHING to change that fact in the past 11yrs.
Now you can whine about there being no jobs and such, but what was their excuse when there WERE jobs, and they were still collecting welfare and living in public housing?
People need to take responsibility for themselves and the children they bring into the world. I'm fed up with supporting people I am not related to, and that do nothing to support themselves but hold their hands out.
Let's redistribute all the private wealth in the USA equally to every citizen. Guess what, in 10 years we would be back to the same inequities. Some individuals are workers, savers, investors, builders and entrepreneurs. They will soon have the redistributed wealth of the others; those who are lazy, unmotivated, satisfied with entitlements from the government and only know how to spend.
A sizable per cent age of 50% who currently pay no federal income taxes will never over the long run live better than they currently are. They have no desire to achieve status; they want to have the government ascribe their status without risk, work or innovation.
Spread the wealth? You really mean steal the personal wealth of some to give it to others who did not earn it. It is called stealing.
My personal property or wealth is not up for discussion. Others opinions about how much I should give is of no concern to me. I do not care about how many people get together to vote a law to tax me (steal my personal property). This is tyranny of the masses and the socialists/communists are tyrants and thieves.
It is almost time for all productive Americans to draw the line in the sand. It is time to stop the thieves and power hungry political pigs. This country is the Constitution and the Bill of
Rights. All those who subvert our way of life under the Founding Documents are the enemy of the American people and are treasonous.
I love the "WE" in this article.... when 47 % of current Americans do not pay federal income tax to fund these ongoing "entitlements".
When will we as a country realize that giving money away destroys
the principals of our country ?
This ideology of take from some to fund the others will simply implode and erode what made this country so great. This social agenda will run it's course to eventually a country of no individual incentive to grow and prosper. Why would some work so hard to earn there place, when it will simply be taken away.... decided by those who are well protected by federal status, i.e. Executive and Legislative positions. It's like asking the fox to oversee the hen house.
It appears like a good idea on paper, but indeed ....very bad for everyone in the end.
GOD Bless our country... we certainly need HIM right now.
Clinton had the dot-com bubble and it exploded on Bush. To say Bush's tax cuts grew the economy is an important step on the part of a Liberal writer, but now take the next step and finally admit that the tax cuts would have worked better if the Democrats and Bush for that matter controlled spending. The dot.com bust was every bit as bad as the housing bubble bust except with the dot.com bust stock holders were allowed to absorb the blow where with the housing bust the government stepped in and did not let the banks absorb the blow.
We should have let the banks fail and covered people's money through the FDIC. Now we saved the banks and they are back to playing with derivatives again because they were not punished for doing so last time. They know that if they fail the government will bail them out again. Don't invest money where there is any risk at all if you can't afford to lose the investment.
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