In The Blogs

A Few Raindrops on the Rich

| Fri Feb. 27, 2009 10:18 AM PST

Andrew Sullivan says that Obama has played the budget and spending game pretty shrewdly:

Look at how Obama has framed the debate since the election. Every single symbolic act has been inclusive and sober. From that speech in Grant Park to the eschewal of euphoria on Inauguration Day; from the George Will dinner invite to the Rick Warren invocation....And now, after presenting such a centrist, bi-partisan, moderate and personally trustworthy front, he gets to unveil a radical long-term agenda that really will soak the very rich and invest in the poor. Given the crisis, he has seized this moment for more radicalism than might have seemed possible only a couple of months ago.

Italics mine. I think Andrew's basic point is correct: by getting the centrist optics right, Obama has been able to move more boldly than he otherwise could have. Republicans who paint him as the second coming of Karl Marx just look like idiots these days. At the same time, let's not go overboard. Here's how Obama is "soaking the very rich":

If Obama's tax plan is approved, a family making $500,000 a year would see its annual tax bill rise to nearly $132,000 from about $120,000, a 10 percent increase, said Clint Stretch, managing principal of tax policy at Deloitte Tax.

Over the past three decades, these families have seen their incomes double and triple while the rest of the country stagnated. Now Obama proposes to increase their tax bill by $12,000 — not even enough to get them back to the rates they were paying when Ronald Reagan left office. This is a very, very modest nod toward fiscal fair play, very much in keeping with Obama's modest optics. You'd have to drink several pitchers of Rush Limbaugh's Kool-Aid to think this counts as soaking the rich.

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Kevin Drum is a political blogger for Mother Jones. For more of his stories, click here.

Comments

Greed of the Majority

Submitted by Anonymous (not verified) on Fri Feb. 27, 2009 10:54 AM PST.

Obama is beating the Republicans at their own game. Nobody wants their own taxes raised, but when push comes to shove they sure don't mind raising taxes on somebody else if it means better public services (or a job) for them. This is what free market fundamentalists should readily recognize as "selfishness". And it is currently rampant. It is no surprise then that when Obama decides to redistribute wealth from the top 5% to the bottom 95%, he gets widespread support. Maybe the Republicans should have tried this first. It may be easy to fool people into thinking a tax cut for rich will benefit them personally the first time around, but apparently not the second. Long live the greed of the majority.

WTF

Submitted by Paul Miller on Fri Feb. 27, 2009 11:10 AM PST.

Greed of the majority? Expecting people who have lived fatly at the expense of a fair system to finally throw some more chips into the pot is greedy? You know, there have been violent revolutions that were the result of radically unfair wealth distribution. We can still be a competitive and capitalist country while embracing some parts of socialism and, most importantly, bringing the standard of the masses up at a minimal cost to the few.

Optics were W.'s biggest problem. Besides being an idiot, I mean

Submitted by Cazart on Fri Feb. 27, 2009 12:52 PM PST.

"...by getting the centrist optics right, Obama has been able to move more boldly than he otherwise could have. Republicans who paint him as the second coming of Karl Marx just look like idiots these days." Exactly! I've been saying this for years. All that "goodwill" Shrub built up really paid off when we needed it, right?

This is sully you're talking

Submitted by Anonymous (not verified) on Fri Feb. 27, 2009 1:00 PM PST.

This is sully you're talking about, the hysterical one, not the nerves of steel pilot. "Soak the rich" is restrained for him.

The Rain

Submitted by SecularAnimist (not verified) on Fri Feb. 27, 2009 2:15 PM PST.

The rain, it raineth on the just And on the unjust fella. But it raineth more upon the just, 'Cause the unjust stole the just's umbrella.

So what are the optimal tax rates?

Submitted by Optimal Rates (not verified) on Fri Feb. 27, 2009 3:58 PM PST.

Kevin - You seem downright gleeful about rising tax rates on the rich. In fact, you seem absolutely certain that the net benefits of raising tax rates will be positive. So what are the optimal rates? Why not raise the rate to 50%? 70%? (they've been that high in the past). How do you know that we haven't already passed the socially optimal level? In Silicon Valley, the combined (state & fed) effective marginal rates may exceed 60%* for many dual-income families. Are you not concerned that the negative effects of such a high marginal rate will outweigh the benefits of increased spending? To take one example - consider the engineers who work 60-70hrs/week and have created companies like Google, Facebook, Intel, MSFT, Cisco, Oracle, etc... Decreasing the incentive to work will certainly have some negative impact- why work additional hours when you only take home 40% of your paycheck? You talk about "fiscal fair play" without defining it. What % of total taxes should "the rich" pay? Your graphs show that the top 1% make 22% of all income but pay 40% of taxes. Is this insufficient? What % should the top 1% pay? How have you arrived at this decision? Is it a moral principle ("fair share") or an economic argument (maximal societal value)? Having read your column for a few weeks, you generally seem pretty reasonable and rational. But here, you take sides without any underlying argument. I'm not saying that increasing tax rates is bad per se, but there doesn't seem to be a serious discussion about the pros and cons and how to weigh (and subsequently measure) the effects of such this change. *Of course, calculating a "general" marginal rate is nearly impossible in the abstract but, I've seen estimates of 60% for many dual-income taxpayers in the Valley.

soakng the rich not

Submitted by Anonymous (not verified) on Fri Feb. 27, 2009 7:03 PM PST.

I am a system engineer (hardware/software) who normally used to work 70 hour weeks and sometime on average 16 hour days. I live in Minnesota and here there is not much real reward unless you are part of the owner's family. Even so I made out well with my 401ks. I am a very strong Obama supporter and came from Hungary after we lost the Revolution in 1956. My unit was one of the last one to stop fighting in the center of Pest on Nov 8. 1956. I dispise the American upper class Kleptocracy. Upper Class Americans have no shame for keeping most of us in relative servitude! In Europe the super rich (Capitalist or Communist) still remember that during the French Revolution over 70,000 aristocrat heads were chopped off in a few days! My life's greatest regret is that we just put in prison most KGB officers without shooting hardly anyone. IMHO we should have summarily executed anyone over the rank of captain or at least let their neighbors lynch them! Sadly Obama's job is much harder than FDR's was, because most of our manufacturing infrastructure is in China. Currently IBM is shifting almost all its US programming jobs (~6 Million) to India for cost reasons. Obviously it will be selling their output back into the US market. Unfortunately Obama does not have any US born professional manufacturing engineers advising him! He might have a few not integrated Indian Brahmin coding Aristocrats! tags guillotine KGB

So what are the optimal tax rates?

Submitted by Anonymous (not verified) on Sat Feb. 28, 2009 12:57 PM PST.

Optimal Rates wrote: "Decreasing the incentive to work will certainly have some negative impact- why work additional hours when you only take home 40% of your paycheck?"

Well, you may want to take a break from work and hire one of the other 10,000 unemployed engineers in your area. I'm sure they'll be happy to take home 80% of their paycheck.

I don't know about you, but if working an extra hour earns me another million dollars, then I'd be happy to work that extra hour to get a net of 400 grands after tax. Either that, or I'd go on vacation to keep the resort staff employed. Win/win.

weeeell doggie

Submitted by flubber (not verified) on Fri Feb. 27, 2009 5:07 PM PST.

"a family making $500,000 a year would see its annual tax bill rise to nearly $132,000 from about $120,000, a 10 percent increase, said Clint Stretch, managing principal of tax policy at Deloitte Tax." Not that he did it on purpose, but people should be careful when talking about percentages and changes. No one is going to have their tax rate raised 10%. The top marginal rate will go up from 35-36% to 39.6% - a 3-4% increase. But since you don't pay the top marginal rate on all of your income, your total tax rate (effective rate) will go up by much less. In his hypothetical example, the family is paying a 24% effective rate, which will rise to 26.4% - a 2.4% increase in rate, a 10% increase in amount.

Worth noting that while it's

Submitted by Mavis Beacon (not verified) on Sat Feb. 28, 2009 9:22 AM PST.

Worth noting that while it's a 10% increase in tax burden, it's only a 3% decrease in take-home pay.

"You'd have to drink several

Submitted by Ted (not verified) on Sat Feb. 28, 2009 12:15 PM PST.

"You'd have to drink several pitchers of Rush Limbaugh's Kool-Aid to think this counts as soaking the rich." Given his history with drugs, I don't think I want to drink anything he's made.

It's a Shallow Soak

Submitted by Carol A. (not verified) on Sat Feb. 28, 2009 4:25 PM PST.

To listen to all the pissing and moaning, you'd think Obama's budget is going to increase taxes on the wealthy to Reagan proportions! People making over $250,000 (1/4 million dollars per year) will have their taxes increased by a lousey 3% in 2011! Three percent!!! This will bring them back to the same level they paid during the Clinton years when folks were sitting pretty. The wealthiest have reaped the benefits of the Bush years. They get tax breaks on owning multiple homes, social security, and are able to take advantage of lots of tax loopholes. While no one wants to pay more than their fair share, the wealthy need to get over it. Included in the group earning over $250,000 are media hosts and pundits. No wonder they are exaggerating Obama's tax increas. I guess that patriotism stops at the pocket book. Helps to explain why so few Democrats have been invited on cable news and main stream media programs to debunk the phoney outrage?

Progressive Taxation Is Fair

Submitted by Hilary Smith (not verified) on Fri Mar. 6, 2009 10:18 AM PST.

Capitalist enterprise cannot succeed outside the context of an ordered society. Maintaining an ordered society requires resources. Therefore it is entirely appropriate for the wealthy to pay a larger percentage of their income in taxes.