In The Blogs

Chart of the Day

| Thu Jul. 16, 2009 7:37 AM PDT

Via Conor Clarke, this chart shows the effective federal tax rate paid by the rich over the past 15 years. The basic story is simple: As their incomes have gotten ever higher, their tax rates have gotten ever lower. So if tax rates on the rich are raised to help pay for healthcare reform, as some Democrats are proposing, it would just return us to the rates of the early 90s, not some hellish confiscatory dystopia. Bruce Bartlett says that if this happens, Republicans have only themselves to blame:

For many years, I have urged conservatives to think about ways of raising new net revenue for the government. My fear has always been that sooner or later, pressure to raise taxes will become overwhelming. If there wasn't a conservative option available, then the default policy would be to sharply raise tax rates on the wealthy. Now it looks as if that day has arrived.

....In the end, higher tax rates on the rich are inevitable if only because of expiration of the Bush tax cuts next year. Since that would just return rates to where they were in the 1990s when growth was robust, any claim that this will destroy the economy should be taken with many grains of salt.

Still, it would be better to pay for health reform some other way. But if Republicans refuse to propose any alternative, insisting instead that taxes should never be raised for any reason, they pretty much guarantee that Democrats will raise the top rate. If that happens, Republicans will bear some responsibility as well.

Yep. If I were designing a system from scratch I'd probably finance it differently too. But Republicans have been so successful at demonizing taxes over the years that there aren't very many practical alternatives open any more. Returning top marginal rates to the level they were at in the 90s is one of the few left.

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

Comments

Why, if you were designing a

Submitted by g. powell on Thu Jul. 16, 2009 8:00 AM PDT.

Why, if you were designing a universal healthcare system from scratch, would you finance it any other way than taxing the wealthy? Why is yet another payroll tax during a time of growing wealth inequality and a shrinking middle class a better route?

And forget the 1990s, look at the 1950s when Eisenhower was president. The top marginal rate was about 90%. And the economy grew quite nicely. How about a modest 50% rate on annual income over a million? I bet it wouldn't hurt economic growth at all.

And for most of the time on

Submitted by MacGruber on Thu Jul. 16, 2009 8:09 AM PDT.

And for most of the time on that chart, the economy was growing.

Coincidence?

I think not.

Except that all the growth

Submitted by Anonymous (not verified) on Thu Jul. 16, 2009 8:41 AM PDT.

tagged as:

result

Except that all the growth since 2000 is now gone. So after a decade of tax cuts, we're right back where we were at the end of the Clinton administration, except now we have a trillion dollar deficit instead of a surplus. Great job, tax cuts.

and when it reached the

Submitted by Anonymous (not verified) on Fri Jul. 17, 2009 1:08 PM PDT.

and when it reached the lowest point we had the biggest econmic collaps in 75 years.

Chart abuse. Exaggerates the

Submitted by Theophylact on Thu Jul. 16, 2009 8:19 AM PDT.

Chart abuse. Exaggerates the scale by chopping off the bottom three-quarters.

Atlas doesn't shrug

Submitted by g. powell on Thu Jul. 16, 2009 8:27 AM PDT.

I'm sure we'll get lots of right and left-wing opinions posted here, all ignoring the evidence.

Joel Slemrod at the U of M is the expert when it comes to the economic impact of taxes, and he finds it to be surprisingly small. The guy's no ideologue, he just looks at the data.

http://www.econlib.org/library/Enc1/ProgressiveTaxes.html

pusillanimous

Submitted by joel hanes (not verified) on Thu Jul. 16, 2009 8:33 AM PDT.

Where they were in the nineties, hell.

Let's return the marginal rate on the top brackets to where they were in the seventies, before Reagan took office and hypnotized the nation with supply-side snake oil.

Taxes neither create nor

Submitted by Anonymous (not verified) on Thu Jul. 16, 2009 8:46 AM PDT.

Taxes neither create nor destroy wealth. They simply change who gets that wealth.

I would argue that taxes do

Submitted by g. powell on Thu Jul. 16, 2009 9:16 AM PDT.

I would argue that taxes do help create wealth. No taxes means no government, therefore no police, courts, roads, public education, etc. No economy. A sound fiscal policy is also probably helpful to investor confidence.

Of course die-hard libertarians would disagree, but they're crackpots.

And if government confiscated all earnings, wealth would be destroyed, but no one is arguing for that kind of Pol Pot regime.

"I have urged conservatives

Submitted by The Real a (not verified) on Thu Jul. 16, 2009 9:04 AM PDT.

"I have urged conservatives to think about ways of raising new net revenue for the government. My fear has always been that sooner or later, pressure to raise taxes will become overwhelming. If there wasn't a conservative option available, then the default policy would be to sharply raise tax rates on the wealthy. "

This knee-jerk reaction on the part of conservatives against taxes on the rich has always amused me. There is no better way to signal that their main purpose in life is to support the plutocracy at all costs. If you're going to have taxes, better to lay them on people who can afford it.

Lies!

Submitted by Right Wing WaPost (not verified) on Thu Jul. 16, 2009 9:20 AM PDT.

How can you possibly say the early 90s wasn't a horrible, hellish dystopia?????

How would you finance it?

Submitted by Royko on Thu Jul. 16, 2009 9:43 AM PDT.

And why differently? Sure, we could argue about specifics, but the Bush years shifted the tax burden from the wealthiest onto the rest of us even as income disparity increased and median incomes stagnated. I'd like to see that balance shifted back, regardless of what program it pays for. They simply aren't paying their fair share anymore.

A Bit OT: Call Finance Committee Members to Demand Public Option

Submitted by Anonymous (not verified) on Thu Jul. 16, 2009 9:44 AM PDT.

The Senate Finance Committee is deciding their version of the health care bill in the next two weeks. Even though it is "Dem" controlled it is leaning against the public option -- among other things Max Baucus has former staffers lobbying him from Big Health. We should be calling/emailing everyone on that committee every day until August. If you call they just ask for your zip code and presumably count the yays/nays, it's very quick. If you email, you could write something like this:

-------------------------------------------------------------------
Dear Senator,

Please include a FULL public option in the Finance Committee health care bill, and get it out before the August recess.

Americans demand this out of basic fairness - they can see that 3/4 of medical bankruptcies involve people who already HAD private insurance when they got sick; they saw the report this month that private insurers systematically lied to inflate out of network pricing; and they know the public option would reduce prices and cost less for the taxpayer.

Please tell your colleagues that this ONE issue is MAKE OR BREAK for the voters for this Senate session--if they oppose the public option they will be under a huge spotlight at the next election for it. Tell them there is plenty of soft money to be had from lobbyists on other issues, on this one they had better vote for what is right, and what their constituents want and deserve.

Thank You!
PRIORITY: Blanche Lincoln (on the fence about public option)
Baucus, Conrad, Bingaman, Dodd (all willing to kill public option)
Wyden (actually against public option)

DEM Members (at least in name):

Please do at least these, if not all:
====================================================================
Blanche Lincoln AR (202) 224-4843
http://lincoln.senate.gov/contact/email.cfm

Max Baucus MT (202) 224-2651
http://baucus.senate.gov/contact/emailForm.cfm?subj=issue

Kent Conrad ND (202) 224-2043
https://conrad.senate.gov/contact/webform.cfm

Jeff Bingaman NM (202) 224-5521
http://bingaman.senate.gov/contact/types/email-issue.cfm

Chris Dodd CT (202) 224-2823
http://dodd.senate.gov/index.php?q=node/3128

Ron Wyden OR (202) 224-5244
http://wyden.senate.gov/contact/
====================================================================

Jay Rockefeller WV (202) 224-6472
http://rockefeller.senate.gov/contact/email.cfm

John Kerry MA (202) 224-2742
http://kerry.senate.gov/contact/email.cfm

Charles Schumer NY (202) 224-6542
http://schumer.senate.gov/new_website/contact.cfm

Debbie Stabenow MI (202) 224-4822
http://stabenow.senate.gov/email.cfm

Maria Cantwell WA (202) 224-3441
http://cantwell.senate.gov/contact/index.cfm

Robert Menendez NJ (202) 224-4744
http://menendez.senate.gov/contact/contact.cfm

Thomas Carper DE (202) 224-2441
http://carper.senate.gov/contact/

Bill Nelson FL (202) 224-5274
http://billnelson.senate.gov/contact/email.cfm
NOTE: Not to be confused with fascist "Dem" Ben Nelson NB

-----------------------------------------------------------------------
GOP MEMBERS - I only list one, others are so far right it's
probably useless to call:
-----------------------------------------------------------------------

Olympia Snowe ME (202) 224-5344
http://snowe.senate.gov/public/index.cfm?FuseAction=ContactSenatorSnowe....

-----------------------------------------------------------------------
Committee on Finance (202) 224-4515 (they don't always answer phone though)

You could also call Reid and Durbin, the Senate leadership, to ask
them to pressure Baucus to stop compromising and include a public
option:

Harry Reid (202) 224-3542 PRESS 1
Dick Durbin (202) 224-2152

A Bit OT: Call Finance Committee Members to Demand Public Option

Submitted by Anonymous (not verified) on Thu Jul. 16, 2009 9:45 AM PDT.

-------------------------------------------------------------------
Dear Senator,

Please include a FULL public option in the Finance Committee health care bill, and get it out before the August recess.

Thank You!
PRIORITY: Blanche Lincoln (on the fence about public option)
Baucus, Conrad, Bingaman, Dodd (all willing to kill public option)
Wyden (actually against public option)

DEM Members (at least in name):

Please do at least these, if not all:
====================================================================
Blanche Lincoln AR (202) 224-4843
http://lincoln.senate.gov/contact/email.cfm

Max Baucus MT (202) 224-2651
http://baucus.senate.gov/contact/emailForm.cfm?subj=issue

Kent Conrad ND (202) 224-2043
https://conrad.senate.gov/contact/webform.cfm

Jeff Bingaman NM (202) 224-5521
http://bingaman.senate.gov/contact/types/email-issue.cfm

Chris Dodd CT (202) 224-2823
http://dodd.senate.gov/index.php?q=node/3128

Ron Wyden OR (202) 224-5244
http://wyden.senate.gov/contact/
====================================================================

Jay Rockefeller WV (202) 224-6472
http://rockefeller.senate.gov/contact/email.cfm

John Kerry MA (202) 224-2742
http://kerry.senate.gov/contact/email.cfm

Charles Schumer NY (202) 224-6542
http://schumer.senate.gov/new_website/contact.cfm

Debbie Stabenow MI (202) 224-4822
http://stabenow.senate.gov/email.cfm

Maria Cantwell WA (202) 224-3441
http://cantwell.senate.gov/contact/index.cfm

Robert Menendez NJ (202) 224-4744
http://menendez.senate.gov/contact/contact.cfm

Thomas Carper DE (202) 224-2441
http://carper.senate.gov/contact/

Bill Nelson FL (202) 224-5274
http://billnelson.senate.gov/contact/email.cfm
NOTE: Not to be confused with fascist "Dem" Ben Nelson NB

Olympia Snowe ME (202) 224-5344
http://snowe.senate.gov/public/index.cfm?FuseAction=ContactSenatorSnowe....

-----------------------------------------------------------------------
Committee on Finance (202) 224-4515 (they don't always answer phone though)

You could also call Reid and Durbin, the Senate leadership, to ask
them to pressure Baucus to stop compromising and include a public
option:

Harry Reid (202) 224-3542 PRESS 1
Dick Durbin (202) 224-2152

Charts where the Y axis does not start at Zero bug me

Submitted by Captured Shadow (not verified) on Thu Jul. 16, 2009 9:47 AM PDT.

Charts like this make it look like the tax is about half of what it was at the peak, rather than 86% of what is was at the peak.

How To Read A Chart

Submitted by dasimon (not verified) on Fri Jul. 17, 2009 4:34 PM PDT.

I don't think it's chart abuse because I know how to read a chart. I look at it and see that the effective tax rate has dropped from a high of 36% to about 31%. I've seen enough "chopped off" charts to know to look at the numbers on the vertical axis.

And there may be good reasons for chopping it off other than to mislead. It would be far harder to see the year-to-year changes if the vertical scale were compressed by a factor of five. Or one could have a much longer chart, which would be annoying.

the chart is fine because

Submitted by Anonymous (not verified) on Fri Jul. 17, 2009 11:59 PM PDT.

the chart is fine because all the discussion is about adjusting the tax rate by a few percentage points. if you start at zero, that would look almost insignificant, when actually it's very significant in terms of the money paid by taxpayers and received by the government. and it wouldn't particularly benefit either side of the argument -- you could either say, "look, the amount they're paying hasn't gone down very much," or, "look, the proposed increases are tiny!"