“Wait a minute!” I can hear you saying. “Cutting taxes on rich people makes them richer, but cutting taxes on working class people cuts their pay? WTF?!?”
I can just hear all these millionaires and billionaires clamoring about losing money to taxation for the benefit of anyone , other than themselves.
They have been given a free ride for so long, they truly believe taxes are punishment.
The arrogance they display is because they are quite comfortable with no wealth for anyone but themselves.
These greedy obsessive narcissists think they deserve more than we do . This is a perversion of what this Country was founded on.
The fact that they are ok with only the children of wealthy individuals being educated, tells us what we need to know.
The lies and deceit that they have been programmed to, by Republican BS over the years has told them , they are better than the rest
of us and therefore are ‘entitled ‘ to more and more , and well, if others
don’t like it, tough.
This will be reversed only with sane leadership , something sorely missing in political leaders these days.
The fact that they are also destroying our world with careless , ruthless chemicals that are poisoning the planet.
Perhaps thats where they should start being responsible for damage they create in their industries.
Data from the genie co-efficient supports your conclusion that higher taxes result in a greater sharing of wealth of a nation. Under FDR and after wealth inequality continuously decreased then reversed to increase under Regan as the graft by Thomas Piketty shows.
Although Ricardo was a vastly limited thinker compared to the intellectually fertile Marx, it is true he did presage one important point in Marx's work. That point is this. The employee/worker does not control his own income, the employer does. At the same time, however, the employer controls his own income. No one else does.
Liberal thinkers point out that it is therefore up to government and unions to even out this disparity. I agree with them.
Tax cuts for the rich became such a campaign slogan since Reagan that I imagined a time would come that those of us in the not wealthy class would simply hand over our money directly to the morbidly rich. Maybe you could say we already are, I’m not an economist. The other way I see it is that there is a finite pie and a bigger piece keeps getting cut for the morbidly rich and we get left to fight over the crumbs. After all there are only so many resources and with their greedy little paws they grab it all. How really can a billionaire (and then some) actually look themselves in the mirror in a world where people starve while they greedily and even with pride hug and horde and show off their riches.
One very important point, that I did not see in this report, regarding the effects of higher taxes on the wealthy is that it has a strong motivating factor for them to keep their money invested, and working, in their business and the economy versus using it to live ever more lavishly and/or 'buying' political/economic favor, literally legalized bribery of politicians and judges as allowed under Citizens United. Tom has discussed the very corrupt Supreme Court decision to allow this bribery via their Citizens United decision previously and it cannot be understated the adverse impact this has had on both our political and judicial systems. The obscene amounts spent on 'influencing' decisionmakers in our political and judicial systems are bad enough but it goes way beyond this. Literally billions of dollars are spent annually to support a misinformation 'machine' that is both organized and widespread flooding Americans with falsehoods that cause them to support people and ideas that are definitely not in their best interest. This is polarizing Americans against one another ensuring a 'Divide and Conquer' control over the electorate and hence the levers of power (and economy). The end goal, minority rule by the wealthy, no limits on their exploitation of the U.S. economic engine, and a continual increase in their share of the wealth generated. The longer this goes on, the more entrenched their grip on power becomes e.g. Putin and his cronies ironfisted rule in Russia.
All of the money of the rich is spent buying themselves expensive toys and digs
Back in the early 1980’s the CEO of Boeing,T.A .Wilson lived in a modest three BR, 2 bath house, in Kent Washington if I recall correctly. He is an exception, compared say to Bill Gates
When it came times for meetings he would rent the Double Tree Inn near SeaTac Airport
Yachts owned by the rich https://www.boatinternational.com/luxury-yacht-life/owners-experiences/yachts-owned-by-celebrities--28323
Super yachts owned by the super rich, mostly Russian Oligarchs and Arabs. https://www.marineinsight.com/boating-yachting/top-10-most-expensive-private-yachts-in-the-world/
15 Luxury Jets https://robbreport.com/motors/aviation/celebrities-most-expensive-private-planes-1234860914/
Mansions of the rich: https://lifebeyondsportmedia.com/the-most-expensive-homes
Yachts and Jets owned by celebrities https://www.gosocial.co/the-incredible-private-jets-yachts-that-your-favorite-celebrities-own/12/
Tom Cruise’s super yacht https://www.thegentlemansjournal.com/article/step-aboard-the-superyacht-tom-cruise-has-chartered-for-summer/
Cruise also owns a stable of planes, including a P51 and a Gulfsteam IV, G4 jet
According to Belfast Telegraph, Travolta has at least seven jets in his collection. His private stable is home to a Bombardier Challenger 601, Boeing 727, Eclipse 500, Dassault Falcon 900, and three Gulfstream jets. https://simpleflying.com/john-travolta-jet-collection/#:~:text=Travolta%20owns%20at%20least%20seven%20jets&text=According%20to%20Belfast%20Telegraph%2C%20Travolta,900%2C%20and%20three%20Gulfstream%20jets.
And then there is Jay Leno’s garage. https://www.youtube.com/channel/UCQMELFlXQL38KPm8kM-4Adg
Of course not all of the above are owned by Americans
Just think, how many children could be educated and given a lunch, by just selling one of them.
How many toys does one person need? Admittedly most of it is to impress their "peers" and maintain their social status.
The reason why I would be happy with a flat tax, is because at least the billionaires would be in the same tax bracket as a single childless worker. And if self-employed that person could pay about 42% on $90,000 a year, whereas the billionaires pay about four and a half percent now? The religious breeders expect single people to fund their lifestyle. You know, the ones who hate communism, and follow lying criminals to treason. Of course they will never admit they support slavery.
Anyone and everyone who still has the stomach for social media should be sharing this piece like seeds to the wind.
Financial gluttony rots at the base of our crumbling society.
1. Increasing the deficit DOES NOT make the nation poorer. The deficit … like any accounting term … has 2 sides: in this case borrower & lender. For every dollar of deficit someone (most likely a US citizen US bank or US corporation) has a dollar of interest bearing assets. Every dollar of deficit reduction reduces asset holdings by a dollar. So reducing deficits is…oddly enough…a path to slower growth, lower incomes & fewer assets.
2. For 80% of Americans aged 24-65 payroll taxes are much bigger bite than income taxes. Cutting income tax might have the paradoxical effect you describe (tho Ricardo never ever ever encountered even the idea of income taxes … all taxes in 1800s England were excise taxes on a wide variety of goods) but cutting payroll taxes by — for example lifting the cap on income subject to Social Security—would allow a reduction in the SS tax rate which would be a direct increase in take home pay of +/- 80% of US labor force.
3. The function of the tax system in a nation that is fully sovereign in its own currency is NOT paying for things. It’s to limit income at the top & pump it up at the bottom to create greater income equality. Income inequality is a scourge on the nation … see Spirit Level, Wilkerson & Pickett. (Nutshell: more inequality causes more: drug abuse, teen pregnancies, incarcerations, premature deaths, HS drop outs. So we can either address each problem separately OR make income distribution less unequal).
4. Arguments for tax cuts conveniently leave out the fact that for 80% of Americans an income tax cut is so small as to be irrelevant … bc most Americans pay much more in property taxes, sales taxes & payroll taxes then they do in income taxes.
A closely related con is still promoted, in spite of its death in broad daylight at the hands of Elon Musk! We now have clear proof of a Great Lie that still serves as a cornerstone of conservative propaganda and economic policy:
"Taxing the wealthy harms the Job Creators and destroys jobs. Don’t tax the job creators!
Taxes on millionaires & billionaires destroy jobs." ... That’s not right at all.
Elon Musk, America’s all time wealthiest billionaire proves has proven this totally dead wrong.
With favorable tax loopholes and low tax rates, Musk has accumulated a massive fortune -- while our nation piled up the debt. A whopping $44 Billion of his spare wealth was used to purchase Twitter.
And immediately he killed 80% of the jobs at Twitter. Thousands were terminated.
Elon Musk is a Job Killer. A mass killer of jobs, and destroyer of employment.
He proves for All of Us that low taxes on the wealthy does not lead to job creation!
Low taxes on the wealthy Destroys Jobs.
The same principle applies to low taxes on corporations. They use their taxpayer supported windfalls for mergers and acquisitions (plus stock buy backs).
This is followed by huge worker layoffs. Low taxes on corporations destroys jobs.
Check out Professor Jon Taplin's work on tech platforms and inequality, if you haven't yet.
His new forthcoming book is : The End of Reality - How Four Billionaires are Selling a Fantasy Future of the Metaverse, Mars, and Crypto
I highly recommend his lecture from some years ago, all of it very telling of our current dilemma of several billionaires owning a tech-based economy very intertwined with our govt. His lecture "sleeping through a revolution" is available online.
The word "union" did not appear in this report. Unions were gradually decimated, further allowing automakers to stagnate wages; this occurred broadly over industries and contrasts with the notion of an"iron law" asserting lower salary growth with cut taxes on workers.
Thom: I view you as a phenomenal scholar and historian and I love reading your work so it is with some trepidation that I announce that I think you have got it wrong this time with your "Iron Law" of worker's taxes.
I understand your contention that workers (wage slaves) are not in control of their own compensation so their masters will titrate their wages for the minimum possible take home pay that they can get away with. It sounds approximately logical.
Two problems: first, you are basing your analysis on a "set point" which you posit as a fixed and knowable take home pay. I dispute that such a thing exists except as the most evanescent, long term, unknowable and meaningless quantity. There is no one salary for all workers (presumably the tax cut applies to a broad swathe of workers) but there are many ranges for all different kinds of jobs and work and technical levels. So you cannot simply say, as you do, that there will be a take home of $30K which is the set point. There are pressures arising from workers, such as by unions, strikes, job changes, educational levels that are sought, while there are changes in import and export quantities and tariffs, changes in industrial trends, changes in products and changes in target markets. In other words, there are major changes in the workplace going on all the time. This means that an analysis that depends on set points like you posit, over the course of years, would need thousands of different set points. And if there are thousands, that means there are none since a set point must be limited and identifiable.
Next, as you point out, the reversion to a minimum acceptable pay takes many years to make itself felt. In that time, there are even more changes, like the ones I mentioned of a temporal variety. Pressures for salaries ebb, flow and wane. I get the impression that the reason for acknowledging the length of time it would take for employers to respond to the lower taxes is to try to find a way to invoke an averaging process. Maybe over a long time, maybe decades, tendencies will out, as you claim, though they will actually be new realities, not a re-establishment of vanished but longed for realities. Meanwhile, and this is central, workers will be enjoying the reduced taxes and the increased pay. They won't be lamenting, with head in hands, their eventual return to previous levels. They will be living their new realities with reduced government demand. They will be spending more. The tax reductions will be real for a long time and this also is a lever for changed attitudes.
So, it seems to me, there will eventually be a certain tendency for employers to eat up the benefit of the reduced taxes, but that is always present. Employers are always chewing on any joy a worker can find to render him or her maximally exploited again. Nothing new in that. But reduced taxes shake up the system to find a new settling point.
In chemistry, we call that L'Hopital's Rule. Any stress put on a system in equilibrium will set up changes that will tend to counteract that stress (in the intervening years, this Rule seems to have become a mathematical one but that's the way I learned it). But a chemical system in equilibrium is infinitely better characterized than an economic one. No economic system can boast such a simple reaction. And that is the Achilles Heel of your analysis. It depends on a far too simple formulation of a complex reality.
Another argument against yours is that it would apply to any benefit a worker enjoyed. If unemployment compensation or social security is increased, you might say that the employer would reduce wages to offset that. So dismal! No, such rewards are not so easily dismissed. They are worth fighting for and every union understands that.
So I am still going to be an advocate for reduced taxes on working people. Perhaps other factors, like a concomitant increase in the minimum wage, or a union contract, would be recommended to be sure it sticks, long term.
“ By taxing income in the very top brackets at a rate well above 50%, ideally the 74% rate we had before Reagan, we stabilize the economy, stop the relentless poaching of working peoples’ wages for the money bins of the rich, and begin restoring our middle class.”
Despite my advanced age, I have never heard this argument before.
I would love to see the promise that working hard is supposed to bring, ie upward mobility and a good life fulfilled. As it is now, the deck is so stacked against the working class that they will never break through.
And the morbidly rich (love that term and am using it early and often!) get richer.
Really, how many billions does one person really need? Looking at you MuskRat.
1. The high income rate only refers to that portion of a person’s taxable income that is in the high income bracket.
For the current tax year, a single person with a taxable income of $11,000 would pay 10% or $1,100 in taxes.
A single person with a taxable income in the highest bracket of $578,126 or more would pay a total of $174,238 plus 37% of the amount over $578,125. But it is only the amount over that gets taxed at the 37% rate. The wealthy pay the same 10% tax on the first $11,000 taxable income as the low wage earners do. I realize most people reading Thom’s newsletter understand this. But I find that many people that I talk to, do not. They hear “tax rate 37%” and think it applies to them and all of their income, when it actually doesn’t.
2. If the members of Congress were to actually find their spines and grow some balls (“Balls”, said the Queen. “If I had them I’d be King”.) and actually raise taxes, the question is, what would be done with the extra revenue? Would it be used to invest in things that affect the average taxpayer and their families? Or would there be insistence on using it all to pay down the deficit? If the former, then the average worker would actually see their life getting better and fairly quickly. If the latter, tho it might benefit the economy over all, the effect on the worker would be less real and more hypothetical.
So any increased revenue from higher taxes needs to go at least in a large part, toward things that workers need and want and appreciate. And the entire thing would need to be talked about with facts (please god, the facts ma’am, nothing but the facts!) and examples so people are educated as to where the money is going.
I despair of this scenario ever happening in the current iteration of our society.
Maybe if there was some sickness that wiped out 90% of republicans* and 100% of the media** we would have a chance.
*in my opinion, anyone in this day and age who identifies as a member of the Republican (fascist) Party has sold their soul, is complicit in the lies and cruelty the RFP is raining down on us and is a part of the problem.
**media includes MSM and Fox and it’s ilk as well as X-Twitter and Facebook.
It does not include SubStack.
My post, my opinions. Others may think differently.
What is also not talked about is the reduction of federal support of college education when Reagan came in and slashed much of the middle class programs. ( closing and emptying out the mental health facilities is another. The increase in homelessness can be directly linked to this.) I submit that much of the fall of the middle class lifestyle can be traced to Reagan’s administration reducing the top tax rate to less than 30%.
Certainly, the evidence by Piketty supports your position about high tax being beneficial. And the executives didn't flee the country.