THE STASH AUGUST 10, 2009
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This is not the first time I’ve had my doubts about Clive Crook as an economics columnist. I had a debate with Crook in 1997 about the benefits of economic globalization. I had misgivings; Crook did not. “Growing economic interdependence,” he wrote, “is on balance an enormously good thing.” Four months later, the Asian financial crisis hit. And look at the world economy today, plagued by currency imbalances and excess capacity in key industries.
Now Crook, who is a featured columnist for The Financial Times, is back at it again. He is advising American President Barack Obama to raise taxes. His column is headlined, “Why Obama will have to raise taxes. ” Is this a good time to raise taxes or even to threaten to raise taxes? Do I have to repeat the mantra about what happened in the United States in 1937 when Franklin Roosevelt got convinced by the Clive Crooks of that era to worry about the federal deficit or what happened in Japan in 1997 when the Crooks of Tokyo convinced the government to hike the consumption tax. Hint: the recoveries in both countries stalled.
And which taxes does Crook think should be raised? It is possible, I’ve argued (as have others who know more than I do) to raise taxes on the very wealthy during a recession as long as the revenue is spent and not saved without endangering the economy. But Crook doesn’t want to do that. According to Crook, the American economy “is heavily skewed toward taxing the rich.” “Before long, especially if you add state incomes taxes” Crook warns, “the U.S. will be a conspicuous outlier among industrial countries in how progressive its taxes are.” Say what? Maybe in 1960 that was true, but no more. As economists Thomas Piketty and Emmanuel Saez conclude their study, “The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s.” Of the major industrial countries, the U.S. has one of the least progressive income tax rates. Combining federal and states rates for the U.S., which gives you about a 39 percent top rates, I counted 26 countries with higher tax rates on top incomes.
Here’s a chart put out by the Australian government of the comparison of top rates:
You can see where the U.S. is on this chart. The U.S. is not an “outlier,” but in the middle, if not lower middle, of the pack. Really, where do these nutty ideas about taxes and taxing the rich come from?
9 comments
John, a lot of it is selective use of facts. It's inconvenient for those on the right to acknowledge the U.S.'s relatively low marginal tax rates. Instead, they focus repeatedly on the share of federal tax revenues paid by the richest percentiles of taxpayers. At first blush, it's a winning statistic for them because yes, the rich do indeed pay a lot of taxes. However, it's because they make a lot of money. In fact, with the U.S. income distribution more tilted in favor of the rich than at any time since the 1920s, it would seem that comparing income vs. taxes paid would be a sensible check before advocating taxes on the non-rich during a time of continuing economic weakness. But Crook has an agenda, and what's sensible takes a back seat to that.
- abrod
August 10, 2009 at 12:19pm
It's amazing how convenient it is for the poor left-wing to continuously press on about higher taxes on the rich. Class warfare at its finest. Taxes are such an abstract thing.
Instead of higher taxes on the rich. How about higher prices for goods? You want a loaf of bread? Income check - Well sir, you make $60k a year which is slightly above average so I'm going to have to charge you $3.39/loaf as opposed to that guy there who sits outside our store all day and does nothing. He gets to pay $0. $1.69 of your price goes towards paying for his bread. It's only fair cause you can afford it.
I wonder with this system how many of you elitist leftist snobs would be up for it. When Whole Foods raises the price of apples to $2 a pop.
The problem with raising taxes on the rich is that eventually you run out of rich.
- jwl2672
August 10, 2009 at 1:04pm
Thanks to jwl for his amusing caricature of the right-wing position. He's got the usual crap about rich people paying higher prices for groceries, and of course the name-calling. Well done, sir.
To people like jwl, sober assessments of taxes paid are "class warfare," and just pronouncing that phrase is deemed to be enough to stop the conversation. To them, the right is by definition immune to the charge. "Class warfare" is a unilateral game in their imagination. Even when the right ignores or--in the case of Crook--baldly misrepresents relevant data to support their view of economics and class, it's still never class warfare!
- abrod
August 10, 2009 at 1:50pm
jeez JWL, what kind of dark fantasy world you live in. You never, ever run out of rich, even in the most wretched countries there are still rich people living as despots. It is the nature of power. As to your idiotic idea, it would never work, which is why no one has ever proposed it on the left, it is just too stupid to mention, of course that never stops Republicans from doing so. Manufacture a delusional world and then ascribe those theories to your political opponents.
I love when Republicans whine that if you tax the rich they will just go elsewhere, ok, then leave, surrender your citizenship, live in a tax haven in the antilles for all I care. The world will go on fine without you. This is something the Republicans can never grasp. They imagine themselves to be indispensible. Contrary to Jwl, raising the marginal taxes on the rich will not has us run out of rich, not as long as the US is Capitalistic. He has such little faith in Capitalism, it is sad.
- blackton
August 10, 2009 at 2:13pm
JWL, the Slovank Consulate called and wanted me to relay the message that your Visa application has been approved and your new 2-bedroom flat in Downtown Kosice is waiting for you. What, you're not interested in emigrating because rich Americans like you don't make your decisions on where to live solely on the basis of top marginal tax rates???
- wildboy
August 10, 2009 at 2:53pm
Note also the bars. The already low US top marginal rate applies to relatively few people. The huge bar for the US means that the top rate only applies to those who earn a whopping 10 times the average income. In France, on the other hand, the slightly higher top rate applies to those who earn about 2.5 times the average. It may be that conservatives are trying to tease this difference into saying that we're more progressive, and that might be true strictly speaking. Taxation might be flatter in Europe, but that comes with the cost of socking a lot more people with higher taxes.
- jhildner
August 10, 2009 at 3:43pm
Actually, Slovakia is a great place--beautiful mountains, relatively untouched old cities, and a flat tax that has produced a tremendous influx of direct foreign investment with attendant good-paying jobs. A fellow could do a lot worse...
- Robert Powell
August 10, 2009 at 4:36pm
Robert Powell - dont forget the harshest press law in the continent, a populist government that includes the ranting extreme right (and I don't mean conservative Christians, I mean actual fascists), an ongoing clampdown on the Hungarian minority's right to speak its own language, and a capital city as small and provincial as your average Ohian town.
- jobeek2
August 11, 2009 at 6:50am
Actually regardless of the conventional wistom, the cause of the current financial crises is that taxes on the rich were too low. Very high marginal tax rates would have reduced the incentive to amass riches, as we have been told ad nauseum, since it would have all been taxed away and so all of the risky bets made to become richer that Croessus would not have been made! One can make a case that the proper way to reduce excessive executive compensation would marginal tax rates that exceed 100%.
- tpinter
August 11, 2009 at 8:54pm