Report: Tax Cuts for Wealthy Linked to Income Inequality

[her209]

http://blogs.wsj.com/economics/2012/09/14/report-tax-cuts-for-wealthy-linked-to-income-inequality/

The report, from the Congressional Research Service, finds that tax cuts for high earners can be linked to a different outcome: income inequality.

The government researchers found that “the top tax rates do not necessarily have a demonstrably significant relationship with investment.” The researchers also said that the correlation between economic growth and the top tax rates “is not strong,” and that any links “could be coincidental or spurious because of changes to the U.S. economy over the past 65 years.”

CRS analysts also said that “capital gains and dividends have become a larger share of total income over the past decade and a half while earnings have become a smaller share.” This phenomenon, the researchers said, suggests that labor may grab a larger share of the pie when the top individual and capital-gains tax rates are higher. The past decade and a half covers a period that includes a decline in taxes; the Bush tax cuts were instituted in 2001 and 2003 and extended in 2010.

Is Mittens going to flip-flop on tax cuts for the 1% now?

 

[Anarchist420]

Income inequality is not wealth inequality... wealth inequality is natural and cannot be reduced by the state.

Also, capital gains may have become more of income because they're taxed at a lower rate. Raising the tax rate on capital gains won't bring in more revenue... and even if it did what good would that do when expenditures need to be slashed?

To answer your question though... Yes, mitt Romney would raise taxes.

 

[Matt1970]

Income inequality started in the early 70's, well before the tax cuts. Plus the tax cuts were for all income brackets, how did that somehow cause income inequality?

 

[DCal430]

One thing I think is a bit misleading is this:

The top individual tax rate for high earners has generally declined since World War II, and is at 35% currently, down from 94% in 1945, the report noted. Although capital gains tax rates have been more variable, the current 15% rate is the lowest in more than 65 years. The capital gains rate was 25% before 1965.

I think some will interpret that to mean it changed to 15% in 1965 when it didn't. Capital Gains was 28% in 1996 before Clinton lowered it to 20% and Bush lowered it again to 15%. Funny how Regan raised Capital Gains tax to 28% and Clinton lowered it down to 20%.

 

[Fern]

Report: Tax Cuts for Wealthy Linked to Income Inequality

I say Bull.

Had they said "wealth inequality" I would agree.

Fern

 

[Hayabusa Rider]

The real issue isn't addressed. If taxes increased at higher levels that would do nothing for the income of others. Blame taxation and ignore the rest. Useless.

 

[Bowfinger]

I say Bull.

Had they said "wealth inequality" I would agree.

Fern

Okay? Because it's not what you feel? Did you read the report? What is your factual basis for disputing it?

 

[Bowfinger]

The real issue isn't addressed. If taxes increased at higher levels that would do nothing for the income of others. Blame taxation and ignore the rest. Useless.

One theory I've heard is that higher tax rates at the top discourage greed by company executives, instead incenting them to share more of the rewards from increased productivity and increased profits. I don't know that this theory is backed by actual data, however.

 

[Fern]

Okay? Because it's not what you feel? Did you read the report? What is your factual basis for disputing it?

CRS analysts also said that “capital gains and dividends have become a larger share of total income over the past decade and a half while earnings have become a smaller share.” This phenomenon, the researchers said, suggests that labor may grab a larger share of the pie when the top individual and capital-gains tax rates are higher.

^ That's the gist of it. Simply that. What's to say other than I don't agree with it? They haven't shown anything other than correlation. They haven't explained HOW lower rates result in income inequality. How can I rebut an argument they haven't even attempted to make?

Fern

 

[umbrella39]

One theory I've heard is that higher tax rates at the top discourage greed by company executives, instead incenting them to share more of the rewards from increased productivity and increased profits. I don't know that this theory is backed by actual data, however.

LOL :thumbsup:

 

[Bowfinger]

^ That's the gist of it. Simply that. What's to say other than I don't agree with it? They haven't shown anything other than correlation. They haven't explained HOW lower rates result in income inequality. How can I rebut an argument they haven't even attempted to make?

Fern

One of us is confused. We agree they didn't offer a theory explaining why tax rates affect income disparity. They simply analyzed the data and reported that there is a correlation. Your response to this was, "I say Bull."

Now, however, you agree there is correlation. So which is it? It seems you are challenging a straw man they didn't make.

 

[Fern]

One of us is confused. We agree they didn't offer a theory explaining why tax rates affect income disparity. They simply analyzed the data and reported that there is a correlation. Your response to this was, "I say Bull."

Now, however, you agree there is correlation. So which is it? It seems you are challenging a straw man they didn't make.

Perhaps.

I read their statement as claiming there is causation. I also read this remark: "suggests that labor may grab a larger share of the pie when the top individual and capital-gains tax rates are higher" and don't believe it suggests anything of the sort. Maybe I misunderstand them, but it seems to me they are saying wages will go up if you increase LT cap gain and div rates. WTH? Why would a company pay its workers more because it's SH were paying higher tax?

Fern

 

[Fern]

One theory I've heard is that higher tax rates at the top discourage greed by company executives, instead incenting them to share more of the rewards from increased productivity and increased profits. I don't know that this theory is backed by actual data, however.

So, taking money away from greedy people makes them les greedy? Sorry, can't buy into to that either.

You raise taxes on greedy people and their first move is do whatever possible to minimize them, even cheat if necessary. Now, they will defer income, but that's a whole 'nother matter, and one these authors may be confusing.

Fern

 

[Jhhnn]

^ That's the gist of it. Simply that. What's to say other than I don't agree with it? They haven't shown anything other than correlation. They haven't explained HOW lower rates result in income inequality. How can I rebut an argument they haven't even attempted to make?

Fern

If taxes on capital gains are lower, and the wealthy own nearly all the capital gains inducing paper, then lower taxes for them will obviously enhance their incomes over time. It's the same for dividends & interest. Hedge fund & PE managers even get to amplify their gains with other people's money, leverage, in the standard 2+20% arrangement. the 20% is taxed at 15%, even if they have no money in the fund.

It's arithmetic.

 

[Bowfinger]

So, taking money away from greedy people makes them les greedy? Sorry, can't buy into to that either. ...

I agree, it seems counter-intuitive to me as well. I will note, however, that many on the right seem to believe it. One of the most frequent objections to raising taxes on the wealthy is that by "punishing" the "job creators," they'll just stop trying to earn more, be successful, etc., ad nauseum. I don't know if you personally have used that objection.

 

[Fern]

Alright, that makes sense.

(Quicker accumulation of capital means more income from capital, etc.)

Fern

 

[Fern]

I agree, it seems counter-intuitive to me as well. I will note, however, that many on the right seem to believe it. One of the most frequent objections to raising taxes on the wealthy is that by "punishing" the "job creators," they'll just stop trying to earn more, be successful, etc., ad nauseum. I don't know if you personally have used that objection.

If they're making money from personal services (physicians, lawyers etc.), yes I would say that high tax rates can discourage earnings. Why stay they overtime if Uncle Sam gets the bulk of the money? I wouldn't.

Otherwise, the risk/reward factor needs to be considered. Why would I risk a bunch of capital etc. if Uncle Sam gets the bulk of the profits? I wouldn't.

Edit: I think the authors are confusing some things. When taxes on dividends were high. companies didn't pay them. They accumulated the money driving up the market value of the stock. In that way their S/Hs converted ordinary (dividend) income into LTCG. And as far as LTCG, people hold off on realizing until the rates eventually come down. When they are high they will eventually come down, they always have. When they are low, they will eventually go back up, they always have.

I think the authors are confusing these moves with some effect on wages, when I think there's nothing of the sort.

However, I will say that if in theory you raise taxes on wages enough you'll see wages going up. If taxes on wages were 75% heck I wouldn't even bother going to work for a salary of $50K. You'd have to pay me $150K to even consider it.

Fern

 

[Jhhnn]

If they're making money from personal services (physicians, lawyers etc.), yes I would say that high tax rates can discourage earnings. Why stay they overtime if Uncle Sam gets the bulk of the money? I wouldn't.

They already pay the highest rates on earned income, and nobody has really suggested raising that.

Otherwise, the risk/reward factor needs to be considered. Why would I risk a bunch of capital etc. if Uncle Sam gets the bulk of the profits? I wouldn't.

Investors in many parts of the world pay much higher rates than their American counterparts, and still invest.

Edit: I think the authors are confusing some things. When taxes on dividends were high. companies didn't pay them. They accumulated the money driving up the market value of the stock. In that way their S/Hs converted ordinary (dividend) income into LTCG. And as far as LTCG, people hold off on realizing until the rates eventually come down. When they are high they will eventually come down, they always have. When they are low, they will eventually go back up, they always have.

That assumes a differential between LTCG rates & rates on dividends.

I think the authors are confusing these moves with some effect on wages, when I think there's nothing of the sort.

However, I will say that if in theory you raise taxes on wages enough you'll see wages going up. If taxes on wages were 75% heck I wouldn't even bother going to work for a salary of $50K. You'd have to pay me $150K to even consider it.

Fern

Nobody is suggesting any such thing, so quit with the fantasy scenarios.

At times in the not too distant past, taxes, particularly high taxes on the wealthy, actually funded the govt reasonably well. Govt & govt contractors competed with private industry for workers, driving wages up in no small way. The current opposite is a win/win for capitalists, who get ultra low taxes and pay low wages at the same time.

 

[Matt1970]

One theory I've heard is that higher tax rates at the top discourage greed by company executives, instead incenting them to share more of the rewards from increased productivity and increased profits. I don't know that this theory is backed by actual data, however.

If anything it would cause them to kick their salaries up to make up the difference.

 

[her209]

Don't like the report? Get it pulled...
http://www.nytimes.com/2012/11/02/b...al-research-services-report-on-tax-rates.html

 

[PokerGuy]

Worthless report got pulled. That's good.

 

[soulcougher73]

So, taking money away from greedy people makes them les greedy? Sorry, can't buy into to that either.

Fern

I think what people are trying to get at is we know they are greedy so we have to keep them in check. They will always be greedy regardless how much we take from them, but what we take can theorectically reduce the burdon on others not so well off.

Still have a spending problem though lol

 

[Jhhnn]

Don't like the report? Get it pulled...
http://www.nytimes.com/2012/11/02/b...al-research-services-report-on-tax-rates.html

Worthless report got pulled. That's good.

When the truth hurts, try to keep people from seeing it. The most amazing part is how middle class Righties champion their economic oppressors. It's some weird form of Stockholm Syndrome, some truly strange expression of religiosity & worship.

 

[Juddog]

This is a bit of a no-brainer, just like trickle-down economics was ridiculous as well.

I laugh when they have to do a study to conclude something this obvious. I laugh even harder when people attack the study out of ignorance.

 

[Pr0d1gy]

This is a bit of a no-brainer, just like trickle-down economics was ridiculous as well.

I laugh when they have to do a study to conclude something this obvious. I laugh even harder when people attack the study out of ignorance.

You're not alone. I just don't bother posting here because the Fox News/Tea Party folks pay their shills to bomb every obviously true thread like this with their deceptions, misinformation, and general douchebaggery. Nice work guys, way to work it through. What did America do to you that is so horrible that you would contribute to the continued effort to turn it into the next 3rd world country?

The Republican party is nothing more than the 4th Reich folks, wake up. I know, I used to be one until I did some real research and saw what this country really is.