Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

March 8, 2009
By: Hilzoy

Be Like Reagan And Thatcher! Soak The Rich!

Possibly because of my immersion in posts about going Galt, I've read altogether too many blog posts and newspaper columns about the horrid, wealth-destroying, class-warfare-waging, socialist nightmare that is Barack Obama's tax policy. So I thought it might be a good idea to get a few basic facts on the table.

Obama is not proposing to raise the personal income tax. He is proposing to allow the Bush tax cuts on families making over $250,000 a year to expire. The Republicans wrote that expiration into law to conceal to hide the costs of their tax cuts. Under the law they wrote, the top marginal tax rate will go up from 35% to 39.6% in 2011.

If a top marginal tax rate of 39.6% is socialism, then there are a lot of socialists in the world. For instance, Japan, South Korea, Australia, along with a lot of the OECD: all have rates higher than Obama is proposing. (Note: I just chose some countries at random. I'm sure I could have found more.) No wonder the world economy is in trouble! There's socialism and class warfare everywhere you look!

But it's even stranger than that. Did you know that Margaret Thatcher (pdf) declared war on the wealthy, a war so extreme it makes Obama's seem meek by comparison? The top tax rate in the UK was 60% for most of her term in office, and 40% for the last year or so. At no point was it lower than what Obama proposes -- and that's without taking into account the VAT.

Likewise, Ronald Reagan was apparently a Class Warrior: for six of the eight years during which Reagan was President, the top tax bracket was 50%. It's a wonder anyone worked at all! In Reagan's defense, though, he was just carrying on a long tradition of wealth expropriation carried out by socialists like Harry Truman, Dwight D. Eisenhower and John F. Kennedy.

All in all, it seems as though we've been suffering through an awful lot of socialism and class warfare all over the world, much of it at the hands of people conservatives claim to admire. If a top marginal rate of 39.6% is enough to make society's producers and creators go on strike, then Galt's Gulch must be getting pretty crowded.

Hilzoy 12:05 AM Permalink | Trackbacks | Comments (22)

Bookmark and Share
 
Comments

Amen!

Posted by: emartin on March 8, 2009 at 12:53 AM | PERMALINK

Great perspective. Right on the money (so to speak)

Posted by: joey on March 8, 2009 at 1:03 AM | PERMALINK

It's all just noise from them. They figure the more they howl and throw poo the better the chances of fighting off the return of this tax increase.

Plus, that's all they got now, screeching in their cage.

Remember, it was this very issue that torpedoed the first President Bush's reelection.

If you're making $500K of income a year you're looking at paying another $25K or so in taxes -- enough to buy a $600K house -- so all this mau-mauing is certainly worth it from a cost-benefit perspective.

FWIW IIRC it was the Dems who put together the final Bush tax cut package due to their control of the Senate in 2001-2002. All this sunsetting stuff was procedural to get it through and quite a disappointment to the rank & file Republican chimps in Congress. 'course, they were working on their permanent majority so they figured no prob.

Posted by: Troy on March 8, 2009 at 1:38 AM | PERMALINK

If you're making $500K of income a year you're looking at paying another $25K or so in taxes -- enough to buy a $600K house

Anyone dumb enough to spend their hypothetical tax break from an imagined further extension of the Bush Tax Cuts For The Rich on real estate as prices continue their nosedive would also be stupid enough to be separated from that money anyway by the next Madoff or other huckster to happen along.
Remember, the supposed justification for the Bush tax cuts for the rich was that they were going to be a net benefit to the economy. That didn't happen.
During the Bush Depression, why should the other 99% of us care about the "pain" of the most well-off 1% minority losing this giveaway?

Posted by: melior on March 8, 2009 at 4:03 AM | PERMALINK

If you're making $500K of income a year you're looking at paying another $25K or so in taxes -- enough to buy a $600K house

Your math also reflects a failure to understand the way marginal tax rates work. The higher rate only applies to the portion of income over the rate threshold, not to all of the income.

Posted by: melior on March 8, 2009 at 4:11 AM | PERMALINK

No wonder the world economy is in trouble! There's socialism and class warfare everywhere you look!

That is, of course, exactly what the Galt cultists believe.

Posted by: dr sardonicus on March 8, 2009 at 4:45 AM | PERMALINK

I think most Republicancers aren't interested in the facts or details. If it won't fit on a bumper sticker, it is too complex for them. If the average IQ is a 100, there are a lot of stupid people out there and Republicancer politicians rely on that. A lot of the articles posted here prove that many of the Republicancer politicians aren't too bright either. If Pavlov was still alive he could experiment with Republicancers instead of dogs (same mentality, no disrespect intended to dogs) using the phrase "tax cuts" instead of a bell.

Posted by: tko on March 8, 2009 at 5:29 AM | PERMALINK

I second what melior (and Paul Krugman) say. People just don't seem to be aware that all your income isn't taxed at the higher rate, only that over the threshold.

Posted by: Andrea on March 8, 2009 at 5:51 AM | PERMALINK

They are just trying to keep the lame "socialist" meme that Caribou Barbie started alive . OOOH LOOK shiny new label...The new dirty word for liberal. So sayeth the right wing. Let us repeat this word until it becomes a hammer with which we can bludgeon the hapless democrats. We are the Knights who say Nicht , take that you foolish Democrats and cringe in fear as we pronounce the word.

Posted by: John R on March 8, 2009 at 6:36 AM | PERMALINK

$500K is $250K above the threshold, and the "new" rate would be 4.6% points higher than the "old" rate. So the math is:

$250K * .046 = $11.5K tax increase. Enough to hire me as a part-time math tutor in case you find yourself in these embarrassing situations too often.

Posted by: Mim Song on March 8, 2009 at 6:42 AM | PERMALINK

If a top marginal tax rate of 39.6% is socialism, then there are a lot of socialists in the world.

And then there are the "non-socialists". Top marginal rates: Russia 13%, Venezuela 34%, Cambodia 20%. Courtesy of Heritage Foundation.

Posted by: Danp on March 8, 2009 at 7:09 AM | PERMALINK

If these Galtists don't want their higher earnings taxed at a higher rate, they could always donate it to organizations that would do the work the increased tax revenues would accomplish. They could build the quarter-million bridges that need to be built...and the eighteen thousand schools whose current editions are so decrepit that they don't even meet the definition of "slum."

They could pay directly for the one million miles of new railbed, or the three-and-a-half-million new miles of electric line, or any of the other goodies the country needs.

Three or four of them could band together, and fully fund a college scholarship.

A hundred of them could do likewise, and their group could completely underwrite a research lab.

But in order to fully appreciate the meaning of PHILANTHROPY, you've first got to say it---then spell it---and then practice it....

Posted by: Steve W. on March 8, 2009 at 7:11 AM | PERMALINK

I wonder how many of these Randy Galtists ever punched a time clock. Processed chickens on a slaughter line. Picked lettuce.

Work is hard and boring and the pay is lousy. Much better to sit in the Club with their confreres and dream up buzzwords, memes, and new ways to frame their attack on reality.

Reality is, after all,is just a matter of spin. . .

Posted by: DAY on March 8, 2009 at 7:38 AM | PERMALINK

Republicans are incapable of discussing an issue honestly.

Posted by: wonkie on March 8, 2009 at 8:05 AM | PERMALINK

Mrs Thatcher cut income tax and it was even higher before her...tax in Britain has shifted from the rich to the poor, this was a trend started by her.

I guess you would like the rest of us to be slaves to the super rich, I think you are mistaken in believing Thatcher was a socialist.

Posted by: Derek Wall on March 8, 2009 at 8:26 AM | PERMALINK

Derek Wall - It's called sarcasm.

Posted by: Danp on March 8, 2009 at 8:40 AM | PERMALINK

Derek Wall @ 8:26

Take your dictionary, presuming you have one, off the shelf and turn to the esses...now find the word sarcasm and absorb the meaning...now close the book and smack yourself in the head with it a couple of times to get the point across.

Glad I could help.

Posted by: Realist on March 8, 2009 at 8:45 AM | PERMALINK

A large part of the efficacy of the buzzword game comes from the prime enablers who write for the major news orgs. There is no financial press to speak of in the NYT or WaPo or on the editorial pages of the WSJ.
The meme of "socialism" (picture the Scream) survives because the major political newspapers simply can't be bothered with financial facts. Social Security, taxes, health care, pick a topic and then see if you can find good solid financial reportage.
Oh, and don't bother with the PuffPo, either.

Posted by: mickscotty on March 8, 2009 at 9:22 AM | PERMALINK

Yes, Derek, she did lower the rate - Had to find a way to bring the top actors, such as Guiness, Sellers and Lom back to England, eh?

But, as Judge Reinhold's character once said on "Seinfeld", "Could have done more". 60 per cent sounds a touch socialistic. She was not exactly slash and burn on that issue.

Posted by: berttheclock on March 8, 2009 at 9:34 AM | PERMALINK

@danp: Don't the Russian and Venezuelan govts. slurp up a lot of their oil revenue instead of relying on income tax? As for Cambodia, can Heritage really be serious?

Posted by: Mim Song on March 8, 2009 at 11:19 AM | PERMALINK

As I wrote elsewhere, I think all this going Galt is wonderful news for the honesty of American political discourse. Since at least Nixon's "Southern Strategy" came into play and certainly up through Sarah Palin, the GOP has relied on so-called cultural conservatism (and racism) for a lot of its support.

Going Galt reminds of where the true roots of the conservative philosophy lie-- the self-perceived interests of the more short-sighted members of the monied classes.

Posted by: Jake on March 8, 2009 at 12:33 PM | PERMALINK

Mim Song (11:19) - You're probably right on all three counts, but the point is that the pro-Galt faction is using the top individual marginal rate as their sole measurement of socialism. I assure you Heritage, which is a very conservative think tank, is in no way endorsing these countries. In fact you really have to look through the data they offer to see a pattern that countries with higher tax rates and spending policies tend to be industrial, democratic countries, while those with policies Republicans like, then do be third world nations.

Posted by: Danp on March 8, 2009 at 3:58 PM | PERMALINK




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly