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November 30, 2012 5:17 PM Guess Who Else Doesn’t Understand Marginal Tax Rates?

By Ed Kilgore

Regular readers know that after a tough week of heavy blogging, I often succumb to the temptation of devoting just one teeny tiny post to the deconstruction of the prose and wisdom of one of America’s most visible and richly rewarded pundits, Peggy Noonan. I won’t torture you by going in detail through her latest column, expressing predictable outrage at Barack Obama’s refusal to make immediate concessions to congressional Republicans. You can laugh or cry on your own at her anger that Obama does not emulate—yes, of course—Ronald Reagan, that good and great man who stooped to break bread and reason with the grubby liberal prole Tip O’Neill.

But there’s one piece of classic Noonanalia that merits special attention. After a couple of graphs suggesting that Republicans need to realize their aversion to higher taxes on the wealthy has been repudiated by voters (a rare moment of clarity!), she turns and argues against Obama’s proposal for higher taxes on the wealthy by illustrating she is among the remarkably large number of pundits who do not understand marginal tax rates:

Mr. Obama wants to raise tax rates on those earning $250,000 or more, as we know, on the assumption that they are “the rich.” But if you are a man with a wife and two kids making that salary and living in Westfield, N.J., in no way do you experience yourself to be rich, because you’re not. You pay federal payroll and income taxes, state income and sales taxes and local property taxes, and after the mortgage, food and commuting costs you don’t have much to spare.
Tighten the squeeze on that couple, and they’ll change how they live. They’ll stop sending the struggling son to a neighborhood tutor, they’ll stop going out to dinner once a week, they’ll cut off the baby sitter, fire the guy who once a month does yard work, and hold back on new clothes. Also the guy will peruse employment ads in Florida and Texas, potentially removing from blue-state New Jersey his heartening, taxpaying presence.

The fictional burgher living the virtuous life in New Jersey on a quarter-mil of taxable income would not, of course, pay a dime in higher taxes under Obama’s proposal. He would, in fact, get a major tax break compared to what he would face under current law, like everyone else, on the first quarter-mil he earned. But even if reject that construct and with it the idea that the Bush tax cuts were never designed to be permanent, Mr. Jersey would still be held harmless. Those higher rates that supposedly threaten the “struggling son,” the local restaurant, the babysitter, the yard man, the clothing retailer, and the State of New Jersey would only affect the money he earned after $250,000.

You’d think someone with a column in the Wall Street Journal, of all places, could grasp how this works. But I suppose everything Peggy Noonan needs to know she learned in that Golden Era that ended in 1989.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • scott_m on November 30, 2012 5:40 PM:

    A while back, someone I know was pointing out that raising taxes on "the job creators" would create an incentive not to invest-- I pointed out that tax rates are marginal and apply only to dollars earned above this or that bracket.

    What I didn't say was "Jesus, man, how could not know this-- you're a freakin' accountant!"

  • c u n d gulag on November 30, 2012 6:22 PM:

    Remember the old adage: "You can't teach an old dog, new tricks."

    Especially not one who knocks bach a handfull of double martini's a day, and then for dessert, a few tumblers of sherry and port.

    I swear, if they gave her a Breath-a-lyzer before he TV appearance, they wouldn't let her on, have some staff member drive her home, tuck her in bed, and arrange for an intervention.

  • MuddyLee on November 30, 2012 6:29 PM:

    Meghan McCain has called for Karl Rove to resign because he has done great damage to the republican party. Could we expect Meghan to ask the same of Peggy Noonan? But it should not be a surprise that republicans don't understand marginal tax rates - they don't want to understand taxes OR government in general - they just want to attack the things they don't understand. Did ANY of these people go to public schools, attend state universities, ever ride on interstate highways, go over bridges built with tax dollars, take advantage of law enforcement services, appreciate our military, cash a social security or tax refund check? Or sell something to people on food stamps or other public assistance? Conservatives: kiss my liberal, FDR New Deal Democrat, War on Poverty, McGovern-Carter-Clinton-0bama voting, Washington Monthly reading, Southern redneck ass.

  • DisgustedWithItAll on November 30, 2012 6:48 PM:

    "You’d think someone with a column in the Wall Street Journal, of all places, could grasp how this works."

    Why would you think that?

  • Joe Friday on November 30, 2012 6:52 PM:

    When oh when will the men in white coats come and take Loony Noonan away ?


  • golack on November 30, 2012 6:55 PM:

    FUD

    It's not about enlightening the readers, but about spreading fear, uncertainty and doubt.

  • Frank on November 30, 2012 6:55 PM:

    Remember Joe the Plumber. It's deliberate.

  • Anonymous on November 30, 2012 7:06 PM:

    Remember the outrage over the Chicago teachers (many of whom have Masters Degrees) make $70K? The lazy slackers don't have the wherewithall to make respectible $250K?

  • Crissa on November 30, 2012 7:13 PM:

    Not to mention - taxable income. So if you're earning $256k, still no raised rate. In fact, someone earning that much and having several dependents, mortgage, medical expenses... All those deductions raise your ceiling to 270k or more as seen by Romney before the rate applies.

    And then it only applies to the earnings above that.

    Why don't we return to st ronnie's tax rates (indexed to medium income), eh?

  • exlibra on November 30, 2012 7:37 PM:

    Maybe Mr Jersey's wife could get a job? Or tutor the struggling son herself? Though, if they don't know what "marginal" means, perhaps there ought to be some subjects she should steer clear of (math and English, to begin with)...

  • DCSusie on November 30, 2012 7:43 PM:

    Oh the horror! To barely be able to afford the private tutor-weekly diner out-yard maintenance man-new spring wardrobe! No wonder they are so outraged!

    And BTW-very unlikely you would be able to match that $250 grand in Florida or Texas.

  • trex on November 30, 2012 7:55 PM:

    "It is difficult to get a man to understand something, when Fox News salaries depend upon his not understanding it!"

  • biggerbox on November 30, 2012 8:17 PM:

    Too bad mr. Jersey failed to fund his local public school system so that it could afford to teach Jr. Better and he wouldn't need a tutor. Also, I'd like to afford someone to take care if my lawn too - but what does that have to do with my tax rate?

  • Nexus6 on November 30, 2012 8:37 PM:

    Since the concept of marginal rates seems so hard for the average public to grasp maybe we should just have a continues progressive rate based on TOTAL taxable income. Say starting at $15K a year income at 1% up to $5M+ at 50% (those earning less than $15K pay no tax) Seems like that would provide an easier to understand and ultimately more progressive income tax system.

    While we're at it we need to do away with the distinction between capital gains and regular income. Sort of like the flat tax idea that conservative seem to love to bandy about but with a seriously progressive element. Should be any easy sell to Joe public.


  • Doug on November 30, 2012 8:58 PM:

    I seem to recall Mr. Reagan giving speeches that actually made sense. How was that possible if Noonan was involved?
    Or was she a "one-speech pony"?

  • Rip on November 30, 2012 9:53 PM:

    Dinner out once a week, a tutor for junior and monthly yard work is very conservatively $300 a month, and that's if you eat at the Golden Corral without the kids.

    That would be $3600 a year, or the amount of additional taxes one would pay on the next 100k after the first $250,000 ( after deductions and exemptions) .

    So the family making these decisions would actually have an income of at least $375,000 in order for these cutbacks to add up.

    That's not private jet, house in the Hamptons rich, but still about 7 times the median household income, and fuck you if you don't feel comparitively "rich" with that sort of annual income.

  • WRONGWORD on November 30, 2012 11:10 PM:

    Did he mean "grubby liberal POL"? Tip O'Neill was rather closely connected to working class Boston, but he was not a "prole." He grew up in a middle class neighborhood in North Cambridge and he went to Boston College.

  • reidmc on November 30, 2012 11:37 PM:

    SO far past her sell-by date. . .

  • Coop on December 01, 2012 12:38 AM:

    Those of us who never made more than about $53K in a year would certainly consider $250K "rich". That Noonan does not gives a pretty clear insight into how much she makes for blathering.

  • m on December 01, 2012 5:18 AM:

    The Bush tax cuts were always intended (by the Republicans who passed them) to be permanent. The only reason they weren't made permanent in the first place was that they could only pass the Senate through reconciliation. That meant they had to appear revenue neutral, and they way that was done was to have them expire. The thinking was that it would be easy to make them permanent at expiration time, because Republicans could browbeat Democrats at expiration time over raising taxes (horrors!).

  • Rugosa on December 01, 2012 6:55 AM:

    I am completely flummoxed by these scenarios in which rich people who spend all their income don't have anything to spare. They have choices - if a big bank balance is the goal, buy a less expensive house, don't eat out so often, take fewer or less expensive vacations, etc. Don't spend all your money on luxuries and then complain you have nothing left!

    Also, how do tax rates on earned income affect investment when capital gains are taxed at a constant, low rate? I may be missing something here since my income doesn't allow me to even think about investing.

  • jim filyaw on December 01, 2012 10:27 AM:

    she and george will would make a terrific match. prissy george couldn't get himself laid in the 60s and has never forgiven those of us who did, and noonan has never recovered from her obsession with the doddering b grade movie actor. would make for some interesting whoopie scenes.

  • ChicagoRob on December 01, 2012 12:25 PM:

    If you're making 250K a year and can't live on it ... no matter what state or community you live in ... you're not (a) trying or (b) smart.

  • Martina on December 01, 2012 10:52 PM:

    People paid higher taxes during the Reagan years than they do now, or would pay under the proposed 39% rate on the top bracket if Obama's plan is adopted. People like Peggy Noonan need to grow up and pay for the government that we have.

  • jimmypete on December 02, 2012 4:59 PM:

    Why oh why is this woman allowed to pontificate on everything, when she knows nothing.