[an]

[quote=dumbrenter]AN, Consider the following 3 potential outcomes:
1. Higher rates are regressive and per your account make businesses fire employees.
2. There is no relationship between tax rates and an employer’s decisions to hire employees.
3. Higher rates are stimulative.

You take position 1 above while I claim position 2. the first one is also popularly claimed by many conservative & right-wing sites & media i.e. a small business owner complaining that he would have to fire employees if his tax rates go up.
To me, this claim does not make empirical sense as explained earlier and I’d like to know if I am missing something.

But in support of item#1, you respond with an argument against item#3.[/quote]
I agree with those 3 potential outcomes. My example of #1 is meant to disprove #3 and not so much as a resounding endorsement for #1. I think for some business (maybe most) more likely to do #2. But I haven’t see any data for either option yet. I just think #3 is counter intuitive.

[an]

[quote=dumbrenter]AN, other than the personal observations which is hard/easy for me to make up a counter story/observation, do you have any data that supports the following claim: Increasing business taxes results in employees getting fired.[/quote]
No, I don’t have data to back up my claim. I only have anecdotal evidence to counter SK’s claim:
[quote=SK in CV]There is evidence, however, that the higher than current marginal rates on businesses (we’re talking small businesses here, NOT big corporations) are stimulutive, and I’ve outlined the reasons for that. That argument is very specific to businesses, not a claim that higher tax rates are always stimulative.[/quote]Do you or him can show me the evidence/data which proves that higher marginal rates on businesses owners are simulative? I know my counter is only anecdotal but I haven’t seen any data to counter my example either. The logic of higher marginal rate is stimulative is counter intuitive for me. I have a few anecdotal examples to confirm my thinking that it’s counter intuitive. Maybe the data is really counter intuitive, but I haven’t seen any data to prove it.

Also, keep in mind that business owners can be in other brackets than just the top most bracket. So, if it is true that higher marginal rate stimulate business growth, then wouldn’t it make sense to increase rates for the lower tax brackets as well?

[an]

[quote=briansd1]I agree.

Once children pop out, it’s the parents reponsibility to take care of them.

Although they are not my kids, I kinda feel the responbility to be nice to my nieces and do little things for them. I want to be the nice uncle. But I kinda resent that responsbility has been foisted on me, not of my own choosing.

I hear plenty of people bitching about having to take care of their kids. And the parents doing the bitching are not poor people.[/quote]
Isn’t it your choosing to be the nice uncle? How can someone force you to be nice?

People like to bitch. Sometimes, they bitch for fun. It’s no different than someone who drive a gas guzzler and bitch about gas or someone who lives far away from work and bitch about traffic.

[an]

[quote=SK in CV]I would suggest that your friends with businesses don’t run their businesses as most are run. Most businesses are run for the highest net possible, and they don’t have employees that they don’t need. If their net income isn’t already significantly more than $250K a year, then this conversation is moot, since we’re discussing only the top tax rate. I’d love to see a very precise description of how a very small increase in the top tax rate would cause a company to drop an employee. With actual numbers. I’ve asked this question quite a few times in other circles, I’ve never got a response.[/quote]
I personally don’t know the moms and pops’s business friends’ finances, so I don’t know if they’re over $250k or not. So, I can’t say one way or the other. However, they have one employee to help them out so that one of the spouses don’t have to work all 10+ hours everyday. If you squeeze them enough, they’ll let go of the employee and have the spouse who are not working 100% cover the work done by the worker. Said worker are also part time worker.

I don’t think a very small increase in the top tax rate would cause a company to drop an employee. Even in my friends’ case. However, my point is that there is a tipping point (which is different for everyone), and if you raise the tax enough that causes them to cross over that tipping point, they’ll start to let one or more employee go. I was specifically responding to this statement by you:
[quote=SK in CV]There is evidence, however, that the higher than current marginal rates on businesses (we’re talking small businesses here, NOT big corporations) are stimulutive, and I’ve outlined the reasons for that. That argument is very specific to businesses, not a claim that higher tax rates are always stimulative.[/quote]You didn’t say a small increase in the top tax rate. You just said higher than current marginal rates. I was assuming you’re talking about 50-60% tax rate you were referring to a few posts back. Also, I gave you instances for it’s not stimulative as you’ve claimed. If anything, it’s the opposite of stimulative. I can’t understand the logic of why it would be stimulative. Maybe you can explain that to me. If their sales/revenue stays constant, how can decreasing their net profit be stimulative?

Now, with my friend who have 150+ employees, yes, they’re well over $250k. If you squeeze their net pay, they’ll gladly find profit in other ways. Such as letting their American employees go and increase their work force for factories in cheaper countries. They’re already doing that by expanding their factories to lower cost countries. They’re not going to just reduce their living standard/saving to absorb the extra tax burden. Again, I don’t know their tipping point, but I do know that’s what they’re currently doing and they’ll gladly accelerate the transition if their net profit decreases.

[an]

[quote=SK in CV][quote=AN]
You cautioning me with my use of correlation vs causation? I’m NOT making any claim at all. I was just showing data and pointing out my observation of the data. You’re the one who make insinuations like top rate was 90% in the early 60s and we saw good economic growth. Then a sentence later, saying we should have higher tax rate because it’ll spur corporate spending. I didn’t make the claims that raising lower tax brackets would spur economic growth. I was just saying if we follow your insinuation about high top tax rate = economic growth, we should also look at what were the rest of the tax brackets were back then as well. You can’t pick and choose which variable you want to manipulate and expect us to believe we’ll see the same result.[/quote]

You misunderstood what I said. There is no evidence that higher top rates inhibit economic growth. Nor is there any particularly strong evidence that it stimulates growth either. I’m quite sure I never made that claim.

There is evidence, however, that the higher than current marginal rates on businesses (we’re talking small businesses here, NOT big corporations) are stimulutive, and I’ve outlined the reasons for that. That argument is very specific to businesses, not a claim that higher tax rates are always stimulative.[/quote]
Thanks for clarifying and I agree with these points except for the business taxes. What make you think business won’t just pick up and move to a lower taxed country. Most countries do have lower corporate tax rate than ours. Btw, how small is small. I know a few mom and pop businesses and they would just fire their one employees if their take home is less. I also know one business owner of a company with 150 employees and they haven’t given a raise in 3 years. If their net profit goes down, they’ll either lay off or just not give raise for a few more years until they get their desirable net profit. They can also fire their American employees, except for their sales force, and hire more employees for factory in lower cost countries.

[an]

[quote=SK in CV]I can. From roughly 1987 through 1990, beginning with the TRA of ’86, and ending when top rates were increased in ’90. I don’t remember if that law took effect in ’90 or ’91. Top rate during that period was 28%. I don’t think that was the only period, but it was the first time in a very long time that all capital gains were treated the same as other income.

Additionally, I would caution your use of correlation as causation.[/quote]
Thanks for pointing me to that time period. It was ’88 and ’89 where the two rates were the same. Wasn’t that right after Reagan’s 1986’s tax reform? He took rate from 50% down to 28%. Then Bush raised it and Clinton followed. So, that’s a very brief moment. Since at least 1954 to now, those were the only two years where we saw the two rates being the same.

You cautioning me with my use of correlation vs causation? I’m NOT making any claim at all. I was just showing data and pointing out my observation of the data. You’re the one who make insinuations like top rate was 90% in the early 60s and we saw good economic growth. Then a sentence later, saying we should have higher tax rate because it’ll spur corporate spending. I didn’t make the claims that raising lower tax brackets would spur economic growth. I was just saying if we follow your insinuation about high top tax rate = economic growth, we should also look at what were the rest of the tax brackets were back then as well. You can’t pick and choose which variable you want to manipulate and expect us to believe we’ll see the same result.

[an]

[quote=CA renter]Based on your chart, it’s easy to see that higher-income earners were paying significantly higher rates back then than they do now. So why all the whining from those who are currently paying ~15$%, some of whom are paying 15% or less on incomes that are much higher than $250K, or even $1MM.[/quote]Who’s whining? But, beyond name callings, do you understand the differences between capital gains vs ordinary gains? The data I showed was for ordinary gains, NOT capital gains. In 1963, capital gains was 25%. This is at a time when the minimum tax rate was 20% and it was 26% if you make more than $4k ($28k today Dollar). So, that’s about equivalent to 15% today.

BTW, we don’t have tax brackets for people >$1M. The top tax rate is >$250k, so, unless you’re suggesting we should create more tax brackets for those extreme high earners, your accusations doesn’t really hold water.

I want low taxes for everyone. But those who point at prosperous times and say, look we had prosperity even when top tax rate was 60-90%, so we should raise their rates back to those level. I just like to also point out that during those time, the bottom rates were also much much higher than today. You can’t just selectively say, if A work in a certain timer period that it’s OK today, without looking at the entire equation back then as well. A is only a single variable within an equations with many other variables. Changing one variable without the other variables won’t give you the same answer you got during those times.

To your point (noticed I didn’t use the word whining) about capital gain being equal to ordinary income, can you point to a time when we had the same rate of capital gain as ordinary income?

[an]

[quote=SK in CV]First, the argument was not that higher top tax rates cause economic growth, but rather there is little evidence that it inhibits growth. [/quote]I thought when you said that “Higher top tax rates encourage businesses to spend money…” mean higher top tax rates cause/encourage economic growth. Business spending usually increase economic growth, right?

[quote=SK in CV]The correlation on the bottom rates would be just the opposite. People who don’t make very much money, tend to spend everything they make. As income (and rates) rise, more is saved. Spending (or in the case of businesses, investing and growing) is stimulative (or more specifically, increases in spending are stimulative) , whether the source is public or private. Higher rates on business with excess cash flow encourages spending/hiring because the higher the rate, the smaller the after tax cost. Lower rates lead to higher savings. [/quote]Past data doesn’t agree with you here. As I’ve shown, in the early 60s and late 50s (you agreed that that period of time had good economic growth), low income people had VERY high tax rate. Yet, we still had good economic growth. So, like you said about high taxes for the rich doesn’t inhibits growth, there’s also little evidence that high taxes for low income people inhibits growth as well. Unless you have data to prove this point. I haven’t run across any yet.

BTW, if you increase taxes on corporation, what make you think those companies won’t just pick up and leave for countries with lower taxes? We are in a global economic world after all. Don’t we have to compete with other countries as well?

[quote=SK in CV]You’re right about the standard deduction being a % of AGI back then. But like now, there were personal exemptions. I think it was $600 per person. So the first $600 (per exemption) plus 10% of AGI was deducted from AGI before calculating the tax.[/quote]Keep in mind that someone making $1k back then (~$7k today), they still have to pay taxes on $300 (~$2100) today. The only people who don’t have to pay taxes are people who make less than $600 ($4200 today). Today, that number has more than doubled.

[an]

[quote=briansd1]That does not refudiate SK’s point in any way.

And nobody is talking 90% of the amount over 250k. The point is that a progressive tax structure is not bad for growth and productivity. It can be very good for jobs.[/quote]The point was NEVER about progressiveness of the tax code. Our tax code has ALWAYS been progressive, so there nothing nothing to debate or refute there.

SK’s point was, we had 90% tax rate in 1963 and we had good economic growth. Then he said this:
[quote=SK in CV]But I could make a pretty strong argument that increasing the top tax rate, particuarly on businesses, would be good for the economy, but not to 90%. Somewhere between 50 and 60% would help. Higher top tax rates encourage businesses to spend money when the government pays for half of it.[/quote]
So, while we all can agree 90% is too high, he said a 50-60% tax rate would help and higher top tax rates encourage businesses to spend money. That got me thinking about 1963 tax brackets. I find out that the minimum tax rate was 20%. If we had good economic growth in the early 60s because of higher top marginal tax rate, then one can say we had good economic growth in the early 60s because of higher minimum tax rate as well. BTW, the standard deduction back then was 10% of your AGI, not a fixed number, so EVERYONE pay taxes.

[an]

[quote=SK in CV]A 90% tax rate is too high. I’m pretty sure nobody is advocating that today. Nor even a 50% marginal rate. Though there would be some benefits to it.[/quote]
Yes, 90% tax is too high, I agree with you there. But you did advocate for 50-60% marginal rate a few post back. You did say higher top tax rates encourage businesses to spend money, so it sounded like you were advocating for 50-60% marginal tax rate. I’m quoting what you said below… Maybe I’m just reading it wrong and you can clarify.
[quote=SK in CV]But I could make a pretty strong argument that increasing the top tax rate, particuarly on businesses, would be good for the economy, but not to 90%. Somewhere between 50 and 60% would help. Higher top tax rates encourage businesses to spend money when the government pays for half of it.[/quote]

[quote=SK in CV]And the current tax schedule looks exactly the same, just with a lot fewer and different rates. Tax doesn’t begin at the first dollar of income now, and it didn’t then. The tax rate schedule applies to taxable income.[/quote]
You’re right, it didn’t begin at the first dollar of income, but it was pretty close. Back then, there were variable standard deduction and it was 10% of your AGI. So, something making $1k/year can deduct $100, but the other $1900 was taxed at 20%. So, if higher taxes was the reason for pretty good economic growth in the early 60s, then why not advocate for higher taxes all the way on down, since back then, EVERYONE was paying taxes and we had good economic growth.

[an]

[quote=SK in CV]But I could make a pretty strong argument that increasing the top tax rate, particuarly on businesses, would be good for the economy, but not to 90%. Somewhere between 50 and 60% would help. Higher top tax rates encourage businesses to spend money when the government pays for half of it.[/quote]
Alright, lets take a look at what the tax brackets were the last time we saw >60% top rate.

Rate 1981 dollar 2010 dollar
0% <2300
14% 2300 5,444.71
16% 3400 8048.71 
18% 4400 10415.97 
19% 6500 15,387.23
21% 8500 20121.77 
24% 10800 25,566.48
26% 12900 30537.74 
30% 15000 35509.00 
34% 18200 43084.25 
39% 23500 55630.77 
44% 28800 68177.28 
49% 34100 80723.79 
55% 41500 98241.57 
63% 55300 130909.85 
68% 81800 193642.42 
70% 108300 256374.99 

Lets look at what the rates look like in 1963 when top rate was 91%:

Rate 1963 dollar 2011 dollar
20% $0.00 $0.00
22% $2,000.00 $14,086.18
26% $4,000.00 $28,172.36
30% $6,000.00 $42,258.55
34% $8,000.00 $56,344.73
38% $10,000.00 $70,430.91
43% $12,000.00 $84,517.09
47% $14,000.00 $98,603.27
50% $16,000.00 $112,689.45
53% $18,000.00 $126,775.64
56% $20,000.00 $140,861.82
59% $22,000.00 $154,948.00
62% $26,000.00 $183,120.36
65% $32,000.00 $225,378.91
69% $38,000.00 $267,637.45
72% $44,000.00 $309,896.00
75% $50,000.00 $352,154.55
78% $60,000.00 $422,585.45
81% $70,000.00 $493,016.36
84% $80,000.00 $563,447.27
87% $90,000.00 $633,878.18
89% $100,000.00 $704,309.09
90% $150,000.00 $1,056,463.64
91% $200,000.00 $1,408,618.18

As you can see, people making $250k in today's dollar didn't pay 91% back then as well.

What's also interesting in 1963, when you say was good period of growth, the lowest tax rate was 20% from the very first dollar you make. It also ramp up very fast where by the time you get to $112k, the tax rate was 50%.

[an]

[quote=SK in CV]Interesting point. At the height of the cold war (from 1950 to 1963), when Joseph McCarthy was looking for a communist under every bed, the top tax rate WAS over 90%. Turns out it didn’t make everyone poor. It was a pretty good period of growth, particularly for the middle class.[/quote]
So, what you’re saying is war = good period of growth and 90% tax rate = good period of growth. How come we’re not seeing great period of growth since we have 2 wars? Is it because we don’t have 90% tax rate?

[an]

[quote=flu][quote=AN][quote=briansd1]It’s income over $250,000, not all of it. People just don’t seem to understand the concept of marginal rates.[/quote]
Of course it’s income over $250k and it only hit 3% of the people. After that’s in the bag, what would stop them from saying, lets lower that to $150k when they need more money. That only affect a few more % of people. Those people are not middle class anyways. Then what would stop them from lowering it to $100k? That’s alost 2X the median income. It only affect another small % of people.[/quote]

AN… Talk to you wife…File for divorce. Then each of you have $200k un no-obama plan. Not to mention being a single parent gives you certain tax advantages…[/quote]
Better solution is to have my wife stay at home. Automatic income and tax reduction. I’ll use your argument from now on and just ask everyone else to pay their fair share.

[an]

[quote=SK in CV][quote=AN]What about two new-ish doctors making $400k, no kids, no house, but they have $400k in student loan? That extra few grand saved in taxes can help them pay off the student loans quicker and help them save to buy their first home.

Btw, it does matter what you call them, because that is exactly how proponent of the tax increase is selling it to the masses. They don’t say increase taxes ok the upper middle class.[/quote]

Those two young doctors should still be able to save tons of money, and pay off their all their student loans in 5 or 6 years. And still pay an extra $5K of taxes. I think they’ll get by.[/quote]
I never said they won’t get by. But you don’t see that scenario being sold. You see multimillionaires as an example for increasing taxes on those who make $250k. If I use your logic, since I can get by with much less than $250k, I guess we should tax those in the 28% tax brackets and up much higher. Afterall, they’ll get by just fine.

[an]

[quote=SK in CV][quote=AN]I see you’re leaving yourself room. So, if I read it right, $250k income alone is not wealthy. Yet you support the tax on the wealthy with $250k….[/quote]

I support a higher marginal tax rate on annual taxable income over $250K. If you’re married, have a couple kids and a house, have a job that pays you around $275K, and no other income, you probably wouldn’t be subject to the higher tax rate. Doesn’t really matter whether you call that rich, or wealthy or upper middle class. Make another $25K, and your taxes go up by less than a grand.[/quote]
What about two new-ish doctors making $400k, no kids, no house, but they have $400k in student loan? That extra few grand saved in taxes can help them pay off the student loans quicker and help them save to buy their first home.

Btw, it does matter what you call them, because that is exactly how proponent of the tax increase is selling it to the masses. They don’t say increase taxes ok the upper middle class.

[Author]

Posts