5 ms·

No, wealth inequality increased because we stopped taxing rich people.

by Ar-Curunir 8y ago

tossaccount123 8y ago
The US didn't have an income tax at all until the 20th century, at least at the federal level
- rswail 8y ago
  It also didn't have any public entitlements. It's also 100 years later. So the point is not particularly relevant.
- isostatic 8y ago
  Rich: having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy: a rich man; a rich nation. Not sure how income tax would apply to that
adventured 8y ago
Wealth inequality has increased mostly due to the massive expansion of the global economy, which was a large benefit to capital owners and was a detriment to US labor (whose wages were artifically very high in the post WW2 decades). Global labor competed, capital benefited. Federal Reserve policies since ~1970 have also overwhelmingly favored capital, asset holders, and not workers. The US tax code has gotten more progressive over time, not less. The very high tax rates from the past were quite narrow in scope, they covered few taxpayers. The top 25% are paying 85-88% of all income taxes in a given year. The top 10% are paying 70% of all income taxes. The top 1% yield 20% of all income and pay 39% of all income taxes. How do you qualify that very progressive tax code as "stopped taxing rich people"? Simultaneously the US welfare state has massively expanded since 1970. Poverty and homelessness have declined by a lot, while healthcare coverage expanded dramatically. The US spends the equivalent of 20% of its GDP on social welfare programs. That's higher than Canada and Australia, just slightly behind the UK at 22%. All of that is paid for by the top 25% of income earners.
- rjf72 8y ago
  There's been another major shift as well. This [1] graph is critical. There were more self employed workers in the US in 1948 than there are today. The population since then has increased by more than 220%. And the trend increases the further back you go. I mention 1948 only because that's as far back as FRED's data goes! The US used to be a land largely driven by self employment. We had large numbers of mostly independent economic centers populated with local businesses owned and operated by local individuals. In many ways it's something akin to what you can find in many parts of the developing world today. And it's awesome. But as the economy 'globalized' we've reached a point such that an urban business streetscape in California can very often look effectively identical, in terms of businesses in operation, to one all the way on the other side of the country in New York. You're never going to have anything even vaguely resembling economic equality when a handful of companies control immense amounts of the entire economy. This also distorts governmental systems since extensive wealth means the reach of companies is practically unlimited. Civil servant versus a company sitting on billions of dollars with international connections spanning the entire globe and the best legal and public relations teams that money can buy? That's not even David vs Goliath, that's ant vs foot. [1] - https://fred.stlouisfed.org/series/LNS12027714 https://fred.stlouisfed.org/series/LNS12027714
  - geggam 8y ago
    Regulation has killed small business.
    - lotsofpulp 8y ago
      Efficiencies of scale killed small business. People had the choice of patronizing small business or large business, and they chose the latter.
      - clarkevans 8y ago
        Lack of capital investment killed small businesses. Everyone now has to pay a tax penalty to take your earned capital and invest it into local main-street businesses. This capital instead, though 401k, goes into trans-national firms.
kortilla 8y ago
If that were true rich people wouldn’t be paying half of the taxes. Even when the US had high marginal tax rates for the wealthy, there were tons more loopholes so the effective tax rate was significantly less. That’s the reason people were on board with lowering the marginal rate in exchange for the elimination of lots of deductions.

No, wealth inequality increased because we stopped taxing rich people.

tossaccount123 8y ago

The US didn't have an income tax at all until the 20th century, at least at the federal level

rswail 8y ago
It also didn't have any public entitlements. It's also 100 years later. So the point is not particularly relevant.
isostatic 8y ago
Rich: having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy: a rich man; a rich nation. Not sure how income tax would apply to that

adventured 8y ago

Wealth inequality has increased mostly due to the massive expansion of the global economy, which was a large benefit to capital owners and was a detriment to US labor (whose wages were artifically very high in the post WW2 decades). Global labor competed, capital benefited. Federal Reserve policies since ~1970 have also overwhelmingly favored capital, asset holders, and not workers. The US tax code has gotten more progressive over time, not less. The very high tax rates from the past were quite narrow in scope, they covered few taxpayers. The top 25% are paying 85-88% of all income taxes in a given year. The top 10% are paying 70% of all income taxes. The top 1% yield 20% of all income and pay 39% of all income taxes. How do you qualify that very progressive tax code as "stopped taxing rich people"? Simultaneously the US welfare state has massively expanded since 1970. Poverty and homelessness have declined by a lot, while healthcare coverage expanded dramatically. The US spends the equivalent of 20% of its GDP on social welfare programs. That's higher than Canada and Australia, just slightly behind the UK at 22%. All of that is paid for by the top 25% of income earners.

rjf72 8y ago
There's been another major shift as well. This [1] graph is critical. There were more self employed workers in the US in 1948 than there are today. The population since then has increased by more than 220%. And the trend increases the further back you go. I mention 1948 only because that's as far back as FRED's data goes! The US used to be a land largely driven by self employment. We had large numbers of mostly independent economic centers populated with local businesses owned and operated by local individuals. In many ways it's something akin to what you can find in many parts of the developing world today. And it's awesome. But as the economy 'globalized' we've reached a point such that an urban business streetscape in California can very often look effectively identical, in terms of businesses in operation, to one all the way on the other side of the country in New York. You're never going to have anything even vaguely resembling economic equality when a handful of companies control immense amounts of the entire economy. This also distorts governmental systems since extensive wealth means the reach of companies is practically unlimited. Civil servant versus a company sitting on billions of dollars with international connections spanning the entire globe and the best legal and public relations teams that money can buy? That's not even David vs Goliath, that's ant vs foot. [1] - https://fred.stlouisfed.org/series/LNS12027714 https://fred.stlouisfed.org/series/LNS12027714
- geggam 8y ago
  Regulation has killed small business.
  - lotsofpulp 8y ago
    Efficiencies of scale killed small business. People had the choice of patronizing small business or large business, and they chose the latter.
    - clarkevans 8y ago
      Lack of capital investment killed small businesses. Everyone now has to pay a tax penalty to take your earned capital and invest it into local main-street businesses. This capital instead, though 401k, goes into trans-national firms.

kortilla 8y ago

If that were true rich people wouldn’t be paying half of the taxes. Even when the US had high marginal tax rates for the wealthy, there were tons more loopholes so the effective tax rate was significantly less. That’s the reason people were on board with lowering the marginal rate in exchange for the elimination of lots of deductions.