4 ms·

But also look at where our tax revenue used to come from: > In 1981, Reagan significantly reduced the maximum tax rate, which affected the highest income earne

But also look at where our tax revenue used to come from: > In 1981, Reagan significantly reduced the maximum tax rate, which affected the highest income earners, and lowered the top marginal tax rate from 70% to 50%; in 1986 he further reduced the rate to 28%.

arcticbull 6y ago
The top marginal tax rate was in the 90%'s for much of the 1900s. Also, the estate tax was in the 80% range for much of the 1900s, now it's effectively zero. Moving huge quantities of un-earned wealth from generation to generation is a great way to create and maintain inequality.
- dnautics 6y ago
  I don't think there's any evidence that generational wealth transfer is the cause of income inequality; the major deviation in income inequality began in 1973 with the productivity gap it's only been maybe a generation and change since then and moreover, this was even before Reagan-era tax changes.
  - arcticbull 6y ago
    > I don't think there's any evidence that generational wealth transfer is the cause of income inequality. Well, it was in reference to general inequality. It absolutely creates wealth inequality. If you are born to poor parents, and your buddy Steve inherits a $1M San Francisco apartment from his family, well, Steve has a big head start over you. That directly translates into income equality too, as inherited investments yield 7% returns invested in the S&P, or that $1M apartment generates $3-4000 per month in rent for Steve, while you have nothing. You know what they say, time in the market beats timing the market -- the sooner you have money the more money you will have thanks to geometric returns. Had Steve's family donated that money before they shuffled off this mortal coil, or the state collected it in taxes, that wealth could have been used to raise the minimum standard of living for everyone in the next generation -- not just Steve.
    - wlesieutre 6y ago
      Generational wealth transfer isn't just your inheritance either: > It has not been easy for me. And you know I started off in Brooklyn, my father gave me a small loan of a million dollars. Makes it a bit easier to start a business when you can just ask your parents for a million dollars. Imagine growing up with the idea that a million dollars is a "small loan."
    - dnautics 6y ago
      The way you put it, it sounds like geometric returns are the primary cause of wealth inequality, with generational transfer being a minor blip. Transfer alone is roughly O(1) over time; geometric returns are O(k^t). And imagine if your k < 1!! Maybe that's the cause of wealth inequality and we should examine that. It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem.
      - arcticbull 6y ago
        Geometric returns are, in a way, the primary cause of wealth inequality. However, if everyone starts at the far left flat end of the curve, it's a fair playing surface allowing for meritocratic rewards for those who provide outsize value. On the other hand, if you start at the parabolic upward portion of the geometric return curve, having demonstrated no value of your own, you've destroyed meritocratic rewards. The founding fathers were historically against generational wealth, after all, they fled such a system in Europe. > It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem. Taxation can absolutely outcompete potential exponential processes, that's why we have progressive taxation. Progressive taxation is exponential in dollar terms. Progressive wealth taxation is another way of approaching this, but so is an estate tax. That short-circuits the whole process. To be clear, I believe in wealth inequality, and I believe in income inequality, so long as it's coupled with social mobility (i.e. everyone has the ability to reach higher tiers), and so long as the minimum standard is a decent existence, not death.
        6y ago
- refurb 6y ago
  Stop looking at rates, and look at where tax revenue comes from. There are tons of loopholes when rates were 90%. When rates were dropped, loopholes were closed. The percentage of total taxes paid by high income earners has increased over time, not decreased.
  - castlecrasher2 6y ago
    >The percentage of total taxes paid by high income earners has increased over time, not decreased. Do you have a link or article that shows this? I believe it, I'd just like to see numbers to support it.
    - refurb 6y ago
      Bottom graph. https://taxfoundation.org/top-1-percent-tax-rate/ https://taxfoundation.org/top-1-percent-tax-rate/ Top rate went from 50% to 28%, then back up, then down, then up, but percentage of all federal taxes paid has been slowly rising from 26% to 37%.
      - arcticbull 6y ago
        That graph starts at 1986. The top tax rate was dropped to 30% from 50% in 1986 -- but it was 90% in 1953.
        refurb 6y ago
        Here is the effective tax rate paid by the top 1% going back to 1915. It’s higher now despite the rate being lower now (because there were many more ways to avoid tax back then). https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
        arcticbull 6y ago
        I find their conclusion that taxes "weren't that much higher" not supported by their graph. In 2010 the rate they show was 30% (it is a bit higher now) and in the between 1945 and 1970 it was roughly 45%. Thats 50% higher. That's a lot higher.

arcticbull 6y ago

The top marginal tax rate was in the 90%'s for much of the 1900s. Also, the estate tax was in the 80% range for much of the 1900s, now it's effectively zero. Moving huge quantities of un-earned wealth from generation to generation is a great way to create and maintain inequality.

dnautics 6y ago
I don't think there's any evidence that generational wealth transfer is the cause of income inequality; the major deviation in income inequality began in 1973 with the productivity gap it's only been maybe a generation and change since then and moreover, this was even before Reagan-era tax changes.
- arcticbull 6y ago
  > I don't think there's any evidence that generational wealth transfer is the cause of income inequality. Well, it was in reference to general inequality. It absolutely creates wealth inequality. If you are born to poor parents, and your buddy Steve inherits a $1M San Francisco apartment from his family, well, Steve has a big head start over you. That directly translates into income equality too, as inherited investments yield 7% returns invested in the S&P, or that $1M apartment generates $3-4000 per month in rent for Steve, while you have nothing. You know what they say, time in the market beats timing the market -- the sooner you have money the more money you will have thanks to geometric returns. Had Steve's family donated that money before they shuffled off this mortal coil, or the state collected it in taxes, that wealth could have been used to raise the minimum standard of living for everyone in the next generation -- not just Steve.
  - wlesieutre 6y ago
    Generational wealth transfer isn't just your inheritance either: > It has not been easy for me. And you know I started off in Brooklyn, my father gave me a small loan of a million dollars. Makes it a bit easier to start a business when you can just ask your parents for a million dollars. Imagine growing up with the idea that a million dollars is a "small loan."
  - dnautics 6y ago
    The way you put it, it sounds like geometric returns are the primary cause of wealth inequality, with generational transfer being a minor blip. Transfer alone is roughly O(1) over time; geometric returns are O(k^t). And imagine if your k < 1!! Maybe that's the cause of wealth inequality and we should examine that. It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem.
    - arcticbull 6y ago
      Geometric returns are, in a way, the primary cause of wealth inequality. However, if everyone starts at the far left flat end of the curve, it's a fair playing surface allowing for meritocratic rewards for those who provide outsize value. On the other hand, if you start at the parabolic upward portion of the geometric return curve, having demonstrated no value of your own, you've destroyed meritocratic rewards. The founding fathers were historically against generational wealth, after all, they fled such a system in Europe. > It seems like income taxation and social subsidies O(t) are unlikely to outcompete exponential processes as ameliorations for the root problem. Taxation can absolutely outcompete potential exponential processes, that's why we have progressive taxation. Progressive taxation is exponential in dollar terms. Progressive wealth taxation is another way of approaching this, but so is an estate tax. That short-circuits the whole process. To be clear, I believe in wealth inequality, and I believe in income inequality, so long as it's coupled with social mobility (i.e. everyone has the ability to reach higher tiers), and so long as the minimum standard is a decent existence, not death.
      - 6y ago
refurb 6y ago
Stop looking at rates, and look at where tax revenue comes from. There are tons of loopholes when rates were 90%. When rates were dropped, loopholes were closed. The percentage of total taxes paid by high income earners has increased over time, not decreased.
- castlecrasher2 6y ago
  >The percentage of total taxes paid by high income earners has increased over time, not decreased. Do you have a link or article that shows this? I believe it, I'd just like to see numbers to support it.
  - refurb 6y ago
    Bottom graph. https://taxfoundation.org/top-1-percent-tax-rate/ https://taxfoundation.org/top-1-percent-tax-rate/ Top rate went from 50% to 28%, then back up, then down, then up, but percentage of all federal taxes paid has been slowly rising from 26% to 37%.
    - arcticbull 6y ago
      That graph starts at 1986. The top tax rate was dropped to 30% from 50% in 1986 -- but it was 90% in 1953.
      - refurb 6y ago
        Here is the effective tax rate paid by the top 1% going back to 1915. It’s higher now despite the rate being lower now (because there were many more ways to avoid tax back then). https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/
        arcticbull 6y ago
        I find their conclusion that taxes "weren't that much higher" not supported by their graph. In 2010 the rate they show was 30% (it is a bit higher now) and in the between 1945 and 1970 it was roughly 45%. Thats 50% higher. That's a lot higher.