Taxing the Rich

My twitter feed is all about taxing the rich this morning, so let's carry on the discussion here. 

In a bizarre column for the New York TimesRoss Douthat writes that increasing taxes on the rich will only help a little bit and pretty soon, even the middle class are going to be taxed at rich people rates, because of "bracket creep" and inflation. And then in some way off, Rad Bradbury future, you're going to have the black and Latino middle class paying to have the liver spots taken off some white, old dude's nose. There will be race riots and tar and feathers and pitchforks. Dogs and Cats. Living together. 

In a more sane column in Slate, Robert Reich explains that the rich aren't really paying all that much in taxes right now. 

Both Reich and Douthat agree that the middle class can't afford more taxes. Reich writes, 

The vast majority of Americans can't afford to pay more. Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.)

But Reich says that we can continue to fund our current policy obligations and even expand our investments, if we increase taxes on the super wealthy. The wealthy are wealthier than they've been in decades, yet their taxes have decreased. 

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it's 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it's 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They're now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they'd be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That's enough to accomplish everything the nation needs while also reducing future deficits.

If Reich's calculations are correct, $350 billion can buy a whole lotta medical care and education programs. 

46 thoughts on “Taxing the Rich

  1. I was never for cutting the estate tax, though I was for adjusting the exempted amount by inflation. I was opposed to increasing the capital gains tax, but it has become blindingly obvious that I’m allowed to take a capital loss and many people much better off than me aren’t so I’d eagerly go for putting the capital gains tax back to where it was.
    I’d still like to keep Robert Reich far from political power and make sure that “education programs” doesn’t translate into “what we’re doing now, but paying the people doint it more.”

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  2. My position lately is that rather than raising taxes on anyone – why not just close all the loopholes? The effective tax rates on both the upper and middle classes are roughly half of the actual rates. Close those and there’s a lot of new revenue out there.
    Beyond that, Douthat is right. Tax increases on the rich alone will not get us in the black. These must be accompanied by either additional hike on the middle class or deep spending cuts.
    I would also note that the reason I think we need to raise taxes on the middle as well is because Americans need to go through the psychological exercise of understanding the financial implications of the services they request from their government.

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  3. What I keep pointing out again and again to people (not just you guys 😉 is that wealthy people made their wealth not simply because of hard work but because of government policies that helped them generate their wealth–that created roads and broadband and infrastructure and tax breaks and lots of stuff like that. Government made it possible to become wealthy, and now it’s time for them to pay back. *shrug* Do they really want to live in a world where people are so poor they can’t buy their products and services?

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  4. Do they really want to live in a world where people are so poor they can’t buy their products and services?
    If they sell Ed Hardy t-shirts and have any taste at all, they might. Anyway, Greece is about to test the ability of governments to pretend that everything will work out if we just adjust things a bit. We’ll see what happens in a month.

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  5. I’m never really certain where conservatives of a Douthatian stripe actually end up in regards to American pluralism. They aren’t uneducated immigrant-bashers, to be sure, but between their concern over family size, and columns like this (which appear to be taking America’s racial diversity as a positive good, in the sense that it will presumably result in the sort of animosities and pressures that will prevent America from becoming like those thumb-sucking homogeneous Scandinavian countries), they seem to be torn over the whole thing. America lacking a common ethnic core = bad, except when that lack of core results in a lack of social solidarity that would make people willing to sacrifice (i.e., pay taxes) on behalf of the common good, in which case lack of a common ethnic core = good. It confuses me, sometimes.

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  6. I think Douthat has always been for a common core which is not ethnically defined so far as such is possible given human nature.

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  7. I’m getting a major sense of deja vu here. I don’t have a lot of time, but here are a few quick notes.
    1. Major government goodies for the middle class have to mean major taxes for the middle class. That’s how it is in Western Europe. To see how little tax revenue you can raise by going after just the rich (even to virtually the point of annihilation), see Iowahawk’s excellent post right here:
    http://iowahawk.typepad.com/iowahawk/2011/03/feed-your-family-on-10-billion-a-day.html
    In order to run the federal government in the manner to which we have become accustomed, taxes would have to be increased much lower down the income scale than “the rich”. All of us merely comfortable folk need to understand that we are crunchy and taste good with ketchup. When the feds talk about going after “the rich,” they really mean you. Hence the recent talk about going after Roth IRAs.
    2. The extremely rich don’t really need the government that much. Heck, they don’t really even need roads. They could just helicopter in and out of their enormous, well-guarded compounds. Plus, they tend to have bolt holes around the globe, so they can shop around for a better deal.
    3. I hate this hocus pocus with comparing tax rates in different decades, rather than looking at the taxes actually collected. Hopefully, I can talk about that later. For the moment, I’ll just note that federal taxes have historically hovered very consistently around 20% of GDP, slightly less in hard times, slightly more in good times. To expect to collect much more of GDP in bad times is over-optimistic.

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  8. The extremely rich don’t really need the government that much. Heck, they don’t really even need roads. They could just helicopter in and out of their enormous, well-guarded compounds.
    That is actually a very good argument for confiscatory tax rates on the super wealthy.

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  9. This is the sort of thinking which has led to population declines in Massachusetts and other Northeastern states. Confiscatory tax rates on the super wealthy? What makes you think they’ll stay put for that? These are people who own multiple residences, around the world. They do business around the world. The world is flat. The super wealthy probably already own residences in friendly foreign jurisdictions, which would love an influx of billionaires.
    http://www.nytimes.com/2010/04/26/us/26expat.html
    David Lesperance, a Canadian attorney, says he has seen a seven- or eightfold increase in cases of people looking to renounced their U.S. citizenship. The advantages of doing so are too great to pass up for financial and personal reasons such as divorce.
    “They are not bound to a particular location to maintain their wealth,” Lesperance says, adding that many people have found they can recreate their lifestyle abroad, and in some cases — heaven forbid — improve it. Wealthy expatriates know that “government at all levels are going to need money” and that “things are not going to get better for us.”

    See full article from DailyFinance: http://srph.it/hZcb6D
    Industry and commerce are international now. It might even be a good idea for industrialists and businessmen to leave the United States, as it becomes more protectionist, and less friendly to commerce and industry. Of course, they’re more likely to open new factories abroad if they’re living abroad. Driving people who control large amounts of capital from the country doesn’t sound profitable for the country in the long term.
    Any tax imposed on the “super wealthy” will sooner or later land on the middle class. The Alternative Minimum Tax was aimed at 156 millionaires in 1969. It affects millions today. http://tinyurl.com/4y6wrxc
    The US should devote more resources to tracking down US holders of foreign bank accounts who are not paying taxes on those holdings.
    Last week, the U.S. Department of Justice said that UK bank HSBC (HSBA.L) in India helped potentially thousands of Americans dodge taxes, another sign of the government’s probe. [ID:nN07129179]
    The government wants authority to serve a “John Doe” summons on HSBC to obtain the names of an unknown number of people who may have engaged in tax fraud. Prosecutors employed the same strategy in the case against Swiss bank UBS.
    Weill and other attorneys say the government is likely now building a case to serve a similar summons on Credit Suisse.

    http://tinyurl.com/3hfhxl9

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  10. They do business around the world. The world is flat.
    If the world is flat, how come I make many times more than what a comparably educated person would make in most of Asia?
    Any tax imposed on the “super wealthy” will sooner or later land on the middle class.
    No. The marginal tax rates on high incomes will filter down the middle class. Carter-era bracket creep and the AMT illustrate that pretty clearly, but people who can helicopter into compounds and the like are playing a different game.

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  11. The AMT was originally designed for the people who can helicopter into compounds.
    f the world is flat, how come I make many times more than what a comparably educated person would make in most of Asia?
    If you work for a college, it’s hard to offshore a college. They are, however, trying (see online education.)
    If you travel to Asia 3x a month on business, as some super wealthy types do, it’s a logical question to consider. Live in the U.S., and commute to Asia, or live in Asia, and commute to the U.S.?
    And consider G.E. http://www.nytimes.com/2011/03/25/business/economy/25tax.html
    A PRESIDENT’S BUSINESS LIAISON
    In January, President Obama named Jeffrey R. Immelt, General Electric’s chief executive, to head the President’s Council on Jobs and Competitiveness. “He understands what it takes for America to compete in the global economy,” Mr. Obama said.

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  12. The AMT is also not a higher marginal rate, just a closing of the deductions for people who have earned income. And, as it deals with income, not capital gains, it was not at any point for the super wealthy, just high earners.
    While it may be very hard to offshore a college, it is very easy to on-shore people who do what I do. Or, would be very easy but for the fact that is it illegal to do so in sufficient numbers to drive down my wages too far. The world is not flat if you are in a socio-political class that has, in the aggregate, political influence. The world is flat if you are landscaper or an assembly-line worker.

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  13. “This is the sort of thinking which has led to population declines in Massachusetts and other Northeastern states. Confiscatory tax rates on the super wealthy? What makes you think they’ll stay put for that?”
    And yet, Massachusetts is still a pretty nice place to live despite all the taxation. Must be something else keeping the super-rich here. Maybe it’s all the public services, education, and universal health care, which make for a better society? Maybe not all super-rich people are heartless monsters who think only in terms of balance sheets.

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  14. I would also note that the reason I think we need to raise taxes on the middle as well is because Americans need to go through the psychological exercise of understanding the financial implications of the services they request from their government.
    Yeah, it was last year’s realization that half of the country has no skin in the federal income tax game that lead to this: 2011 will be the year we’ll go from people who pay someone to just do their taxes to people who pay (another) someone to provide very specialized guidance on how to avoid taxes (Reichian logic aside!).
    Off topic: Laura, are you really not going to blog on the Flanagan article?!? 🙂 I’d add a quote to make my case, but really, the whole damn thing is such a perfect response to the Tiger Mom brouhaha that I can’t bring myself to excerpt it.

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  15. MA’s population hasn’t declined (1 million + since the 1960’s, and a 3% increase in the last decade). It has been growing slower than the rest of the US. But, as people like to point out about budget “declines”, often people really mean that the item is not keeping pace with the rest of the budget or with the population it serves.
    Didn’t Obama’s tax increases for the “rich” openly target the 200+ income bracket (i.e. the 2nd sweet spot for raising reasonable amounts of revenue)? And, no, people who make 200K don’t consider themselves rich. But they have paid more taxes and the past and still could.
    I have sympathy for the argument that everyone should feel the effect of tax increases, so that they understand the cost of the services they receive (but I think when we calculate who pays taxes and how much that we have to include all taxes, not some selected subset). I’m also sympathetic to a real conversation about what services we want to have and provide in our society. I’ll be disappointed if the answer is that we don’t want to care for our poor and disabled or educate all the children. But, except for constitutional guarantees (some states guarantee education for all the children; our laws guarantee education for the disabled), if I am disappointed enough, I can choose to flee elsewhere.
    And, that’s more likely to make me flee than raising my taxes.

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  16. http://www.gallup.com/poll/145397/states-losing-congressional-seats-tilt-democratic.aspx
    Nine of the 10 states that lost congressional seats as a result of this year’s census are in the Northeast or Midwest. The exception is Louisiana, whose population loss at least partly as a result of Hurricane Katrina cost it a seat. Politically, all 10 of these “losing” states skew Democratic in political orientation, based on Gallup’s latest state political identification data from January through June of this year. The two states that each lost two seats, Ohio and New York, have a net Democratic political identification of +7 and +19, respectively. The Democratic margin in the other eight losing states ranges from +20 in Massachusetts to +1 in Missouri.
    Must be something else keeping the super-rich here. Maybe it’s all the public services, education, and universal health care, which make for a better society? Maybe not all super-rich people are heartless monsters who think only in terms of balance sheets.
    As Fidelity just announced its move from Massachusetts, I don’t think I can agree that the super-rich are remaining here. They’re moving to lower-tax states. Are they following their largest clients?
    Company watcher Jim Lowell notes the mutual fund giant is consolidating away from a high-cost state.
    “Fidelity is long on Yankee thrift,” Lowell said, “and whenever they’re going to shave a penny, they’re going to do it.
    “And in this case I don’t think it could be any clearer. What they’re looking to do is to take advantage of … probably a far more friendly tax lay of the overall landscape, both in Rhode Island and across the highway over in New Hampshire.”

    http://www.wbur.org/2011/03/15/fidelity-move-jobs
    *****
    Or, would be very easy but for the fact that is it illegal to do so in sufficient numbers to drive down my wages too far.
    H1b visa? http://jvenugop.wordpress.com/2009/05/18/is-the-h1b-visa-useful-to-america/
    Hospitals recruit nurses overseas. School systems recruit teachers overseas. The world is flat if you teach, nurse, or work with computer systems.

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  17. “It has been growing slower than the rest of the US.”
    Massachusetts’ appeal has gotten more selective.

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  18. If Mass (hate spelling that!) is so fantastic for the huddled masses, why don’t more huddled masses move there? 3% growth over a decade is not exactly Detroit, but it sounds like stagnation.
    Any thoughts, Wendy?

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  19. Hosptals recruit nurses overseas. School systems recruit teachers overseas. The world is flat if you teach, nurse, or work with computer systems.
    Take any of those types of jobs and compare salaries across the world. Where you took your first breath and what language your parents spoke at home predict your salary far better than how much education you have had or skills you have acquired. Especially in teaching. I know about H1b visas and work around people with them. The process is designed, through formal and informal means, to limit incoming workers to those that can be employed with driving salaries too low.

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  20. Whoops, so you did! Too much travel in March meant I missed a lot of the internet, and I just caught up on my stack of mags last night.

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  21. We are truly squeamed out by Granny dying of something treatable. And by kids growing up to a life of crime and failure for lack of good schools. Potholes, doing thousands of dollars of damage to drivers’ alignments for lack of $50 of asphalt!
    On the other hand, Granny dying two miserable months later after $200000 of invasive and painful treatments and she was only awake for fifteen hours of it, and do-nothing nephews getting janitor slots (not accurately called ‘jobs’) and six guys standing around a scrap wood fire in an oil drum while one guy shovels out on the highway, well, that’s not so good.
    Obama is quite right that we want to keep Granny going, educate the children effectively and appropriately, and maintain and improve the infrastructure. Obama blithely ignores the nephews and the oil drum fires. His discussion of his own grandmother’s hip replacement was really a wonderful piece of political discussion of a moral issue. The TEA people notice the nephews and the oil drum and the hip replacements for someone who dies in three weeks and never walks again, and they’re not wrong either.
    My own view is: we need to be working harder on the effectiveness of the money we do spend. We should be raising the money for current expenses from current taxes – borrowing to pay teachers, or pensions, or subsidies on ethanol is nuts. It’s plausible to borrow to spend on long-term investments – improvements in highways and sewer treatment plants, etc. Some things are a little harder to characterize – we justify wars for the long-terms safety of the Nation, well, can you amortize them over that long term? Education has long-term benefits, on the other hand it is a current expense and it’s not going to go away next year unless we stop having children.
    We should be raising more money through current taxes than we are. AmyP April 18 2:44 goes to a nice clear WSJ piece about where we can get that money in income taxes: it’s the upper middle where the vast bulk of the income is. Many of the super rich can follow Johnny Hallyday and Ingvar Kamprad to Switzerland if we go much more heavily into taxing them, I tend to think Obama made a huge error in letting the Reeps bully him into allowing the Bush tax cuts for the highest level be extended, but what I think he ought have done is to let the cuts for both top and middle expire. That’s about as far as is sensible to go in taxing income, I think. The next thing to do is to raise the gasoline tax and institute a VAT, to drop the mortgage tax deduction for anything over about a $150000 house, and to stop spending subsidy money on making food into fuel. Fund roads through tolls – this stops the next Bobby Byrd from putting your tax dollars into four-lane highways into Cow Hollow, West Virginia, and bond buyers will only put their money into notes secured by roads which will pay their way.
    We are spending huge stupid amounts of money on the War on Drugs, not that drugs don’t do harm but the War has been an utter failure so we should accept defeat.

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  22. “…to drop the mortgage tax deduction for anything over about a $150000 house…”
    I don’t think that the $150k and under set actually gets anything much from the mortgage tax deduction.

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  23. No, they probably don’t if they are married. Even with high property taxes and a brand new loan (where all the money goes to interest), you’d barely hit the standard deduction. It would only matter if they had other large deductions, like a lot of charitable donations.

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  24. I always felt like we got something out of it. But around the same time we bought this house, we started using an accountant because my husband’s side business income was picking up and becoming too complicated. We don’t really have any mortgage interest now because we’ve paid down most of the principal.
    Re Mass being good for the huddled masses, well, I didn’t say it was. I said the super rich are happy enough there. 🙂

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  25. …this stops the next Bobby Byrd from putting your tax dollars into four-lane highways into Cow Hollow, West Virginia
    People who aren’t from the area probably don’t realize how true that is. You can see the PA/WV border by watching the pavement.

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  26. How many of the “Massachusetts” super rich are really “Florida” super rich, when we’re speaking of residency? The deciding factor is 180 days, isn’t it? So, some people can even own property in Massachusetts, but not pay Massachusetts income taxes. (Massachusetts: 5.3%, Florida, 0%)
    I had the impression that many of the Madoff stories had Boston/Florida ties. The reporters had to travel to Florida to speak with people I think of as Massachusetts people. At the time, many of them had thought of themselves as “super rich.” Fundraisers for Boston charities seem to travel to Florida frequently, too.
    Found it! http://www.bostonmagazine.com/articles/greetings_from_palm_beach/
    Ancestry aside, Palm Beach for some Bostonians is a place to start anew, especially if you’ve ditched a litigious mistress, a pesky ex-wife, or the tax man. The palm trees sway, the Pouilly Fuissé flows, and most folks don’t really give a damn, as long as there’s no shortage of, well, anything.
    (Dated article alert! Madoff names: Shapiro appear in the text)

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  27. Cranberry, if Massachusetts is so horrible for the well-off/upper income, then why do you live here? Why don’t you move to Florida? I won’t even let you answer. The reasons are: you have a job, you have a house, your kids like it here, your family of origin lives near here, Florida would be too hot and you happen to like the New England weather, the schools are better, the people aren’t morons, etc. etc.
    In other words, people do not make decisions for purely economic reasons. If they did, they would all move to Arizona or Wyoming or wherever is supposedly better financially. Taxes may or may not have an effect, but I really don’t think so many super rich or even moderately rich people will be moving out of the US or even out of their state if their taxes go up.

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  28. It isn’t a question of moving out, it is a question of not moving in. Very few urbanized areas can maintain their population without people moving in.

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  29. Wendy, the super rich can afford multiple houses. The difference between being a resident of Florida and a resident of Massachusetts may come down to good record keeping. Make sure not to spend more than 176 days in Massachusetts.
    New Hampshire works, too. The point is, borders are fluid.
    At that income level, I presume they could find a good private school.
    Let’s say a super rich person has a net worth of $500 million. She makes a return of 3% on her investments. Her income is $15 million a year. 5% of 15 million is $795,000. That’s a great deal to pay to live in Massachusetts. It’s perhaps worth spending two months longer in Florida for $795,000 a year.
    I haven’t even tried to calculate the other benefits, such as the differences in estate tax. (http://www.avvo.com/legal-guides/ugc/considerations-in-becoming-a-florida-resident)
    Florida’s whole tax system seems laid out to draw rich people down south.

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  30. I pay 5% of my income in federal taxes, and I am in the bottom quintile of househole income. I pay 3% of my income in state tax, because I live in a state with a FLAT TAX rate, and an extremely low deductible. The purposely regressive system (sales tax with few exempted items, flat tax) means I live in a city with high crime, terrible roads, and very poor social services. I have absolutely zero sympathy for the whiny super rich.
    Instead of promoting lowest common denominator taxes because otherwise “they’ll move somewhere else” maybe we should advocate for collective action in raising taxes all over? Also, I fail to see the advantages to the non super rich in keeping taxes so low services are no longer fundable, on the hypothetical that things would get even worse if the rich moved away. If public schools are a mess, roads are crumbling, crime is on the rise because police forces are cut, federal grants to academia and non profits are getting slashed, public funds for health care are slashed, etc, how much worse can my life get if rich people move away? Places with high taxes (e.g. Northern and Western Europe) manage to keep enough of a tax base to provide pretty comfortable lives for the middle classes, so what if the Bjorn Borgs move elsewhere? I don’t see anyone in Sweden crying over that. I vote we call the bluff of rich people. Sure, they can go elsewhere, but 1) Liechtenstein isn’t all that large, and 2) paying for private security in Nigeria adds up, plus living in a heavily armed gated compound gets old quickly.
    At this point in my life, I really regretting my ancestors decision to move away from Scandinavia. I am also staying in a marriage I was considering leaving because if I do so, I can when finished with grad school easily immigrate to an industrial nation with universal health care, record low unemployment, a robust hiring market for academics, and great weather. (I am only partially joking about this.)

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  31. “…how much worse can my life get if rich people move away?”
    Things can always get worse.
    B.I., I notice that you didn’t mention your local property taxes. How are they?
    Speaking of taxes, I was talking to my dad today about the Big Construction Project. The county has been nickel and diming my dad and his partners on every revision the county demands on the plans, $100 at a time. The partnership just asked for a permit to build a pump house (to supply water). The pump house is going to cost $2,000 to build. The county wanted $1,000 for the permit. The partnership managed to get the county to reduce the permit cost to $600, but it’s still a pain, particularly since it won’t be the last time they get turned upside down and shaken by the county. The project is going to generate a couple of jobs once it’s up and running and enormous amounts of tax revenues for the county, if all goes well, not even considering the construction labor. My dad said that while raising taxes is difficult, the county commissioners have a pretty free hand with raising fees.

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  32. It sounds like dealing with the county is like being partners with the wise guys in Goodfellas, but at least the county won’t burn your restaurant down.

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  33. Amy P:
    Property taxes are simple. I don’t own any property, and so I pay no property taxes. (At least not directly. Presumably my landlord factors property taxes into rent.)
    Things are about to get A LOT worse. Congress just slashed about 50% out of the several budgets that provide funding for most graduate student research in my field and those related to it. It’s about as much as half a wing on a fighter jet, but means that tens of thousands of grad students will get screwed over. I don’t know how much harder this will make getting funding, but it may delay graduation by several years.

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  34. Here’s an Ace of Spades post with Ed Schultz attempting to talk about a graph showing US federal revenue versus US federal spending over the course of 20 years. As Ace points out, Schultz doesn’t quite get it.
    http://minx.cc/?post=315021

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  35. Here’s another WSJ article with a pretty chart. 80 years of data suggests that 20% of GDP is the natural ceiling for federal taxes in the US–despite a great diversity of different tax structures over those years, 20% seems to be the natural maximum. (I think there was an isolated jump to 21% during the dot com boom, but that was very unusual.) Any US federal revenue and spending forecasts need to take this apparently natural barrier into account.
    http://online.wsj.com/article/SB10001424052748704608104575217870728420184.html

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  36. and there’s this
    “http://www.washingtonpost.com/politics/for-richest-federal-taxes-have-gone-down-for-some-in-us-theyre-nonexistent/2011/04/17/AFx6LCwD_story.html”
    The richest 400 Americans pay 17% of their income in Fed Income taxes, 9% less than they did in 1992.
    And, the Wash Post poll, showing what we’ve all suspected, that people prefer to cut benefits for people other than themselves and raise taxes for people other than themselves. My guess is that we’ll come up with a budget that does something like that (just like Clinton’s budget, with big changes in welfare paired with increases in taxes for the higher end of the income spectrum). As with Clinton’s budget, I suspect that this will bring us closer to non-deficit spending in the short term without really addressing the long term issues.
    In the end, it’s a political balancing game, with the numbers falling where they do when we look at the number of non-other voters who would loose benefits v the number of non-other voters whose taxes would go up. Usually, this works out in favor of small tax increases on the upper end of the tax bracket that raises not quite enough money, since, by definition, the “upper tax brackets” are a small group. And we’ll combine that with small cuts in programs that most Americans don’t think they’ll use.

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  37. I also came across this article.
    This part is interesting: “A corporate tax rate that is too low actually destroys jobs. That’s because a higher tax rate encourages businesses (who don’t want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.”

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