This article, by David Cay Johnston, is at least a few months old, and I didn't see it when it first came out. I did see a blog post which referred to it, and quoted some passages of it. Here are the ones which caught my eye then:
Without a doubt, the much lower tax rates at the top encouraged people to realize more income in the tax system. And if the only measure is that some people made more, then this would be a good.
But let’s ask the question that the classical economists would have asked back when they were known as moral philosophers and their leaders spoke of policies that benefited the majority. Let’s go back to a time before Vilfredo Pareto’s observations began what is the overwhelmingly dominant orthodoxy today, neoclassical economics with its focus on gain.
What is the social utility of creating a society whose rules generate a doubling of output per person but provide those at the top with 37 times the gain of the vast majority? ...
Is a ratio of gain of 37 to 1 from the top to the vast majority beneficial? Is it optimal? Does it provide the development, support, and initiative to maximize the nation’s gain? Are we to think that the gains of the top 398 or 400 taxpayers are proportionate to their economic contributions? Does anyone really think that heavily leveraged, offshore hedge fund investments are creating wealth, rather than just exploiting rules to concentrate wealth, while shifting risks to everyone else?
Under the overwhelmingly dominant economic theory of today, this is all good. Pareto argued that if no one was harmed, then all gain was good.
Carried to an extreme, neoclassical economics would say that if the bottom 99.9999997 percent had the same income in 1961 and 2006, and all of the gain went to the one other person in America, that would be a good. ...
Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?
Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983.But the original has some other important things to say. It begins,
For most Americans, living off income tax savings would mean starvation. Their income tax savings have been minor, and when looked at over a long period, say since 1961, increases in payroll taxes have more than offset their slight income tax reductions.
But for the very few who have gained the most from living in the United States, the story is quite different. Their tax savings alone from a single year, invested to earn just 5 percent annually, would be enough to provide a lifetime income at nearly twice the income threshold for being in the top tenth of 1 percent.
That's a remarkable decrease for some very privileged folks! Johnston goes on to compare what has happened with incomes at the very top of the scale between 1961 and 2006 with what has transpired for the bottom 90% of us. The bottom 90% saw real income rise from $22,366 to $31,642 (both in 2006 dollars). At the 90th percentile, wages rose from $60,404 to $104,440. DCJ goes on to make some points which Elizabeth Warren and Amelia Tyagi made in "The Two Income Trap:"
In 1961 most families lived on one income, maybe supplemented by some part-time work by the wife for what was quaintly known back then as "pin money." Now two-income households are the norm.
The overall wealth of America grew and grew during this era. GDP, adjusted for inflation and increased population, was up 227 percent. But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were on a mostly flat trajectory for more than two decades, rose briefly in the late 1990s, and then fell sharply in the new century. Airline pilots have seen their 1990s income cut by more than half; some union factory workers have seen their pay slashed by two-thirds. Millions are out of work, and the jobs they once held are gone and are not coming back. And even if the Great Recession is coming to an end, we face years of jobs growing more slowly than the working-age population, which could radically transform America's culture, work ethic, and sense of progress.
In 2006 families worked on average about 900 more hours than families did in the 1960s and early 1970s. That is a roughly 45 percent increase in hours worked accompanied by a 41 percent increase in total income.
For many, the reality is that two jobs produce the same or a smaller after-tax income than just one job did three and four decades ago.
Compare that to the top 400 taxpayers:
The income tax bill went up too, but only 7.8 times as much because tax rates plunged. Income tax rates at the top fell 60 percent, three times the percentage rate drop for the vast majority. And at the top, the savings were not offset by higher payroll taxes, which are insignificant to top taxpayers.
The average income tax rate for those at the top in 1961 was 42.4 percent. By 2006 it was down to 17.17 percent. Add on payroll taxes, and the 2006 rate is 17.2 percent, the same as rounding the income tax figure alone.
Johnson ends with this:
Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families, with children, whose head is age 50 or younger, is smaller today than it was in 1983.
The alternative? Tax the annual value of those resources -- which are rightly COMMON property, provided by the Creator and by the presence of all of us and the spending/investment of the entire Community, not by individuals or corporations -- heavily (say, 90% or 95% of the annual value) and reduce or even eliminate -- starting at the bottom -- the wage and interest and sales taxes and taxes on manmade improvements to land. Think about the ramifications of that reform. They're profound, and point in the direction of a healthier, more stable and more just economy. Will the revenue generated be sufficient to fund all of today's public spending? Probably not. But
The bottom 70% or so of us CAN'T save. Large shares of our incomes are devoted to housing and transportation, and to all sorts of FIXED costs. We can't increase our spending on other goods, and we can't save. We have to fix that. We have to do things which distribute the value of that which SHOULD be common, and end the privatization of value which ought to be common.
1. that's no reason not to shift our taxes off bad taxes onto good ones; and
2. we may find that with good taxes, things change enough that we no longer need to spend large amounts on the social safety net, because a vibrant economy with opportunities for all and a somewhat more equal distribution of income and of wealth and power permits the vast majority of us to be self-sufficient and prosperous.