Tuesday, April 10, 2012

Once Again We Have to Explain the Concept of Progressive Taxation to Idiot Ideologues

Because Once Again They Try to Make a Case with No Facts or Logic

One of the reasons it is so difficult to have a serious discussion on taxes is that those who want to talk subjectively as opposed to objectively refuse to accept the concepts that everyone else has examined.  For example, the economics profession is in total agreement that the concept of progressive taxation is that as income increases, the percentage paid in taxes increase.  A flat tax in this regime is one where the tax rate is constant regardless of the income and a regressive tax is one who effective rate decreases as income increases.

But this definition doesn’t work for Conservatives, because they want to show that taxes on the wealthy are too high and should be reduced.  So in their weird world progressive taxation means that as income increases the proportion of total taxes paid increases.  Here is former Sen. Phil Gramm, whose award of a Ph. D. in economic must totally embarrass the school that gave it to him and a colleague talking about taxation.

The Organization for Economic Cooperation and Development (OECD) data on the ratio of the share of income taxes paid by the richest taxpayers relative to their share of income show that the U.S. has the world's most progressive tax burden.

Wow, the U. S. has the most progressive taxation in the world!  Well here is their numbers to back that up.

it is the expansion of government in the name of the poor and middle class that always costs poor and middle-class families the most. When the U.S. collects 16.1% of GDP in income taxes, the top 10% of taxpayers pay 7.3% and the other 90% pick up 8.9%.

In France, however, they collect 24.3% of GDP in income taxes with the top 10% paying 6.8% and the rest paying a whopping 17.5% of GDP. Sweden collects its 28.5% of GDP through income taxes by tapping the top 10% for 7.6%, but the other 90% get hit for a back-breaking 20.9% of GDP.

If the U.S. spent and taxed like France and Sweden, it would hardly affect the top 10%, who would pay about what they pay now, but the bottom 90% would see their taxes double.

Okay, what’s missing here.  Oh it is this, the reason that the top earners pay so much of the total tax is that the top earners have so much of the total income.  The top heavy distribution of wealth and income in the United States means that the tax burden is top heavy as a percent of total taxes.

To try and finally put to a merciful death of the idiocy of Mr. Gramm and Mr. McMillin consider this contradiction in their logic.  As Conservatives these gentlemen and others believe that high taxes on the wealthy are the single greatest deterrent to economic growth and prosperity, and that lower taxes on the wealthy will lead to higher economic performance for a country.  So if the U. S. has the most progressive taxes in the world, particularly compared to Europe it must mean that economic performance in Europe is far greater than that of the United States.  And it must mean that in the 1990’s when taxes on the wealthy rose under the Clinton administration it produced an economic horror.

Guess what.  The Unites States economy with its supposedly most progressive tax system in the world is outperforming Europe by a huge margin.  And after Mr. Clinton succeeded in increasing taxes on the wealthy the U. S. enjoyed its greatest period of economic growth and employment growth in the post WWII era.  Mr. Clinton handed George W. Bush a strong economy and a federal budget surplus.  Ouch, there are some ugly facts that get in the way of the basic Conservative position.


  1. Facts! I'm constantly dismayed by the DPE's use of facts to deny the "basic conservative position": Rich people need more money! Poor people need less, or they wouldn't be poor.

    Yes, that's "right". We'll get the facts "right" later.

  2. How about a little more honesty and a little less sarcasm? You say "the reason that the top earners pay so much of the total tax is that the top earners have so much of the total income." True, but that is beyond dispute and misses Gramm's point entirely. As you highlight in your first out-quote, the OECD says the richest U.S. taxpayers have the most progressive tax burden "relative to their share of income." Based on the data from the OECD, Gramm is correct. You might have benefited from a little closer reading and a lot less venting.

  3. The Gramm statement is an example of something that is factually correct but analytically meaningless.

    All that is being said is that the wealthy in the United States pay a lot of taxes relative to the wealthy in other countries. Which is true because the wealthy in the U. S. are much wealthier than the wealthy in other countries. This does not make for a progressive tax system, it makes for a high unequal distribution of income.

    Sorry about the venting and sarcasm, but that is what we do here, it is our 'raison d'etre'.