Along the same lines, this morning I came across a report from The Society Pages detailing the relationship between the minimum wage and the nominal value of that wage. It compares a workers' actual hourly rate of pay versus the value of that dollar after many factors, including inflation, are taken into account, determined by the purchasing power of a dollar earned in 2010. It's a pretty dramatic look at how wage increases are not keeping up with inflation increases.
(http://thesocietypages.org/socimages/2012/01/07/the-minimum-wage-and-capitalism-2/)
If you look at the chart you'll see that a dollar's purchasing power appears to be greatest between from 1964-1980. If you match that up with the tax rates during those years you'll see some correlating numbers.
From 1950-1963, the 14 years prior to the highest purchasing power, the tax rate on income above $400,000 was 91%, with the exception of 1952-53 when it was actually 92%! The chart above shows a dramatic upturn in the purchasing power of a dollar during this 14 year time span. I believe the high point of purchasing power I highlighted early, 1964-1980, is a direct result of this sustained tax rate. It insured reinvestment into the infrastructure that facilitated the enormous growth of the United States. It also prevented wealthy Americans from reaping financial benefits on their climb toward wealth and then "cashing out" and denying that chance for the next generation. Without this continued reinvestment of tax dollars it would have been impossible to maintain the governmental investments and incentives for the creation of new businesses and opportunities.
The tax rates, for the lowest and highest income brackets, for those 17 years of high purchasing power are as follows:
Tax Rates | ||||
Bottom bracket
|
Top bracket
| |||
| Calendar Year |
Rate
(percent) |
Taxable Income Up to
|
Rate
(percent) |
Taxable
Income over |
| 1964 | 16 | 1,000 | 77 | 400,000 |
| 1965-67 | 14 | 1,000 | 70 | 200,000 |
| 1968 | 14 | 1,000 | 75.25 | 200,000 |
| 1969 | 14 | 1,000 | 77 | 200,000 |
| 1970 | 14 | 1,000 | 71.75 | 200,000 |
| 1971 | 14 | 1,000 | 70 | 200,000 |
| 1972-78 | 14 | 1,000 | 70 | 200,000 |
| 1979-80 | 14 | 2,100 | 70 | 212,000 |
| 1981 | 13.825 | 2,100 | 69.125 | 212,000 |
This appears to be a time of great prosperity for the American Dollar. So what happened to push it toward our current dysfunctional system?
Well, inflation rates were above 10% each year from 1979-81. That meant that, on average, goods cost 39% more at the end of 1981 than they did at the beginning of 1979. So to combat this our government surely sought to revert to our more prosperous techniques of the past, with respects to tax rates, by asking wealthy Americans to pay a little extra so that the people who needed money to afford things like food and shelter were able to keep a few more dollars each month, right?
They actually did the opposite. Here's the data from the same chart for the rest of the 1980s:
Tax Rates | ||||
Bottom bracket
|
Top bracket
| |||
| Calendar Year |
Rate
(percent) |
Taxable Income Up to
|
Rate
(percent) |
Taxable
Income over |
| 1982 | 12 | 2,100 | 50 | 106,000 |
| 1983 | 11 | 2,100 | 50 | 106,000 |
| 1984 | 11 | 2,100 | 50 | 159,000 |
| 1985 | 11 | 2,180 | 50 | 165,480 |
| 1986 | 11 | 2,270 | 50 | 171,580 |
| 1987 | 11 | 3,000 | 38.5 | 90,000 |
| 1988 | 15 | 29,750 | 28 | 29,750 |
| 1989 | 15 | 30,950 | 28 | 30,950 |
These charts show only the bottom tax bracket and the top tax bracket. Most years there are several brackets in between with gradual increases in rates but some years these represent the only two brackets.
So, let's try to make sense of this and compare apples to apples. Brace yourself. An abundance of numbers will be used. I will be using tax rates for a single man with no children from this chart.
Let's take a single man making $40,000 per year and assume he maintained this wage from 1981-1989 with no raise. His tax liability, not including deductions or credits, in 1981 would be $12,000, at a rate of 30%. That same man's tax liability in 1989 would be $11,200, at a rate of 28%.
Take-home pay 1981: $28,000.
Take-home pay 1989: $28,800.
Hey, way to go! This fortunate man got to keep $800 more of his money.
But keep in mind, the inflation rate over this nine year period works out to just over 50%. So if this man's monthly bills in 1981 were $1000, his same bills in 1989 would be $1500. Sorry, pal. It doesn't look like that $800 drop in annual tax liability is going to offset the extra $6000 ($500 * 12 months) you'll be paying on your bills. You actually come out $5200 worse. Let's hope you got annual raises enough to cover this.
IF(!) he got a 2% annual raise EVERY year, his 1989 wage would be $46,866. Factoring in inflation and tax rate changes, he comes out $1666 better in 1989, after bills and taxes, than he did in 1981. Assuming this guy has a generous employer, and hasn't added any expenses (like children), he's not doing too badly.
Now let's look at a man making $1,000,000 per year over this same period. His tax liability in 1981 would be $691,250, at a rate of 69.125%. The same man would pay taxes of $280,000 in 1989, at a rate of 28%.
Take-home pay 1981: $308,750.
Take-home pay 1989: $720,000.
Wow!
Let's say his bills are TEN times the previous man's bills. That means that monthly bills of $10,000 in 1981 would be roughly $15,000 in 1989, after factoring in inflation. Meaning he would pay $411,250 LESS in taxes and $60,000 ($5,000 * 12 months) more in expenses. With no raise at all, this man comes out $351,250 better in 1989.
If you factor in an annual 2% raise (new salary $1,171,659), this man comes out $522,909 better in 1989, after bills and taxes, than he did in 1981.
That's a lot of numbers but here's what it boils down to: After bills and taxes, the first man increased his yearly income by just over 4% while the millionaire increased his yearly income by just over 52% during the same time period.
Wait. 28% tax rate in 1989? Isn't that the same rate as the guy making $40,000? Yes, it was. The tax rates for the wealthy from 1988-92 and 2003-2011 were literally HALF what they were from 1936-1981. The rates from 93-2002 were merely 44% lower. AND, from 1988-90 anyone making over $19,450 paid the same tax rate. A person making $20,000 paid the same tax rate as a person making $20,000,000. That sounds absurd to me.
Fun Fact: Prior to 1987, the last time tax rates for the top bracket were below 50% was 1925-1931. Check those years, and their aftermath, if you need help figuring out what broken policy can create.
My point is this: Our current system is completely unsustainable. If we continue to allow inflation to rise much faster than wages we will end up with a country full of people completely dependent on their government for assistance. If we simultaneously allow millionaires and billionaires to hide their income and pay unbelievably, historically low tax rates, then the government will be in no position to offer any help to those who have slowly been robbed of their financial security, their buying power, their self-sufficiency, and eventually their dignity.
I don't want socialism. I don't want to rob from the rich and give to the poor. I want a country with sustainable policies. And we don't have that right now.
Well said, though I'm a bit suspect of your numbers—I believe those are marginal tax rates, so they don't apply to the money earned below the bracket, e.g. earning a million in '81 with the marginal rate at 69.125% for income over 212,000 would be (1,000,000 - 212,000)*0.69125 = 544,705 not 691,250, (with the money below 212k taxed at their respectively lower rates). I'm wholly on board with the sentiment though. (Also it doesn't change the basic story at all).
ReplyDeleteHave you seen
They do a pretty good job of summing up the several major problems.
Also I was reminded recently that Inside Job is a really well done movie explaining how a lot of the current problems came to be, and how screwed we are (it's pretty outrageous what's happened).
I've been thinking lately it was probably the huge tax cuts that Reagan passed that were responsible for the demise of Bush Sr, where he was forced to break his campaign promise and raise taxes. And I think his subsequent outing probably reinforced the willingness of conservatives to oppose raising taxes and to double down on all the anti-tax rhetoric.
Oops, meant to say, have you seen this:
ReplyDeletehttp://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10
It's a series of charts expressing many problems people are upset about.
You are completely correct. In my haste to get all of the words out of my head I didn't check my numbers to make they were sound.
ReplyDeleteYou are also correct that reevaluating the numbers using the correct marginal tax rates makes the numbers even more in favor of the millionaire. Ironically, I made them look like they were paying more taxes than they actually were.
I will definitely check out Inside Job.
Sorry guys; you have fallen for the ole "keep 'em occupied(pun intended) with the mind-fuck instigation through power of accusation so we can continue postulating our indignant concern and living as royalty well above the law.
ReplyDeleteIt is not a fucking crime to be rich!
sorry, the absolute gall infuriates me.
I salute your efforts of research and critical reasoning sir, but I do believe the cause and effect conclusion is a bit shy of center.
The artistic and manipulative genius of King I-know-everything has become the most damaging factor of the American core I have ever seen.
Taxation is NOT the problem or the answer.
I plan to expand a bit later, but as many criminals do, I will now drink some alcohol, smoke a cig and watch some conservative news.
I agree: correlation is not causation. Taxation is not the cause of the economic downturn, but it sure as hell is exacerbating the problem.
ReplyDeleteWhen you spend more than you take in, you create problems. And when you combine increased spending with decreased income the problem grows exponentially.
It is NOT a crime to be rich. But using tax incentives to acquire your wealth and then doing everything in your power to cheat the very system you just used is almost the definition of biting the hand that feeds you. And yet, I don't blame the average millionaire. They should take any advantage that is open to them.
It is not easy to make your way from a paycheck-to-paycheck job to a seven figure salary. Anyone who has achieved that put in untold hours of work. But there's not one person who has ever done it without immeasurable amounts of help.
I'm not mad at them for being rich. I angry that they're so fucking arrogant and dismissive of anyone else's plight.
Not everyone can be born with people around them shitting privilege and opportunity.
If I hear one more time that the wealthy should pay their fair share, I will hurl my 78 cent corn-dog like a frickin mortar round.
ReplyDeleteSpending is the problem; whether it is from 5% or 95% of taxes, congress and the shitball in cheif will spend every damn penny and borrow more from the fucking communists.
The only person talking about realistic, meaningful and long-term spending control is also a scary old congressman who thinks it's ok for murdering terrorists to have nuclear weapons.
WTF!
The United States has always been the exception to every rule we hope to impose on the rest of the world.
ReplyDelete"You can't have nukes but if you do then you can't have more then we do. You know, for peace."
"Treat your citizens better and give them basic human rights. Oh, the 2012 NDAA? It's the war on terrorism. We HAVE to undermine the constitution."
"Freedom of speech? Freedom of the Press? Freedom from unwarranted search and seizure? Those are only allowed when they don't interfere with the machine, silly."
It's disgusting. We can't preach peace and human rights when we're fighting 19 wars and detaining people for years.
We claim to be a compassionate nation but how many people would give their money to fund that compassion if not legally required? Sometimes people make bad decisions and end up in financial ruin. Does that mean they have less of a right to live?
The wealthy can whine all they want about "earning their wealth" and not wanting to give "handouts" to the lazy and unemployed.
"Life's not fair" is a bullshit excuse. Telling a 7 year old he won't eat dinner this week because his daddy made bad financial decisions is insanity. We live in the the most abundant country in the entire fucking world. The fact that we have American citizens still going hungry is all you need to know to understand we are a nation of selfish hypocrites.
How can we possibly hope to sustain a functioning country if we are so worried about people "taking advantage of the system" that we allow them to go hungry?
$10,000 out of the pocket of a millionaire means relatively nothing. But how many meals and doctor visits could that money provide for people who can't afford it?
If I hear one more millionaire talking about how they feel like they're being persecuted for being rich I may hurl. Deciding between stock options doesn't even compare to deciding whether to eat or fill your prescription.
If people could take a few minutes off from finding clever nicknames for the president they might be able to see difference.
That came out rather harshly directed at you, Anon. That was not the intent. I got a little carried away.
ReplyDeleteNo problem; harsh comments, intended or not roll off me like responsibility rolls off congress.
ReplyDeleteI agree 100% that the vast majority of "the haves" inherit the wealth or more often the environment to flourish in the financial world. Unfortunately, many of these self-absorbed pricks also inherit the class arrogance and, dare I say it the "entitlement mentality".
Say we change the tax code; various brackets for different income levels. Maxing out at say, 40%. Deductions and write-offs are the real culprits which, must be changed.
OK you have increased revenue 300 billion.
The debt is almost 16 trillion, what will congress do with the 300 billion? Which country will get it? What useless projects will it be wasted on?
To perpetuate this tax issue is absurd. The best result from it will help only marginally, if at all.
Our King and Savior will proclaim victory and promise to feed the masses from his basket of red herring.
The piss bucket has a gaping hole in it. We continue to be addicted to drink, keep the bucket leaking all over our homes, and blame each other for not plugging the hole.
It is not the responsibility of the government to take care of us, theirs' is to protect us.
Our government has caused the political, security, financial, social and now health care problems; yet his majesty has succeeded in convincing the populations of the world that these problems are our fault and has us blaming and condemning each other.
What a waste of oxygen.
I am not absolving the U.S. government from responsibility. Actually, it's almost entirely their fault. Bankers may have abused the system and used obscure loopholes to defend their practices, but isn't part of Congress' job to eliminate those damaging loopholes BEFORE they vote on a bill?
ReplyDeleteTo steal your term, I'm mainly enraged at the entitlement these wealthy pricks feel. After Christmas my Twitter feed was awash with comedians retweeting ridiculous high-schoolers bitching about not getting a new iPhone because they just expected one.
I'm so sick of the "everybody gets a trophy" "you can be whatever you want to be if you put your mind to it" bullshit that's shoved at our kids. My best friend in high school had straight A report cards his entire public school career, played two sports, was a talented trumpet player in the band, joined every academic club available, had an ACT score of 31, a GPA over 4.2, and was valedictorian. Not only did his top college choice not offer him a scholarship, they didn't even accept him. His second choice was willing to give him $1,000 per semester which might have covered the costs of his books. This guy did literally everything he was supposed to do to be what he "wanted to be" and then was told it wasn't enough. How can you win when the game is a farce from the start?
This is a real-life metaphor for the entire country. More tax revenue will not "fix" the economy. A lack of money isn't the problem. It's the inability to balance a checkbook that is drowning the country in debt. We could focus our funding on strengthening our foundation and focusing on the future through education, renewable energy, and a government built on fiscal stability and longevity. Or we can blow up a foreign country and then pay to rebuild it. Or just give money to the dickhole that's already running the country.
Text "Help" to 14973 to help the homeless in Haiti. Text your friend Jennifer to make fun of the homeless guy living in the woods behind the K-Mart.
My main point in these two posts about bankers and tax rates is to highlight the disparity between political talking points and reality. The tax rates are just a quantifiable example of Wealth and Power colluding to ensure their continued dominance.
Now we are talking! Your examples are poignant and sobering. What are the answers? How do we "change" things?
ReplyDeleteRun for office to effect change from within, write a letter to a congressional aide, join in an activist group of some peripheral affiliation or sit around a public park smoking a pipe?
The detached reptiles in Washington know that we the lowly taxpayers have but one option, vote for the lesser of the evils. Or do we?
Who has the power? Money + Media = Power.
Without the power change is impossible. Those with the money control the media; Those with the money do not want change. So, the only way to induce change is to take control of the media.
Is this possible without money?
I will send some flash cards, simply pay additional shipping and handling charges.
Perhaps a new alliance of people who have reached their limit of lies and deceit. An alliance of U.S. citizens
(all of us) who have the courage and drive to take our country back and our constitution back to the days of the Federalist Papers.
I am not suggesting a blood filled revolution, I am presenting the idea of a citizens organization with initially a single goal: acquire enough power from the people to force the media to produce and publish every single facet of governmental action and non-action.
Every few years we change the packaging and marketing of the next jerkwad to preside over the same buddy fuck system. Allofus (or whatever will work) seems the only option left for all of us.
This is partly why I champion the Occupy movement. Occupying a park is not going to change policy or make the country a better place. But it does get people to ask what is happening. The only way to derail the machine is to an informed and engaged populace.
ReplyDeleteFor the first time in history we have the technology to be connected to anything and everything nearly anywhere. This allows people to read AND report news from their phones. Ten years ago would we have seen actual video of a punk cop pepper spraying college kids peacefully sitting on a sidewalk? Or live streaming video of a march in the streets of New York?
It is becoming increasingly difficult for the machine to keep up the Oz facade. When anyone can report anytime, everyone becomes a reporter. When college kids with cell phones become as accurate as newspapers and nightly news it becomes impossible to control the flow of information.
Obama didn't win based on merit. He was young, attractive (?), well-spoken, and entirely plugged into social media. He was a character. He was an idea. Four years later everyone is trying mimic has tactics.
As far as publishing every facet of governmental action, if I remember correctly one of Obama's campaign promises was to post every congressional bill online for public review BEFORE it was up for vote.
We're still waiting.
But there is an Android app that gives insane detail into the daily official congressional records. For instance, it shows that the House was in session for five (5) whole minutes today. Congratulations guys. Keep the streak alive.
Yes, Mr. transparency has been exactly that to me from the start. And yes, technology has become invaluable in discovery and communication of information.
ReplyDeleteBut, TV and the endless supply of opinions that spew forth from it remains the key to reaching the uninformed and the technologically challenged. Further, influence of TV op-eds is most effective in achieving particular mass direction of thought.
Obama was elected through media induced fantasy, fraud, stupidity and racism. I was still amazed that Clinton was re-elected until I witnessed the travesty in 2008.
This Muppet on crack smirks every time he insinuates that the populace is responsible for the condition of the country. Why? Because he knows that indirectly he is right. This country was gullible and stupid enough to elect him. The sheer number of stupid people in America is absolutely shocking!
I work tech support. When I first started I was constantly astounded at the ignorance and unwillingness to learn. Now I expect it. The day a Kardashian decides to run for office we're all screwed.
ReplyDelete