Sunday, November 22, 2009

Federal Tax Code Games - Supply Side Bull****

At one time the top federal income tax rate was 95%. That immediately strikes people as wrong. It seems the federal government is trying to run solely on the backs of the wealthy and it seems like confiscation. It seems like this because people forget that the tax code is not only about raising revenue, it is also about achieving social and economic ends. This "sin taxes" are all about, the goal of cigarette taxes isn't so much to raise revenue as it is to discourage smoking.

If you play along for a moment, a 95% rate only applies to the amount earned above the next lower rate - not the entire income. The first $20K of a gadzillionaire's money is taxed at exactly the same rate as a burger flipper's. (all this neglects the effects of FICA and tax code allowances) Now that 95% applying only to a "narrow" sliver of income should make it clear that it isn't about revenue (unless you posit there is a reason to try to get that 5% left), what it is about is discouraging grasping for that last piece of the pie. There is an absolutely closed system within companies, there is just so much money to pay for labor, salary, capital investment, share holder disbursements.

There is a reason that 40 years ago the CEO multiple of wage earners income was a fraction of what it is today - there wasn't any point in getting it. The slashing of the top income bracket rates means that they are free to grasp for any amount they can get and keep it. You don't have to look too hard to understand that the capital gains tax reduction and income tax reduction coincide with crushed labor compensation.

Sure, there are other reason as well - and they pale in comparison. This is the triumph of greed over the common good. Supply side economics my ass - you've been sold a bill of goods.


Phil said...

So, it's not just me. You see it, too. Time to put the corporations back on their leash.

Chuck Butcher said...

I'm pretty sure an economist could figure out a multiple of median income to tag it to, rather than a fixed number that eventually eats who it shouldn't - see minimum tax.