As I’ve been saying for quite some time, I’m bothered by all the rhetoric not just from flapping heads and politicians, but from Those Who Should Know Better (e.g. Joseph Stiglitz), who argue that the entire top 1% of earners in the U.S. should be paying more in taxes, cost of living and position within that group be damned!
I’d thus like to thank Jeffrey Gundlach of Doubline for providing us with this chart, picked up by Zerohedge (h/t Edward Harrison of Credit Writedowns), showing that, as I’ve said, lumping in those who make ~$350,000/year with those who make millions (upon millions, upon hundreds of millions…) defies all reason and logic. That is not to say those in the top 1% can’t afford to pay slightly more in taxes – certainly a few thousand dollars out of hundreds of thousands is less pain that a few thousand out of tens thereof – but comparing incomes that differ by several orders of magnitude is not just illogical but unfair no matter how you slice it.
As we can see from the chart, the top 0.1%’s share of income was relatively high after (and likely before) the turn of the 20th century, but then after WWI and WWII dropped down – as it did in other developed nations – to around 2%. Then, as globalization and digitization became more prevalent in the 80’s, the their share of income shot-up back towards levels not seen for a century. Economists debate the various and myriad reasons for this, but if you consult any introductory Economics textbook (see Greg Mankiw’s, for example), at least some of the reasons should be painfully apparent. Perhaps I’ll discuss them in another post in more depth, but for now I’d just like to talk about taxes, not National well-being and income (in)equality. Moving on…
I’m all for cutting unnecessary/ineffective spending before we even consider raising taxes on any group, but I recognize that financially and politically that’s simply not going to happen to the degree necessary to completely address our budgetary and fiscal issues. If we are going to raise taxes, especially on those at the top, at the very least we need to add at least 2 income brackets, and any higher marginal tax rates need to be very carefully considered so as to not encourage increased tax-avoidance behaviors (although the extent to which this is possible is debatable).