Summations Only

I'm just saying, if you're going to increase the amount of wealth you own on any kind of meaningful basis, it has to be by permanent transfers of wealth from other people to you. Going into debt doesn't make you any wealthier, because you have to give it back. Usually with interest, so when you do give it back, it takes a bunch of your wealth with it. That's making you poorer, not richer. No, you wouldn't. You could spend the money you already have.You're conflating two entirely separate financial transactions - the money you borrow from counterparty A, and the money you lend to counterparty B. Only one of those transactions actually made you money, and that was the money you lent, not the money you borrowed. If you had only lent your own money, you would have made even more of a profit because you wouldn't have had to pay interest on it. It absolutely did. Your leveraged investment (that's what it's called when you invest borrowed money) didn't create any money; you simply transferred money from the customers of the business back up the bank and kept a little bit along the way.Lending doesn't create money and it didn't create any wealth in this instance; you indebted yourself to the bank at one interest rate, you indebted a company to you at a higher interest rate, you paid the bank from the interest on your investment, and the company either took the hit in profits or raised prices on its consumers. Ultimately, your wealth came from spending, not from debt. But they didn't make money by being in debt; they lost money by being in debt. They made money because people spent money on their business, and they were able to increase the amount that their customers were spending on them, either by finding additional customers or increasing prices. If they'd done exactly the same thing without having to go into debt with you, they would have made even higher profits yet.Now, of course, you have to spend money to make money, as the saying goes (see how it all comes back to spending, not debt?) and if the business didn't have the money to spend, then they did have to borrow it. Not having access to capital - illiquidity - is a restraint on the growth of an economy. But it's just as likely that the business might have taken your investment and then failed to raise any profits at all with it. The presence of your investment didn't cause an increase in their profits, it only allowed an increase in their profits. Spending, ultimately, was the source of their profits and yours. Not debt. Sure, but it's wealth that came entirely from spending. Not debt.

I'm saying that unless their contribution to productivity is greater than the share of it they receive you have trickle up rather than trickle down.If the wealthy are receiving more wealth than they are creating what is it that is trickling down? Better off than what?For every 100 pounds of growth in the UK economy over the last 30 years the top 0.1% have seen 14 and the bottom 50% have seen 12.Are the bottom 50% better off than they would have been if policies which didn't concentrate wealth at the top had ben implemented instead? Look if you give all the money in the US to the richest person and then everyone borrows from him to do anything productive you could in a very fucked-up-way say that this individual was responsible for ALL of the economic activity and that anyone who received any benefit at all from economic activity did so because of his enabling role.But that would be bonkers wouldn't it?Yet in percentage terms that is pretty much what is happening.... Why does focusing policy on making the wealthiest wealthier rather than the middle or the bottom wealthier produce more economic benefit for society as a whole?If it doesn't - Then trickle down economics cannot be said to work.And the evidence strongly shows that when trickle down economic policies are implemented it is the richest who benefit rather than anybody else.

I'm not familiar with the British tax system, but it's the effective tax rate that counts, not the rates in the tax tables. Earlier in this thread we used presidential candidate Mitt Romney's income as an example. Last year I believe he paid around 15% on $20 million income. Our top marginal tax rate is 35%. He paid only 15% because he is able to funnel income from his investment company through tax loopholes that magically transforms it into long term capital gains, which are taxed at the lower 15%. The justification for the loophole is the acceptance by investors of the risks normally associated with long term investments, but in reality the way investments qualifying for this loophole are normally managed eliminates most risk.So I can see that your capital gains rates can be as high as 56.25%, and your income tax rates can be as high as 60%, and your VAT rates can be as high as 20%, and insurance tax rates as high as 12%, but how much do the rich actually end up paying? I'm not trying to imply anything, I'm just asking if you know. Here in this country such information is hard to come by. Romney as a presidential candidate found it politically expedient to make last year's tax return public, but very few of the rich ever do.But while I do not know the answer, I'm sure my suspicions are obvious. I suspect the rich in Great Britain are as successful at avoiding taxes as they are here.Anyway, the rational for keeping tax rates low is that the higher the tax rate the less the motivation to take risks or exert effort to earn money. If you're in the 10% tax bracket then you get to keep 90% of every dollar you earn, but if you're in the 90% tax bracket of the 1950s then how much effort would you be willing to exert or risk to endure if you only get to keep a dime of every dollar? This is the lesson of the Laffer curve. I don't understand why so many in this thread are into hyperbole, or why when they echo back what they think they heard it's also in terms hyperbole that didn't appear in the original.The claim is not that the rich are "untouched and untouchable." The claim is that the evidence suggests that attempting to increase the amount the rich pay in taxes is fraught with peril because their wealth gives them great influence over those responsible for tax legislation.--Percy

...Because 10% of a million dollars is still $100,000, which is still a lot of money, more by far than I make in an entire year.I get to keep about 75% (as I recall, I'd have to look up my tax return to be precise) of my ~$65,000 annually (just state/federal taxes), so I get to keep around $48,000.So if I could invest a million dollars, I'd still get to keep about double what I take home right now.In short, "Yes, please."A person can only reasonably spend so much money. You can only buy so many houses and cars, hire so many maids, have so much jewelry. You only need to eat so much food. There are only 24 hours in a day in which to find ways to spend more money. The utility of money scales down even as the ability for money to make more money scales up. There is a reason that the wealthiest 5% will not spend nearly the percentage of their wealth that the bottom 5% will, and that is that the bottom 5% need every single penny of what they have just to get by, and the top 5% do not.I don;t necessarily advocate a 90% tax rate for those making a million dollars or more per year. Personally, I think it would make more sense to address some bits of the tax code that were clearly written before such incomes were nearly so common - like the fact that social security tax stops after around $300,000 of income (so a person making ten million dollars per year will pay the exact same dollar amount in social security taxes as a person making $400,000, which seems rather off), or the fact that the progressive tax brackets just stop at a little over $380,000 (a person making ten million dollars per year will pay the same percentage of tax as a person making $400,000).I think we should simply continue the scale of progressive tax rates; don't change anything for those making $400,000, but maybe the guy making $750,000 should pay 40% instead of 35%, and maybe the guy making ten million per year should pay 60% instead of 35%.The rationale behind progressive tax brackets, after all, is that those blessed with greater income can better afford to have higher tax rates; 10% taken from a man who earns $30,000 means far more for him than does even 50% taken from a man who earns ten million dollars. And the wealthiest are also those who most benefit from living in this country - the more wealthy you are, the more you owe the other citizens, both those living and those who came before and created the system you were able to take advantage of.I'd also like to see massive increases to inheritance taxes, possibly even caps on the amount that can be inherited:

quote:

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"What is most important for democracy is not that great fortunes should exist, but that great fortunes should not remain in the same hands. In that way there are rich men, but they do not form a class." - Alexis de Tocqueville, French writer (1805-1859)

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The "idle rich," the "trust fund kids," and the super-wealthy dynasties living on the fortunes of their forbears who produce nothing of value on their own should be a thing of the past.

Crash - focus only on that part of the plot that corresponds to the Reagan years (1981-1988) - it's the only segment that is roughly flat. Percy was only referring to that segment with his characterization of "flat".Note that the steepest segment of the curve is the very last part - well within the Obama years.A lot of people in this thread seems to have misconstrued Percy's statement that wealth trickles down. He is basically arguing that the value of the trickle-down economic is similar to a simple equation:Value = A - BWhen he says that trickle-down happens, he is merely stating that A is greater than zero. He says nothing in that moment about B, which is the detrimental aspect of the equation. He has later abundantly demonstrated, that, in his opinion, B > A, so that the total value of trickle-down economic theory is negative.

Percy reposts the plot: Ah! Wait - Crash, I apologize. The X-axis is HORRIBLY presented in slanting numbers that are shifted left. The flat period seems to be shared by Carter & Reagan's first term.Poor Gerald Ford!Edited by xongsmith, : period

And the evidence shows that trickle down economic policies result in ever greater concentrations of wealth at the top which gives the wealthiest even greater political influence to shape economic policies to their own benefit.So we end up in a cycle of increasingly concentrated wealth providing ever greater political influence to concentrate wealth further.In short a sort of plutocracy. Which is, I would argue, not a situation compatible with trickle-down economics having worked. It certainly isn't the situation that proponents of trickle down economics put forth as the end result of such policies. Which is kinda the same as saying the wealthy are effectively untouchable when it comes to imposing tax legislation on them that they don't like.

Well, ok, let's do that:Not even close to flat. What am I missing, here?

Yeah, we suck. Look to Europe; especially the most successful nations. I reject the notion, fundamentally, that we can't close tax loopholes. Well, gosh, maybe we should reform the system so they don't have so much influence, then?

See my apology in Message 336.Sorry.

It is money that has trickled down. And up and sideways and in all other directions.We may have different ideas about the origins of productivity. While I suppose the source of productivity increases could be workers just working increasingly harder, that is certainly unsustainable for any prolonged period. Productivity increases mean getting more done with less effort. An example might be increasing automation, such as an auto company like GM might make on its production lines, or that supermarkets might make in their checkout and inventory processes, or that computer makers might make with just-in-time inventory and manufacturing processes. I'm afraid the argument that the rich are stealing the productivity gains contributed by the rest of us doesn't hold water.--Percy

You're missing quite a bit, actually. The focus should be on the very early years of the Reagan administration when the tax cuts went into effect, which would be 1981. Productivity doesn't begin taking off until 1983, which you conveniently obscured with your red line that extends well into the flat period of the early years of the Reagan administration (this is the stagflation period that began during the Carter administration). Here's another graph showing productivity gains where the x-axis is easier to read: But top 5% income began rising in 1981, coincident with the Reagan tax cuts: If the increasing income of the rich derived from increasing productivity, how did the increase begin before productivity began rising again? And since productivity has been generally increasing since statistics began, why did the rich wait until the Reagan tax cuts to begin rolling productivity gains into their income? The data just doesn't support your interpretation.It isn't that productivity isn't part of the mix. It most certainly is, along with a host of other factors. But the most likely explanation for why top 5% income began rising in the early 1980s is the Reagan tax cuts that cut the top marginal rates from 70% down to 50%, stimulating the economy by encouraging investment, which increases income, and moving money from unproductive shelter activity into categories more easily recognizable as income.--Percy

In that last sentence I think you mean "earn a million dollars," not "invest a million dollars." If that's right then I understand what you're trying to say, but this is not an example of marginal earnings.A high marginal tax rate, translated into your wage bracket, would be if you earned $48,000 after taxes but are now in the 90% tax bracket. You're now presented with the opportunity to work on a special project that will pay you $10,000 for 100 hours work. Since you're in the 90% tax bracket your net will be $1000 for 100 hours work, or $10/hour. Are you still saying, "Yes, please?"We agree that the rich should pay more in taxes, and I know progressive tax rates seem like a fair way to accomplish this, but the reality is that the rich shoot approaches like this full of holes. When the highest marginal tax rate was 90% there were extremely few of the wealthy who actually had to turn to the 90% table in the tax forms. Here's a brief excerpt from a blog article titled The 90% Tax Rate Myth: I believe the solution is to flatten tax rates (not completely flat, just flatter), simplify the tax code, and focus on eliminating loopholes. When the rates are flatter and tax laws are simpler then loopholes and attempts to insert them in legislation will not be easy to hide.--Percy

It's the early Reagan years when the tax cuts happened and when top 5% income began rising that are relevant.--Percy

Hi Straggler,Much that is "fraught with peril" is not effectively impossible, if I've captured your meaning. Fraught with peril" means fraught with peril rather than impossible, which actually means something else.Again, I don't understand the hyperbole or the tendency toward absolute statements. I would think you'd want to avoid both in a discussion about economics.--Percy