Additionally people involved in these tea parties may couple taxation and government spending because the government has no money, they merely have the ability to take the money from the people through inflation or taxation.

http://nationaleconomist.blogspot.com/

Have a great day.

I definitely think the government needs to tighten its belt, and therefore am sympathetic to the cause, but what I saw in this last election is people who were bought and paid for by corporations interested in less regulation and tax breaks for businesses. That costs the government (and therefore the taxpayer) more in the long run when they have to do things like pay medicare and clean up environmental messes for companies that screw things up.

The half-hearted war is due to one party, and the need for the massive social spending is due on balance more to the other party. So who would we elect to fix things? And once elected, would they fix anything?

If the currently proposed bailout succeeds in averting a depression and/or return to crime levels of the 1970s (or worse), then it’ll be cheap. Time to read up on the state of US society in the early 1930s, just before the last great bout of stimulus spending and tax rate increases.

This is all beside the point for the tea parties. The tea parties are about Americans who made good choices by getting home loans that they could afford and build businesses that work being forced to pay for the homes and businesses of other Americans who did not make such good choices. This is about me paying for my neighbors mortgage, even though my neighbor makes less money, bought a bigger house than me, has more bathrooms than me, and spent 40 thousand dollars refinishing his kitchen (on a loan taken out against his mortgage). The tax parties were organized directly after Obama indicated that he intends to take a large portion of the “bailout” money and spend it on refinancing homes going into foreclosure. The tax parties are about government spending. The kind of spending that puts some Americans at a position of slavery to another set of Americans. This is not necessarily the entire focus, but rather the tipping point. The tea parties are protests of the bailout mentality of the current government. It is protest of the idea that the government can take my money by force and give it to someone else who screwed up.

There’s a whole 1000 page book written about this called, “Atlas Shrugged,” if anyone would like to have this further clarified.

All of this aside, I think it is rational to say that the very act of providing bailout funding IS a taxation in and of itself. Spending money that does not exist will directly result in inflation. If the government introduces “new” money into the money supply without an asset to represent it, then this simply devalues the rest of the money. This is how the government can “take” your money from you and “give” it to someone else without actually passing a law that gives them the authority to tax you. Call it what you want, but it’s still a tax in my book. Of course, to curb the massive inflation, we’ll be told that the government MUST raise taxes, “or else!”

Not to quibble too much but “The lowest marginal rate is always zero”. The chart needs to show the bottom rate not zero.

The chart needs to show rates relative to adjusted gross income. If my AGI is zero than my rate is zero. Someone with an AGI of 30k pays a different rate than someone at 1 Million AGI.

Additionally, the Korean war did, according to your graph, have an impact. The rate didn’t go down after WWII ended. It was the cold war. Funny thing is that Johnson’s war on poverty and Vietnam forced the rate down. See 1964-1967. Nixon didn’t show up until 1968.

Clinton had surpluses that kept the rate flat. Lower than Reagan’s small government.

Analytics are a dicey thing…..

http://blog.heritage.org/wp-content/uploads/2009/03/wapoobamabudget1.jpg

Nahh

Maximum marginal rates are relatively useless. What really matters are AVERAGE tax rates, and then average tax rates separately by income decile and by wealth decile. And that leads to arguments about what the taxable income basis should be: adjusted gross income (AGI), gross income (i.e., including interest from tax-exempt state and local government bonds, excluding Schedule D and E losses) less full capital and business (active only or active and passive? i.e., without or with tax shelters?) losses rather than the capped losses that go into AGI, AGI after subtracting itemized deductions (aka taxable income), or Alternative Minimum Tax income.

The graph of marginal rates also ignores how capital gains have been taxed over the years and the fact that the top wealth decile derives at least as much of its income from capital gains as from ordinary income.

The current US tax code is very complex, but it’s much, much less complex than it was in 1980, just before Ronald Reagan became president. The inflation-ridden 1970s were the golden era of tax shelters, and while the top marginal tax rate applied, only 60% of capital gains were subject to tax, which means an effective top marginal rate on capital gains of 42%. And capital losses were included in full back then, so paper losses could completely offset ordinary income. I did mention that that was the golden era of tax shelters.

A fine example of nonacademic discussion of US income tax policy: concentration on marginal rates because it’s all that 99.99% of the population can understand. Graphs too to make it pretty pictures!

Kevin: 48 states as of 1912. I tried to show call outs that had an impact on the direction of the graph. Wars and depressions generally mean increasing taxes; prosperity usually means the opposite. Reagan was a ‘small government’ guy and his agenda was to reduce taxes and reduce spending. That was significant to the highest marginal rate, so it was notable IMO. Clinton had very little impact on the tax rate as is clear from the graph.

The lowest marginal rate is always zero, by the way. I know that’s not what you meant, but as arbitrary as the highest marginal rate may be, I think a spread would be more so. It might be interesting, though.

Funny, though that the Korean and Vietnam wars didn’t have the same effect. Tax rates were already pretty high during the Korean war, so there wasn’t a lot of room to move up. Vietnam actually saw a tax decrease. I would have liked to have a callout there around 1965, but I couldn’t determine a historical event that would have caused it – in fact it seems it should have been the opposite if Vietnam was costing us a lot of money. Perhaps it was just the policy of the current administration, or perhaps taxes were just too high regardless of the circumstances and needed to be reduced.

Sean: You don’t like my logic? Taxes (by one measure) are as low as they’ve been since 1929. Don’t protest high taxes when we don’t have high taxes – that’s all I’m saying.

Micheal: I thought about (and even started) doing a chart that shows what a family making $100,000 per year would pay in taxes over time. A family making that much in 1913 is probably a little different than today, so should I adjust the dollars for inflation? I think a good graph would be effective tax rate at an adjusted gross income number. So take $100,000, adjust to 1913 dollars, figure the tax, divide the tax into the adjusted dollars, get the effective rate. It sounded like a lot of work, so I went with highest marginal rate.

States in the Union, 1913: 48
States in the Union. 1960: 50

…
48ArizonaFeb. 14, 1912
49AlaskaJan. 3, 1959
50HawaiiAug. 21, 1959

How does this mean lower tax rates?

…mrt