A Little Income Tax History

[Guest]

Last night at the meeting of The Villages Homeowners Association they had a speaker from the AARP Tax Preparation Service. The service here is the largest in the U.S. with dozens of Villages residents trained by the IRS as tax preparers who have already prepared tax returns for over 6,000 Villages residents with the "heart" of tax season still before us.

What was most interesting in the presentation were the statistics presented by the speaker, to which I've added some from my own research...

• The federal income tax was created in 1913 as the result of the 16th Amendment to the Constitution. The Amendment is pretty simple saying, "The Congress shall have the power to lay and collect taxes on incomes, without apportionment among the several states, and without regard to any census or enumeration." Forty-two of the then forty-eight states ratified the Amendment. Three states rejected it and three more never bothered to conduc an election to vote on the proposal.

• The Congress immediately enacted a table of income tax rates. The top rate, for those earning over $500,000, was 7%.

• In 1917, the Congress revised the tax table, increasing the top marginal rate to 67%. This was done as the expenses of World War I mounted.

• Congress bumped the top rate up again in 1917 to 77%. The threshold income to which this tax would apply was cut in half at the same time. Presumably WWI needed even more tax revenue to finance the costs.

• Between 1925 and 1931, the rate was dropped to 25%, but the threshold income to which that rate would apply was also dropped dramatically from the original $2 million in 1913 to $1 million in 1917 and down to only $100,000 by 1925. While the marginal rate was lowered, the highest income earners were actually contributing a greater proportion of tax revenues.

• In 1932, presumably because the effect of the Great Depression, the marginal rate for top earners was increased to 63%.

• In 1936, as the economy was improving modestly and many of the expenses of FDR's New Deal were paid for, Congress took actions that reduced the tax burden borne by the wealthiest Americns. They increased the top marginal rate to 79%. But along with the increase in rate, they raised the income threshold to which it would apply from $1 million to $5 million per year. That combination of rate and threshold remained in place until 1939.

• In 1940-41 the top marginal rate was increased to 81%, with a $2 million income threshold.

• In 1942-43 the top marginal rate was increased to 88%, but the income threshold for the top rate was reduced dramatically, to $200,000. Then in 1944-45 the rate was increased to 94%. These changes were deemed necessary to pay for World War II.

• From 1946 until 1950, the marginal rate hovered between 83-88%, but the threshold income was increased from $200,000 to $400,000. This relatively high taxation was necessary to pay for the conversion of the economy from wartime to peacetime.

• From 1951 thru 1963 the threshold income remained at $400,000 and the top marginal rate was 91%. For the rich, this eight-year period may represent the greatest tax burden in the country's history.

• From 1964 thru 1981, the threshold for the top bracket was again dropped to $200,000, but the top maginal rate hovered between 70-77%.

• Between 1982 and 1990, the top marginal rate was reduced to as low as 28%. But the threshold to which that rate would apply was dramatically dropped, to as low as only $30-32,000 in the last few years of that period. This combination of rate and income threshold reductions may actually have been a tax increase for the wealthiest Americans.

• From 1993 until 2000 the top marginal rate was 39.6%, but the Congress gradually increased the income threshold of the top bracket from $87,000 to $289,000, in essence a modest tax decrease for the wealthy.

• Then between 2001 and 2003, the top marginal rate was decreased from 39% to 35% while the income threshold increased modestly from about $289,000 to $310,000. The top rate has reamined at 35% since then.

---------------------------------------------------------------------------------

So what do these statistics tell us, other than the fact that Congress has historically changed both the marginal tax rates as well as the threshold incomes to which they would apply quite frequently?

The statistics suggest that the Congress has tended to modify its taxation based on the economic needs of the government at the time, whether it was to finance wars, to react to recessions or depressions, or to fund major public works projects. But the whole philosophy of financing our government appears to have changed beginning in the early 1990's. We appear to have changed from paying for government expenses currently and minimizing federal debt to an approach of being insensitive to the creation of federal deficits and financing those deficits with borrowed money. That worked well during peaceful times of strong economic growth, but has proven inadequate during times of war and recession. The Congress did not make many adjustments to either the marginal rates or the threshold income amounts in the last decade or so, choosing to finance the government's needs, even as deficits increased, by authorizing increased federal debt or by using fiscal tools such as interest rate and money supply manipulation by the Federal Reserve to try to grow the economy and resultant tax revenues. At this point in 2009, it's obvious that the financing strategies of the last decade have failed.

So what do all these statistics foretell? I guess it's hard to really determine the answer to that politically-charged question. But one thing seems readily apparent--those that are accusing the current administration and Congress of "redistributing income" have awfully short memories as to what federal taxation has been in the past.

I suppose another thing that is equally apparent is that something needs to be done to reduce national debt and annual spending deficits. Spending reductions are one way, of course. But there's a lot of room on the increased taxation side before we ever get anywhere close to what taxes have been in the past. Of course, either cutting spending or increasing taxes becomes far more difficult in this period of deep economic stress. But if the U.S. is not able to continue to substantially increase it's borrowing at reasonable interest rates, both cost-cutting as well as increased taxation may well be the only solution.

[Guest]

I suppose another thing that is equally apparent is that something needs to be done to reduce national debt and annual spending deficits. Spending reductions are one way, of course. But there's a lot of room on the increased taxation side before we ever get anywhere close to what taxes have been in the past.


VK this is all good information , much of which I was not aware of. Of the two options you show I say lets cut the spending.
There is a third option , Let the people pay the taxes that they do own and not try and get away with every penny they can cheat on.
Lets take Geithner and Rangle as examples. Unfortunately there are many people on both sides of the aisle that believe the tax rules do Not pertain to them . Clearly both parties are guilty.
:agree:

[Guest]

As always intereting facts and assumptions from you and thanks for that !!

It interested me quite a bit thus I did some research on marginal tax rates.

There are studies out that and the link below goes to 2004 which indicates a very direct correlation between these marginal tax rates and the movement thereof AND that find "high and increasing marginal taxes have serious negative consequences on economic growth, labor supply, and capital formation”.

This report from which the above quote comes is from 2004, well before President Obama was on the scene and thus is not politically motivated in any way and is from the Library of Economics and Liberty, which to my knowledge anyway has no political agenda.

http://www.econlib.org/library/Enc/MarginalTaxRates.html

Secondarily, I would point out an editorial in todays Wall St Journal which speaks to the language and charts used in the President budget which suggest that those who earn much will not simply pay for many of the programs which frankly many would not oppose but suggest that the agenda is that this folks will "pay for" .

Language in the budget such as "While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not." suggest a motive that is not exactly what you are looking for.

http://online.wsj.com/article/SB123681860305802821.html

Then when you check WHO has been paying tax and who has not it becomes apparent that those who are going to be "saved" have not been paying tax anyway !

Interesing question and discussion !!

[Guest]

A few more studies, all from prior to President Obama's entrance and policies, which sort of takes them out of the political arena for today's discussion !

CATO Institute....2002 found that higher marginal tax rates stifle economic growth...

http://www.cato.org/pub_display.php?pub_id=5693

The Heritage Foundation in 2001 in speaking of reviving the economy speaks directly to LOWERING marginal tax rates.

http://www.heritage.org/research/taxes/BG1443.cfm

Now Warren Buffet, a leading Obama supporter, said this week that billionaires, like him, should in fact pay more taxes BUT that overall taxes should be lower. (on this I am paraphrasing).

All of this just to get another perspective !!

[Guest]

Good references, Bucco. But I think we have to consider economic theory in the context of where our economy currently stands. We can (and should) substantially cut federal expenditures. It doesn't appear that this will happen with this Congress. It's not a political party thing. If the GOP wanted to stalemate spending bills, they'd have a good chance in the Senate, even now. The president could veto outrageous spending legislation. I think I know why he didn't with the recent partial year omnibus bill. The next one will paint a more accurate picture of his intent. But as a political commentator described on CNN last night, when he called the office of a Congressional leader to inquire about earmarks, he was blown off in very foul and profane terms. He was told, "...all we have here in Washington has is TV cameras to speak to, lobbyists to help us out and earmarks. What the #@*% do you want from us? You want us to give up what little we have?" That probably defines the attitude of the present bunch pretty well.

But on to my reactions to your articles...

First, and again in the context of our present economic condition, of eleven major developed countries that we trade with, we've already got the lowest top marginal tax rate. With our economy as sick as it is, cutting taxes and incurring even more debt to finance deficits is not a reasonable alternative. I never thought that either Presidential candidate could actually cut taxes, and that was before the economy tanked right at the end of the campaign. I was right--President Obama actually raised tax revenues by increasing the rate on the wealthiest and decreasing the rate on those that pay little or no taxes anyway. That's pretty much what had to be done to begin to whittle away at the deficit and the national debt. More tax increases will likely be needed. Even if we raised our top marginal rate by 5 full percentage points, still only India and South Korea would have lower rates among our major trading partners.

There's something else wrong and that's the amount of money the U.S. spends. Whether it be military expenditures or plain old pork, our political leaders still haven't gotten the message. They won't until they're voted out of office (unlikely) or the rest of the world begins to balk at lending us more money to finance our irresponsibility (more likely).

Your second chart, showing how much the top 1% has contributed to tax revenues is a little misleading. My guess is that if we had charts organized by quartile of taxpayers, we'd see a much steeper line upwards by the middle class than by the wealthiest quarter of taxpayers, particularly in the last decade or so.

I have wondered why our government so clearly changed it methods of financing government around the beginning of the 1990's. Many say that the growth of influence by lobbyists dates to Congressional leaders like Representative Tom DeLay of Texas who began a campaign to fill the capital's K Street corridor with Republican lobbyists, and made it plain that those seeking to influence legislation would have to "pay to play" in the form of political contributions.

Since only 1998 the number of registered lobbyists has increased by more than 50% and the amount they've spent lobbying for their special interest clients has more than doubled. In fact, if you simply take the expenditures shown on the chart at http://www.opensecrets.org/lobbyists/ and divide by the members of Congress, it amounts to over $6 million for each and every member of Congress in 2008.

It's no wonder that our elected representatives seem to serve interests other than our own.

[Guest]

"Congressional leaders like Representative Tom DeLay of Texas who began a campaign to fill the capital's K Street corridor with Republican lobbyists,"
__________________________________________________ _____---


WOW...you know I was under the impression that for once there was a discussion going on about current events...the proposed budget...that would not get into party politics but you dont disappoint with a little "shot" to show your party colors.

You could have alluded to any congressional leaders and been accurate you have to make it partisan always !!!

All my comments that in anyway crossed party lines had to do with CURRENT...comments in the CURRENT proposed budget and a true advocate of President Obama (Buffet) all the other references were prior to this administration even on the horizon.

Why was that comment necessary ? If I were to mention ACORN or MOVEON in ANY context you would be insulted and call me negative.

[Guest]

PERCENTILES BY PERCENTAGE OF FEDERAL
AGI TAX PAID

Top 1 % 39.89 %
Top 5 % 60.14 % 2006
Top 10 % 70.79 %
__________________________________________________ _____
Top 1 % 39.38 %
Top 5 % 59.67 % 2005
Top 10 % 70.30 %
__________________________________________________ _______
Top 1 % 36.39 %
Top 5 % 57.13 % 2004
Top 10 % 68.19 %
__________________________________________________

Couldnt find the last two years anywhere, but evident the top 10 % 's share of the tax has increased and is just about 2/3 of the total !!

http://www.ntu.org/main/page.php?PageID=6

By the way, in 2003 the top 10% paid 65.84% of federal tax and grew to 70.79% in 2006 !!!

[Guest]

Bucco, you are sooo sensitive. If it weren't for the fact that my reference to Tom deLay came directly from a New York Times article on the growth of the influence of lobbyists, I might even take it personally.

Just to set the record straight, so no one gets confused about my politics...
Until the 2000 Presidential Election I never voted for any candidate other than a Republican.
Now I call myself a "center-left independent" and I will vote for whomever I believe to be the best candidate with no concern whatsoever for party affiliation.
I voted for Barack Obama and believe that he was and is the best choice as the President to lead our country.
I am particularly pleased with the progress the Obama administration has achieved in satisfying so many of the promises made during the campaign. That is a refreshing change from many prior years and many prior candidates who said one thing while campaigning and then did anther after being elected. Obama certainly seems to be a "what you're getting is what he promised" candidate in that he has not surprised with the legislation he has pushed thru Congress.
I think many in the U.S. Congress are self-serving political hacks with little interest in anything other than their own re-election and the power of their political party.
I believe that in recent years, particularly in the last decade or so, that our governance has become much more for the benefit of special interests than for the people.
I particularly disdain Nancy Pelosi, Harry Reid, Barney Frank, Chris Dodd and Charles Rangel. I think that other members such as Richard Shelby, Lindsey Graham, Mitch McConnell and Charles Schumer are egotistical and idealogical blowhards.
I believe that the most wealthy Americans have benefitted greatly from the political polices of the last dozen or so years at the expense of the middle class.
I am offended by those on either the far left or far right of the political spectrum. I am particularly offended by those with an interest only in a narrow spectrum of social or religious issues.
Now, let's get on with our discussion.

Thanks for finding the distribution of tax payments for the last three years. I found the concentration interesting. Initially, I thought that maybe the wealthy were being asked to carry too much of the burden, but when I re-considered the data, other questions crossed my mind. Why is the upper 15-16% of taxpayers bearing so much of the load, an increasing amount actually? Is it because the concentration of their income(s) has so exceeded that of the middle and lower classes that even with relatively low marginal tax rates, they still pay more taxes than the lowest 85% of taxpayers? The discussion of what is a fair distribution of the tax burden only makes sense if the distribution of income is fairly normal. If the distribution is skewed heavily towards high incomes, the resulting tax payments will naturally be as they have been for the last few years.

As far as free-market, capitalistic, "trickle down" economic theory is concerned, all I can say is that the performance of our economy for the last decade or so, capped by the current financial crisis, has proven that economic ideology to be ineffective in achieving its theoretical objectives--at least in the short term. The reason for its failure might not be all economic. Cultural, moral and political faults certainly are on the list of causal factors. But currently, the only solution appears to be massive intervention by government forces, regardless of the variance from desired economic theory. The cost of such intervention not happening is simply too great. Whether our economy and government can ever return to the pure free-market capitalism that many believe is most desirable is a question that may not be answerable for a decade or so.

P.S. That National Taxpayers Union website is a good one.

[Guest]

Bucco, you are sooo sensitive. If it weren't for the fact that my reference to Tom deLay came directly from a New York Times article on the growth of the influence of lobbyists, I might even take it personally.

Just to set the record straight, so no one gets confused about my politics...
Until the 2000 Presidential Election I never voted for any candidate other than a Republican.
Now I call myself a "center-left independent" and I will vote for whomever I believe to be the best candidate with no concern whatsoever for party affiliation.
I voted for Barack Obama and believe that he was and is the best choice as the President to lead our country.
I am particularly pleased with the progress the Obama administration has achieved in satisfying so many of the promises made during the campaign. That is a refreshing change from many prior years and many prior candidates who said one thing while campaigning and then did anther after being elected. Obama certainly seems to be a "what you're getting is what he promised" candidate in that he has not surprised with the legislation he has pushed thru Congress.
I think many in the U.S. Congress are self-serving political hacks with little interest in anything other than their own re-election and the power of their political party.
I believe that in recent years, particularly in the last decade or so, that our governance has become much more for the benefit of special interests than for the people.
I particularly disdain Nancy Pelosi, Harry Reid, Barney Frank, Chris Dodd and Charles Rangel. I think that other members such as Richard Shelby, Lindsey Graham, Mitch McConnell and Charles Schumer are egotistical and idealogical blowhards.
I believe that the most wealthy Americans have benefitted greatly from the political polices of the last dozen or so years at the expense of the middle class.
I am offended by those on either the far left or far right of the political spectrum. I am particularly offended by those with an interest only in a narrow spectrum of social or religious issues.
Now, let's get on with our discussion.

Thanks for finding the distribution of tax payments for the last three years. I found the concentration interesting. Initially, I thought that maybe the wealthy were being asked to carry too much of the burden, but when I re-considered the data, other questions crossed my mind. Why is the upper 15-16% of taxpayers bearing so much of the load, an increasing amount actually? Is it because the concentration of their income(s) has so exceeded that of the middle and lower classes that even with relatively low marginal tax rates, they still pay more taxes than the lowest 85% of taxpayers? The discussion of what is a fair distribution of the tax burden only makes sense if the distribution of income is fairly normal. If the distribution is skewed heavily towards high incomes, the resulting tax payments will naturally be as they have been for the last few years.

As far as free-market, capitalistic, "trickle down" economic theory is concerned, all I can say is that the performance of our economy for the last decade or so, capped by the current financial crisis, has proven that economic ideology to be ineffective in achieving its theoretical objectives--at least in the short term. The reason for its failure might not be all economic. Cultural, moral and political faults certainly are on the list of causal factors. But currently, the only solution appears to be massive intervention by government forces, regardless of the variance from desired economic theory. The cost of such intervention not happening is simply too great. Whether our economy and government can ever return to the pure free-market capitalism that many believe is most desirable is a question that may not be answerable for a decade or so.

P.S. That National Taxpayers Union website is a good one.

Yeah I suppose I am a bit sensitive, but I thought if you quoted someone like the NY Times you were to use quotation marks or at minimum give some sort of reference to that. Gee...all this time I thought it was YOU saying these well said things :)

To your analogy of the last decade I think in fairness you need to add the cost of Iraq war, 9/11 and Katrina ALL of which had devastating effect on our economy and budget. Any discussion without including them, to me is not valid ! In addition I just find it offensive AND bad economics to go after the "rich" to fund the "poor". It is like calling a class war.

But again, that is simply my opinion, it is not a poltical thing with me...it just makes sense.

[Guest]

Being very insensitive, it does not matter how many registered lobbyists there are, because the past practice of the cocktail circuit "unregistered" lobbyists more than outweighed what the "registered" ones have done.

My voting record is all over the spectrum, so the concept of following party policy is foreign to me. But, what I have noticed about both major parties is that the elected members all share a similar gene - and that's the acquisition of funds for personal war chests from whomever has the cash.

The tax code can swing with the wind, but to those not affected at the moment, there is always room for greater taxation. To those who actually pay the increase, there is not only no room for greater taxation, but also any increased taxation is selective and capricious.

I do have what seems these days to be considered a "narrow" moral and religious viewpoint : Life - in any stage of maturity - is a God-given privilege, and we do not have a human right to abridge a God-given privilege in anything other than a self-defense situation. That view seems to always put me simultaneously in the cross--hairs of the pro-abortion herd and the capital punishment bunch. So be it.

But, I'm digressing from the tax issue - When you rob the Peters of world to pay the Pauls, eventually the ratio of Pauls-to-Peters will be so far out of whack that there will be a zero-balance in Peters. Then what?

[Guest]

...I think in fairness you need to add the cost of Iraq war, 9/11 and Katrina ALL of which had devastating effect on our economy and budget. Any discussion without including them, to me is not valid ! In addition I just find it offensive AND bad economics to go after the "rich" to fund the "poor". It is like calling a class war...

That was the point that I was trying to make...our government frequently changed both tax rates and the income thresholds to which they applied to pay for costly situations as they occurred, wars, public works projects like the New Deal and the interstate highway system and other situations that caused reduced income from taxes like depressions. They did that regularly from 1913 when taxes began until about the early 1990's. In the early '90's we changed our "MO" and began to pay for things by borrowing the money, not taxing the citizens. This made dramatically increased spending very popular with taxpayers--it was "free". I might also argue that that change made elected officials more popular--more electable--because they were providing more and more to the citizenry with no additional out-of-pocket cost in the form of increased taxes.

So, by continuing to borrow to fund our spending our legislators continue to feather the nest of their popularity and re-electability, even though our national debt is reaching the point that our ability to continue to borrow will be threatened. The costs of profligate spending and the funding of "stimulii" will be passed on to future generations who won't have the ability to vote for those elected officials who will have caused them the pain of crushing national debt that for them will almost certainly require an increase in their tax burden to pay it off.

On your comment on taxing the rich to pay the poor, I find that opinion valid only if the income distribution in the country is close to a "normal" six sigma distribution. But right now the distribution of income in the U.S. is bi-modal, with a huge bulge of citizens at the low end of the scale and another bulge at the high end. As an example, we currently have more than 20% of the families in the country with income less than the poverty level established by the Census Bureau. At the same time there are more than 13% making more than $100,000 per year. See the following chart...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/IncomeDistribution.jpg
Source: U.S. Census Bureau

Another chart shows that for a couple of decades the incomes of the "rich" have been increasing at a rate far exceeding that of those at the lower end of the income ladder...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/800px-United_States_Income_Distr-1.jpg
Source: U.S. Census Bureau

In my opinion, sooner or later these trends will have to change. If democracy works, they almost certainly will as those at the lower end of the scale assert their political power. You have consistently been afraid of the methods of Saul Alinsky, who organized the downtrodden stockyard workers in Chicago back in the 1930's. I don't believe that President Obama is applying those tactics now, but there is clearly a growing opportunity for a current generation of Alinsky's to activate the lower income classes. It seems to me that taking a long, hard look at both our spending and the way we pay for it before that happens might be a good idea. If our legislators refuse, and we permit them their luxuries, the social upheaval in the U.S. really might approximate the socialism you have so consistently feared.

[Guest]

That was the point that I was trying to make...our government frequently changed both tax rates and the income thresholds to which they applied to pay for costly situations as they occurred, wars, public works projects like the New Deal and the interstate highway system and other situations that caused reduced income from taxes like depressions. They did that regularly from 1913 when taxes began until about the early 1990's. In the early '90's we changed our "MO" and began to pay for things by borrowing the money, not taxing the citizens. This made dramatically increased spending very popular with taxpayers--it was "free". I might also argue that that change made elected officials more popular--more electable--because they were providing more and more to the citizenry with no additional out-of-pocket cost in the form of increased taxes.

So, by continuing to borrow to fund our spending our legislators continue to feather the nest of their popularity and re-electability, even though our national debt is reaching the point that our ability to continue to borrow will be threatened. The costs of profligate spending and the funding of "stimulii" will be passed on to future generations who won't have the ability to vote for those elected officials who will have caused them the pain of crushing national debt that for them will almost certainly require an increase in their tax burden to pay it off.

On your comment on taxing the rich to pay the poor, I find that opinion valid only if the income distribution in the country is close to a "normal" six sigma distribution. But right now the distribution of income in the U.S. is bi-modal, with a huge bulge of citizens at the low end of the scale and another bulge at the high end. As an example, we currently have more than 20% of the families in the country with income less than the poverty level established by the Census Bureau. At he same time there are more than 13% making more than $100,000 per year. See the following chart...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/600px-Income-curve-10k.png
Source: U.S. Census Bureau

Another chart shows that for a couple of decades the incomes of the "rich" have been increasing at a rate far exceeding that of those at the lower end of the income ladder...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/800px-United_States_Income_Distribu.png
Source: U.S. Census Bureau

In my opinion, sooner or later these trends will have to change. If democracy works, they almost certainly will as those at the lower end of the scale assert their political power. You have consistently been afraid of the methods of Saul Alinsky back in the 1930's. I don't believe that President Obama is applying those tactics now, but there is clearly a growing opportunity for a current generation of Alinsky's to activate the lower income classes. It seems to me that taking a long, hard look at both our spending and the way we pay for it before that happens might be a good idea.

You make some very good points. Worrisome, but insightful.

[Guest]

That was the point that I was trying to make...our government frequently changed both tax rates and the income thresholds to which they applied to pay for costly situations as they occurred, wars, public works projects like the New Deal and the interstate highway system and other situations that caused reduced income from taxes like depressions. They did that regularly from 1913 when taxes began until about the early 1990's. In the early '90's we changed our "MO" and began to pay for things by borrowing the money, not taxing the citizens. This made dramatically increased spending very popular with taxpayers--it was "free". I might also argue that that change made elected officials more popular--more electable--because they were providing more and more to the citizenry with no additional out-of-pocket cost in the form of increased taxes.

So, by continuing to borrow to fund our spending our legislators continue to feather the nest of their popularity and re-electability, even though our national debt is reaching the point that our ability to continue to borrow will be threatened. The costs of profligate spending and the funding of "stimulii" will be passed on to future generations who won't have the ability to vote for those elected officials who will have caused them the pain of crushing national debt that for them will almost certainly require an increase in their tax burden to pay it off.

On your comment on taxing the rich to pay the poor, I find that opinion valid only if the income distribution in the country is close to a "normal" six sigma distribution. But right now the distribution of income in the U.S. is bi-modal, with a huge bulge of citizens at the low end of the scale and another bulge at the high end. As an example, we currently have more than 20% of the families in the country with income less than the poverty level established by the Census Bureau. At the same time there are more than 13% making more than $100,000 per year. See the following chart...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/IncomeDistribution.jpg
Source: U.S. Census Bureau

Another chart shows that for a couple of decades the incomes of the "rich" have been increasing at a rate far exceeding that of those at the lower end of the income ladder...

http://i275.photobucket.com/albums/jj316/Villages_Kahuna/800px-United_States_Income_Distr-1.jpg
Source: U.S. Census Bureau

In my opinion, sooner or later these trends will have to change. If democracy works, they almost certainly will as those at the lower end of the scale assert their political power. You have consistently been afraid of the methods of Saul Alinsky, who organized the downtrodden stockyard workers in Chicago back in the 1930's. I don't believe that President Obama is applying those tactics now, but there is clearly a growing opportunity for a current generation of Alinsky's to activate the lower income classes. It seems to me that taking a long, hard look at both our spending and the way we pay for it before that happens might be a good idea. If our legislators refuse, and we permit them their luxuries, the social upheaval in the U.S. really might approximate the socialism you have so consistently feared.

Very well constructed and interesting post. Bear with me as I am going to take the scatter gun approach !!!

1. While you say "Another chart shows that for a couple of decades the incomes of the "rich" have been increasing at a rate far exceeding that of those at the lower end of the income ladder..."

The census bureau also says (and they only have info up to 2006) that folks living below the poverty level in 2006 was significantly lower that for example in 1994 (12.3 in 2006 and 14.5 in 1194)..actually there has been a continuing down trend in this number.

2. To your point about income inequality, it is also a fact that those in those upper levels have a much much more financially stable home life...example...of those in what is considered that upper echelon 76% came from TWO earner households, while only 42% is the national average of TWO earner incomes.

I am not going to dispute what you say and there are stats that can be read a number of ways to make whatever point you want.

I would be very happy if money were spent to give MORE OPPORTUNITY for folks to increase their income by education, etc. But to simply say we are going to take it away from one group who is successful and give it away to another group because they are statistically in some catagory bothers me.

I think you agreed when you began this post that the government has increased the revenue with tax rates to fund special situations such as 9/11, Iraq, WW2, etc. The statistics you cite, IN MY OPINION, do not fall in the same catagory, ie., we have too many folks who make money. THAT is not something I believe should make this action necessary !

When the dust settles on the stimulus program and we see where it actually goes and what it is used for then we can talk. I am also taken back by all the "strings" attached to this money to the states and the companies. Some of it disguised as "accountability" !

Your statement on Alinsky...yep scared straight about what is happening because unlike you, I see MUCH of Alinsky's tactics in this Presidency. Example that comes to mind now.....the President has been so very very negative and was called on it...Alinsky taught you gotta make them feel like they are near the bottom so they will "allow" you to rescue them !! Now, the President has changed his tune a bit in the last few days after getting heat, but notice how he is now saying what McCain was totally blistered for in the campaign...that the basic economy is strong !!!!!

[Guest]

....The census bureau also says (and they only have info up to 2006) that folks living below the poverty level in 2006 was significantly lower that for example in 1994 (12.3 in 2006 and 14.5 in 1194)..actually there has been a continuing down trend in this number.

.....there are stats that can be read a number of ways to make whatever point you want.

....I would be very happy if money were spent to give MORE OPPORTUNITY for folks to increase their income by education, etc. But to simply say we are going to take it away from one group who is successful and give it away to another group because they are statistically in some catagory bothers me.

.....we have too many folks who make money. THAT is not something I believe should make this action necessary!

....I see MUCH of Alinsky's tactics in this Presidency.

Bucco, I won't argue with your statement from the Census Bureau saying that there are less people living in poverty than in prior years. All I did was take the numbers from the table in my post and totaled the percentages for those income classes less than what that same Census Bureau said was the "poverty level" of income. I wasn't trying to take statistics to support a pre-conceived point. All I did was take the numbers from the Census Bureau and make the resulting conclusion...there are about 20% of Americans living below the poverty line. Why the Census Bureau says one thing while some of their numbers say another is something I can't explain.

Regarding taxation, again, you seem to have mis-interpreted what I said. Briefly, what I said was that the Congress had regularly manipulated both tax rates and the income thresholds to which they would apply from the time when federal taxes were authorized in 1913 until the early 1990's. The changes were dramatic. The top marginal rate has ranged from 7% to 94%. The definition of the top marginal rate from $38,000 to $5 million. Since the early '90's we have financed our spending, even though it has increasingly created deficits, by borrowing rather than paying for government spending with a balanced budget--taxpayers paying for government expenditures from current tax revenues, minimizing long-term debt. I suggested that this has to stop and can be accomplished with both reduced spending as well as increased taxes. It will be a difficult thing to stop because by financing expenditures with more and more debt rather than funding spending with tax revenues, the public keeps asking for more from their government and happily re-elects those who keep giving it to them. That won't be an easy system to change.

Our current tax rates and marginal thresholds are towards the low end of what they have been historically. Personally, I think there is plenty of room to increase taxes on all who can afford to pay them until deficits are eliminated and the national debt is reduced to a reasonable level. Ultimately, that is what I think will have to happen, regardless of which President is in power and whatever his/her political party might be. I would hope that the political will would exist to make such a decision, but I don't think that is the case. We'll wind up having to raise taxes because the rest of the world will simply stop lending us the huge amounts of debt we are asking for, thereby forcing the U.S. to make dramatic cuts in government spending as well as increasing income taxes to all who are able to pay them. So, my reason for finding increased taxation acceptable has nothing to do at all with "take it away from one group who is successful and give it away to another group because they are statistically in some category", as you suggest. It DOES have to do with balancing our federal budget and reducing our national debt to a reasonable level as quickly as is practical. That will require everyone to pay increased taxes. However, I would place a caveat on increasing taxes to exclude increases on those who are already living in or near the poverty level.

As far as Alinsky is concerned, I don't see nor do I ascribe the tactics you describe to President Obama. What I DID say in my post above was that if the growth of lower and higher income classes are permitted to continue, it is not unreasonable to expect that someone using Alinsky's tactics will activate the lower classes using the democratic political system to satisfy their own interests. I said that the causal factors that were resulting in a growing and restive lower class and concurrent increases of the wealthiest in the country should be examined and corrected in order to prevent what might be a political upheaval which would have long-term negative effects on our way of life. Common economic theory says that economies which can build and sustain an economically-strong middle class will perform the best. The middle class in the U.S. has been eroding for the last twenty years or so, replaced by growth of both the wealthiest and economically poor classes of residents.

P.S. Please, let's not any of us get involved in debating the Milton Friedman thesis that lower taxes encourages economic growth while higher taxation inhibits such growth. Since the early 1990's, about the time Friedman set forth his thesis, it has not been supported by actual economic performance. Taxes have consistently been at historic lows while economic growth has ranged from strong to moribund. Friedman's thesis makes for nice ideaological political argument but unfortunately it has not resulted in a strong and vibrant economy nor can it be argued that its application will extract us from the current economic crisis.

[Guest]

I won't argue with your statement from the Census Bureau saying that there are less people living in poverty than in prior years. All I did was take the numbers from the table in my post and totaled the percentages for those income classes less than what that same Census Bureau said was the "poverty level" of income. I wasn't trying to take statistics to support a pre-conceived point. All I did was take the numbers from the Census Bureau and make the resulting conclusion...there are about 20% of Americans living below the poverty line. Why the Census Bureau says one thing while some of their numbers say another is something I can't explain.

Regarding taxation, again, you seem to have mis-interpreted what I said. Briefly, what I said was that the Congress had regularly manipulated both tax rates and the income thresholds to which they would apply from the time when federal taxes were authorized in 1913 until the early 1990's. The changes were dramatic. The top marginal rate has ranged from 7% to 94%. The definition of the top marginal rate from $38,000 to $5 million. Since the early '90's we have financed our spending, even though it has increasingly created deficits, by borrowing rather than paying for government spending with a balanced budget--taxpayers paying for government expenditures from current tax revenues, minimizing long-term debt. I suggested that this has to stop and can be accomplished with both reduced spending as well as increased taxes. It will be a difficult thing to stop because by financing expenditures with more and more debt rather than funding spending with tax revenues, the public keeps asking for more from their government and happily re-elects those that keep giving it to them. That won't be an easy system to change.


Our current tax rates and marginal thresholds are towards the low end of what they have been historically. Personally, I think there is plenty of room to increase taxes on all who can afford to pay them until deficits are eliminated and the national debt is reduced to a reasonable level. Ultimately, that is what I think will have to happen, regardless of which President is in power and whatever his/her political party might be. I would hope that the political will would exist to make such a decision, but I don;t think that is the case. We'll wind up having to raise taxes because the rest of the world will simply stop lending us the huge amounts of debt we are asking for, thereby forcing the U.S. to make dramatic cuts in government spending as well as increasing income taxes to all are able to pay them. So, my reason for finding increased taxation acceptable has nothing to do at all with "take it away from one group who is successful and give it away to another group because they are statistically in some category", as you suggest. It DOES have to do with balancing our federal budget and reducing our national debt to a reasonable level as quickly as is practical. That will require everyone to pay increased taxes. However, I would place a caveat on increasing taxes to exclude increases on those who are already living in or near the poverty level.

As far as Alinsky is concerned, I don't see nor do I ascribe the tactics you describe to President Obama. What I DID say in my post above was that if the growth of lower and higher income classes are permitted to continue, it is not unreasonable to expect that someone using Alinsky's tactics for activating the lower class within the democratic political system for their own best interests. I said that the causal factors that were resulting in a growing and restive lower class should be avoided or corrected in order to prevent what might be an unavoidable political upheaval.

We could discuss the tax thing for a long time, but I do want to comment on the Alinsky thing.

You are correct in one sense but you, IN MY OPINION, are being very naive if you dont think it has already begun. I will be very curious, for example to see how much ACORN gets of this stimulus money...my reading on them and trying to find the truth is that they are simply a "front" as is MOVEON. It is beginning whether you like it or not.

No comment from you on the switch from the President saying the fundamentals of the economy are strong after he and the press ridiculed and mocked McCain for saying that !!! I can almost understand the President...that is politics and despite his followers believing anything else he is a politician FIRST...but it sure does make the case that SHOULD be made about how the press covered this last election !!!

[Guest]

...No comment from you on the switch from the President saying the fundamentals of the economy are strong after he and the press ridiculed and mocked McCain for saying that !!!

Here's how I might analyze what was said during the campaign.
For the first time in memory, a President is delivering on many of the things in his campaign platform. I'm encouraged by President Obama's performance in this regard. I'm not happy that he didn't call the Congress on their earmarking in the partial year spending bill. He criticized them verabally without using the veto pen. I would have preferred the veto. We'll see how he deals with the upcoming spending bill on the new federal budget.
Of course, President Obama is now trying to view the economic situation with a "glass half full" approach. He is the country's political leader and has a huge amount of public confidence. He's doing what he can, while still being honest, in an attempt to improve public confidence. What he's doing and saying is little different that the CEO of any company when describing the prospects for his business...describe the situation in the most positve light without misleading. I'm glad the President has adopted this approach, rather than the more pragmatic but less confidence-building approach of telling it exactly and completely as it is.
I really don't care what either Obama or McCain said during the campaign regarding the economy. The economic situation is so dramatically different from what existed then that statements of either man are simply not applicable.

[Guest]

Here's how I might analyze what was said during the campaign.
For the first time in memory, a President is delivering on many of the things in his campaign platform. I'm encouraged by President Obama's performance in this regard. I'm not happy that he didn't call the Congress on their earmarking in the partial year spending bill. He criticized them verabally without using the veto pen. I would have preferred the veto. We'll see how he deals with the upcoming spending bill on the new federal budget.
Of course, President Obama is now trying to view the economic situation with a "glass half full" approach. He is the country's political leader and has a huge amount of public confidence. He's doing what he can, while still being honest, in an attempt to improve public confidence. What he's doing and saying is little different that the CEO of any company when describing the prospects for his business...describe the situation in the most positve light without misleading. I'm glad the President has adopted this approach, rather than the more pragmatic but less confidence-building approach of telling it exactly and completely as it is.
I really don't care what either Obama or McCain said during the campaign regarding the economy. The economic situation is so dramatically different from what existed then that statements of either man are simply not applicable.


I respectfully disagree.

Pres. Obama has not fulfilled any promise of any kind. What has happened is that he has rubber-stamped what has been presented by Speakers Pelosi and Reid who have both had agendas for over 20 years and now find themselves in positions to get their way. The "earmarks" demonstrate who runs whom.

Pres. Obama is an excellent orator, but his performance so far is reminiscent of the first half of the movie "Dave." His cabinet, for the most part, has shown themselves as indecisive and clumsy. We're two months into a new administration and the bulwark of the federal agencies are still in by being managed career federal employees acting as caretakers with a status quo agenda, and there are no names in the queue to undergo Congressional review.

There isn't a "huge amount of public confidence" in Pres. Obama, except in selective groups who are hoping they didn't back a lame horse. The waffling on his public position regarding the "stimulus" and the condition of the economy only demonstrates the actions of a salesman who says whatever will not make the customer walk out the door. His Secretary of the Treasury sounds like one of the junior tellers in "It's a Wonderful Life," and that's far from confidence-building.

The economic condition is different today than three months ago - it's worse. If the "let's give everyone other people's money" approach continues unabated, we can all hold hands and sing "Sixteen Tons." Nobody ever got out of fiscal problems by doubling-down at the table.

[Guest]

Here's how I might analyze what was said during the campaign.
For the first time in memory, a President is delivering on many of the things in his campaign platform. I'm encouraged by President Obama's performance in this regard. I'm not happy that he didn't call the Congress on their earmarking in the partial year spending bill. He criticized them verabally without using the veto pen. I would have preferred the veto. We'll see how he deals with the upcoming spending bill on the new federal budget.
Of course, President Obama is now trying to view the economic situation with a "glass half full" approach. He is the country's political leader and has a huge amount of public confidence. He's doing what he can, while still being honest, in an attempt to improve public confidence. What he's doing and saying is little different that the CEO of any company when describing the prospects for his business...describe the situation in the most positve light without misleading. I'm glad the President has adopted this approach, rather than the more pragmatic but less confidence-building approach of telling it exactly and completely as it is.
I really don't care what either Obama or McCain said during the campaign regarding the economy. The economic situation is so dramatically different from what existed then that statements of either man are simply not applicable.


I am not really sure what you mean "For the first time in memory, a President is delivering on many of the things in his campaign platform." From what I have seen it just may be the complete opposite.

I have been reading much about the Axlerod offices that meet twice a week to simply discuss the POLITICS and how the polls are working...it is all politics VK....he has blinded you with his oratory !!!

You didnt respond to my remarks on the "Alinsky thing" and my feeling that the "application" of those methods not only have begun but have been used since the campaign.

Have your read about some of the new "players" on the scene ? Jim Wallis, one of the trusted "men of the cloth" that President Obama actually appointed as one of the leaders of the Democratic platform. He is maybe not an avowed and open marxist but through his career has actually, in one case, said that he wished that ""more Christians will come to view the world through Marxist eyes."

Listen, for me my worse fears just keep moving in one direction...I wish I could see something to tell me otherwise but it is not and will not happen.

Dont listen to his words...watch what he is doing !!!

[Guest]

I'm still willing to give the new President a couple of years before I begin to assess my interest in backing him for re-election. I would be inclined NOT to vote for his re-election because that's my own personal technique for enforcing term limits. But that depends an awful lot on who the opposing candidates might be. I can say for sure that if the opposition is any combination of Rush Limbaugh, Sarah Palin, Sean Hannity or Bobby Jindal, I'll be voting for Obama's re-election. If the Republican ticket includes names like Charlie Crist, David Petraeus or Michael Bloomberg, chances are pretty high that I won't be voting for the incumbent.

I'd have to say that I really don't want to know who the opposition might be by the time of the mid-term elections. That would suggest that the 2012 campaign had already started two years in advance of the 2012 election day. I don't think I could bear another two years of negative campaigning, Joe the Plumber II, and whatever dirty tricks the political operatives can dream up for that long again.

By the way, Bucco, twice a week with David Axelrod is nothing compared to having almost every single decision vetted by Karl Rove.

[Guest]

I'm still willing to give the new President a couple of years before I begin to assess my interest in backing him for re-election. I would be inclined NOT to vote for his re-election because that's my own personal technique for enforcing term limits. But that depends an awful lot on who the opposing candidates might be. I can say for sure that if the opposition is any combination of Rush Limbaugh, Sarah Palin, Sean Hannity or Bobby Jindal, I'll be voting for Obama's re-election. If the Republican ticket includes names like Charlie Crist, David Petraeus or Michael Bloomberg, chances are pretty high that I won't be voting for the incumbent.

I'd have to say that I really don't want to know who the opposition might be by the time of the mid-term elections. That would suggest that the 2012 campaign had already started two years in advance of the 2012 election day. I don't think I could bear another two years of negative campaigning, Joe the Plumber II, and whatever dirty tricks the political operatives can dream up for that long again.

By the way, Bucco, twice a week with David Axelrod is nothing compared to having almost every single decision vetted by Karl Rove.

Gotta admit...I agree with this post ALMOST entirely !! :)

1. Would eliminate Crist and add Romney to your list !

2. Just for clarification...while I agree with your basic feelings on Axlerod/Rove...TWICE a week is what we have as of now !!! There are those who think it is daily !!! Note how even today the WH is now after Cheney after going after Limbaugh ! WHY ? Makes no sense to me except for the politics of it..they surely dont need to !!