Why not tie the top marginal tax rate to the unemployment rate?
Let's say we have a formula like this:
The top marginal rate is calculated as the (UR * 4)+10.
At 9.8% unemployment, the top tax rate would be 49.2%. At 5%, the rate drops to 30%.
I see many advantages to this:
1) Government receives more revenue to stimulate the economy and subsidize unemployment insurance when the economy needs stimulating, less revenue when it doesn't need stimulus. 2) The pain of economic downturns is shared across income brackets. 3) The wealthy are more likely to invest in domestic job-producing industries instead of off-shorers and unproductive things like derivatives, shifting the economy toward domestic production rather than speculation. 4) The rich get to control their own tax rate through their investment decisions. They also see their investments grow as the well-employed consumer base grows.
I've been musing about this for a while and was surprised when a libertarian co-worker said he liked the idea. I say if the rich really do create jobs like many claim, let them prove it, and let them have some skin in the game.
So what do you think about the idea generally? Has this been proposed before or even attempted somewhere?
I work 40 plus hours a week. Week in and week out. Making very little wage, I have earned a middle class wage before. Now I am paying 24% of my low income into state and federal taxes. I can not even pay for my heat, and electric this month. Fuck. Who gets there bill on time.... My landlord, electric, my kid in college, this internet sight, phone? I think that every one should pay an equal amount. Low or high amount of income, pay your part. Not Just us who are working hard to make ends meet!
33. We need establish a living wage in this country
The top-earners are making record amounts of money and where is it going? I doubt you're spending much on exotic financial instruments or stock in corporations that create jobs overseas. I dare say a greater percentage of your income is reinvested in the domestic economy, compared to the income of the top earners. I need to see if I can find some figures on that.
Once the uber wealthy have reached a level of opulence there is no "carrot" to pull their cart. If they, as they claim, drive the American market and employment lets give them some actual responsibility to do so, with a just reward attached.
11. My assumption is that labor law stays the same
I think there is enough incentive and unused domestic production capacity already that the rich wouldn't feel the need to do that. I'm more worried about bribed politicians messing with the official unemployment rate, which is already less than real.
are you talking about income tax rates or corporate tax rates? Second of all that idea would never work. Would you raise and lower rates every time new unemployment number came out? Business need to know in advance what their tax rate is going to be, so they have time to plan. And if companies are running in the red and are not paying taxes why would they care if taxes go up? And if companies are doing good and running in the black, they are the ones growing and hiring people why punish them with a higher tax burden?
Corporate taxation is too complicated for me to even guess about. I'm more concerned with the investor class and how they use their money. Whatever they have beyond the $250K is money people put to risk in investment anyway. I'm not sure about the mechanics of it. I was thinking that an average unemployment rate over the same tax year would be used to calculate the tax rate.
17. Then proposing the idea might force them to admit that
I actually think there is a connection between investment direction and the rate of unemployment but if there isn't, it would be great to force the Republicans to argue that and drop the age-old talking point about the rich creating jobs.
Their money does. Through increasing bank liquidity, allowing interest rates to be lower. Meaning more projects get done. The problem we are having now is even with low rates the banks just took a huge hit to their liquidity because of the housing crisis.
A lot of economist and most all politicians think the best way to stop/get out of a recession is the Keynesian approach. Lower taxes and increase government spending. Temporarily of course!
Combined with a truly progressive tax structure, it would work beautifully, only the top marginal rate should fluctuate between 70% and a confiscatory 95%.
Think about it, even forced to invest in the US to keep unemployment low, that low marginal rate would allow the plutocracy to seize more and more of the nation's wealth and dictate the terms of employment, meaning we'd be 99.5% serfs and 0.5% overlords, exactly where they are headed now. Only by making the tax truly progressive (the rates tied to the median wage) could we avoid the growth of plutocracy by providing a strong disincentive to greed and a means to siphon off obscene wealth.
No rich man ever has enough. However, it's a numbers game after a certain point, and even if those numbers are depleted by taxation, they still confer boasting rights to the little rooster who has them, and that is generally sufficient.
All these tax debates happened over a hundred years ago and the conclusion was that the only tax that was fair to the working class and which would provide sufficient revenue was the progressive income tax, something that would fall heavily on disposable income but not touch subsistence income. Thanks to Reagan, that whole notion has been turned upside down and that is why this country is in serious fiscal trouble.
21. Using the U-6, which was 16.1% for 1/2011, the tax rate is 74.4%
But in January 2001, the U-6 was 7.1%, making the top marginal rate back then, using the formula (U6*4)+10, only 38.4%. This would probably not be acceptable to the Republicans but the debate could at least start there. And the debate itself would be illuminating, instructional. Maybe it would even get the rich to start thinking about how they invest their personal wealth, and how the decisions they make as CEOs and board members affect that wealth.
anyone in their right mind really think raising taxes on ANYONE create economic growth? Taxes are a necessary evil for government to operate. So we can have the rule of law, a military and some entitlements. The governments role is not, and should not be to set economic policy! The market sets economic policy!
26. The problem with Friedman is his ideas don't work
Edited on Mon Feb-28-11 07:56 PM by nuxvomica
They've already been tried and it ended in disaster. The Bush tax cuts didn't help the economy, they just created huge deficits and rampant speculation. I think it would be better for rich people's discretionary income to be chasing jobs instead of exotic financial instruments that produce nothing.
This is an historical comparison to show how the formula (top
marginal rate = (U-6 * 4) + 5) would work in different
economic contexts. I've tried to keep the formula relatively
simple yet flexible, so that a low U-6 rate results in much
lower taxation (1999-2000). Yes, the rates are very high
during times of high "real" unemployment (the U-6
includes the underemployed and the discouraged) but I'm
proposing the incentive could have prevented those high rates.
Year U-6 YRLYAVG proposed TMR actual TMR
------ ------------ ------------- ----------
1994 10.79166667 48.16666667 39.6
1995 10.01666667 45.06666667 39.6
1996 9.616666667 43.46666667 39.6
1997 8.808333333 40.23333333 39.6
1998 7.991666667 36.96666667 39.6
1999 7.425 34.7 39.6
2000 7.025 33.1 39.6
2001 8.141666667 37.56666667 39.6
2002 9.583333333 43.33333333 38.6
2003 10.13333333 45.53333333 35.0
2004 9.575 43.3 35.0
2005 8.933333333 40.73333333 35.0
2006 8.233333333 37.93333333 35.0
2007 8.35 38.4 35.0
2008 10.56666667 47.26666667 35.0
2009 16.29166667 70.16666667 35.0
2010 16.75833333 72.03333333 35.0
Median income has gone down for a number of reasons but it's all part of a economic class war that's been waged over the past 40 years, IMHO. With my limited knowledge of economics, I'm not sure how it could be addressed short of easing union organization (card check etc.) and establishing a living wage law. I'm old enough to remember a time of mixed, vibrant neighborhoods, with corner groceries and shops, and teachers, mill workers, bus drivers, etc. sharing the same status and dreams for their kids as doctors, lawyers and business leaders, etc. It's easier to destroy than to build, and the supply-siders attacked that America from multiple directions. That's what made our economy less productive. I refuse to believe the decline was inevitable so I still believe a reversal is possible. Maybe a return to a producing economy is the start but I don't know.
I've been such a "debbie downer" on DU lately I just felt like I needed to pull back a bit and not go so sour on the state of things. That said, I cannot disagree with a thing you wrote here. I don't know if revamping America's manufacturing sector is the "magic bullet" that will get the economy going again but it's one heck of a lot better than allowing these companies to pack up factories here and move them to china. Severe economic penalties should be imposed against any company that does that, that much I know.
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