Yglesias Advocates Massively-Regressive Tax Increase
August 31, 2012 3 Comments
Matthew Yglesias on Romney’s nostalgia:
He thought the America of the 1950s and 60s was a good place and a land of opportunity. Which is interesting, because looking forward his view is that avoiding a return to Clinton-era marginal income tax rates is crucial to preserving America’s status as a land of freedom and opportunity. But back in those Romney salad days, those rates were up at 70 percent or even higher. Yet somehow life went on. It’s worth thinking about.
Okay, let’s think about it! I thought about it.
Looking at inflation-adjusted tax rates (not marginals – who cares about marginals? – I’m talking about rates) in 1963, when the top marginal rate was last 91%, vs. today (35%), my quick, dirty, and hopefully minimally-buggy Excel vlookup() and sum() work suggests that net (federal, income) tax effective-rates on a single/married-filing-separately person were anywhere from 30-90% higher back then, on all income categories. Rates in the $50k-110k range (adjusted to 2011 dollars) are perhaps ~30% lower now but those on the low and high ends have seen far higher reductions.
So, it’s true that higher-income folks were billed more in (federal, income**) taxes back in Romney’s utopia. But it’s also true that lower-income folks were billed more. To restore the greatness of 1963 then, we’ll obviously need to raise everyones’ taxes by at least 30% of their current rate. It does seem to be the case that we could squeeze higher incomes more than that, and ‘life would go on’. But only – apparently – by also really sticking it to those making $30k and under – indeed, however much we wish to 1963-ize our tax code, in rate-increase terms we’ll need to squeeze them every bit as much as we’re going to have to stick it to those making $150k or more, as this graph clearly demonstrates:
Of course, the Matthew Yglesiaseses of the world would be the first to point to basic marginal utility theory and say that such a change to the tax code is effectively regressive – raising lower-income folks’ taxes by X% hurts them far more, while higher-income folks are able to more painlessly absorb the same X% extra hit. Nevertheless, having taken his advice to heart and thought about it, I find that Yglesiaseses’s analytical approach and the lessons of history makes it rather inescapable that (if we want to raise higher-income marginal rates at all) that’s what we’re going to have to do, in order to reestablish America as the good place, the land of opportunity of Mitt Romney’s youth.
Or we could just, y’know, not raise taxes at all, on anyone. Absent an actual argument to do so, I mean.
**Obviously, we are ignoring all other changes to the tax environment that have simultaneously occurred since then which may mitigate or even reverse the picture of changes to the tax code these numbers paint: the more-than-doubling of Social Security taxes, the introduction of Medicare (which didn’t exist), the fact that state taxes, sales taxes and property taxes are probably much higher than they were then (if they even existed at all). But that’s totally fair for me to do, and to focus on federal income tax numbers in pure isolation from everything else, since that’s exactly what Matthew Yglesias did.