22 May 2010

Lies Conservatives Give Us

Like the one that higher marginal tax rates stunts the economy and hurt the ordinary people.

Paul Krugman looks at the data, and notices that median family income stalled out once we started cutting the top tax rate:
You can see why: the facts are embarrassing. Here’s a rough-cut version. The blue line, left scale, shows median family income in 2008 dollars; the red line, right scale, shows the top marginal tax rate, a rough indicator of the overall stance of policy. Basically, US postwar economic history falls into two parts: an era of high taxes on the rich and extensive regulation, during which living standards experienced extraordinary growth; and an era of low taxes on the rich and deregulation, during which living standards for most Americans rose fitfully at best.
I would also add that the flattening of income growth also happened as more and more of these families became two earner families.

So the addition of the 2nd earner also masked a very real drop in wages of ordinary people.

We want the marginal rate back above 75, and we want the lower taxes on unearned income, capital gains and dividends, to be reversed.

Money does not trickle down, it bubbles up, and money that goes to paying billions to hedge fund managers and other criminals is money that is taken from ordinary families who play by the rules and work for a living.

6 comments :

Sortition said...

The data is even more damning than that - average income growth and per capita gdp growth have been slowing down over the decades of top tax rate reduction as well.

The only ones for which this has been a good deal are the very very rich.

Matthew G. Saroff said...

Actually, Krugman does not support the idea that the lowering of top marginal tax rates was the cause, but instead that the lowering of these tax rates is a more general proxy for a constellation of policies such as weakening unions and regulation.

Sortition said...

I agree. The only direct effect of lowering the top income tax rate is an increase in the after-tax income of the very rich.

The point is - and I believe this is Krugman's point as well - that contrary to free-marketeering dogma, lowering taxes on the rich does not result in widely shared prosperity. It does not even result in increased average prosperity. It does, of course, result in increased prosperity for the very rich.

DJ said...

Interestingly enough, raising taxes on the rich does not result in prosperity either, it only serves to drive the economic activity out of the country derived from the holdings of the rich. The 90% tax rate in the depression only served to drive millionares out of the country.

Matthew G. Saroff said...

I disagree with your points, and will rebut in a post, because I think that there are a number of myths here that are harmful to our discourse.

John Sundman said...

Amen.

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