Unreasonable World

Stephen Weil

Stephen Weil
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Graduated from Emory University majoring in international affairs and history. Currently a research intern at the Center for Strategic and International Studies. All views expressed herein are my own. You can view my blog in its original format here: http://unreasonableworld.wordpress.com/.

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APRIL 12, 2012 2:57PM

Inequality of what, exactly? The Buffet Rule and "Fairness"

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A friend recently sent me this Wall Street Journal opinion piece, entitled “The Real Causes of Income Inequality.” The authors make some valid points, but also draw some misleading conclusions. My main reaction to the article was frustration—with the authors, with conservative media more broadly, but also with Obama and the liberal narrative on inequality. Allow me to explain.

The authors’ central objective is to refute the argument that inequality has increased because the wealthy have not “paid their fair share” in taxes. Attacking this logic makes perfect sense, as this loaded phrase has become a political rallying cry for Obama during his push for the Buffet Rule (the administration is even pushing a #fairshare hashtag on Twitter). Moreover, this criticism is not only understandable from a political perspective, but also quite justified from an economic perspective, as the authors are correct to observe that raising taxes on the wealthy would not be a silver-bullet solution to addressing inequality.

Most of the causes of growing inequality run deeper than the tax code: a woefully inadequate educational system, an economic shift away from low-skill labor, and a decline in union membership are all examples of long-term trends that have negatively impacted the middle and lower classes. Yes, capital gains rates play a role; wealthy investors have been able to compound their profits while CEOs take away record earnings through stock options and other forms of “non-income” income. That being said, raising more government revenue through the Buffet Rule would not do much to help address the structural flaws in our economy that have undermined social mobility and ravaged the middle class. Not only would the returns be relatively marginal (some $50 billion over 10 years), but as long as corporate special interests maintain disproportionate influence in our government, it seems unlikely that those revenues will be directed towards education, labor protections, health care, or other guarantors of social welfare.

While I agree with some of the arguments advanced by these authors—inequality has resulted more from changes to the nature of our economy than our tax code—I could not disagree more with their conclusions. Befitting their position as Wall Street Journal contributors, these two authors conclude that inequality is essentially “natural,” and that we should thus not worry about reducing it.

Admittedly, some level of inequality is inevitable. Some people will be more successful in their economic pursuits than others, whether from luck or from skill. This is simple mathematics; there will always be a distribution of talent centered on an average. Not everyone can be “the best” at what they do. As long as we live in a world of private property and profit incentives, wealth will never be completely equal. Nor should it be.

While this assessment is reasonable in the abstract, it ignores the true injustice that plagues America; an inequality of opportunity. In a fair society, everyone will not end up equally wealthy, but each person should have an equal chance to be successful. The combustible Newt Gingrich may have actually made this point best while on the campaign stump in Florida. During one event, which I happened to catch on CNN, Gingrich rallied the troops against Obama’s “socialist” agenda by emphasizing that the constitution guarantees the right to the pursuit of happiness, not to happiness itself. The implication, of course, is that free enterprise provides a means to pursue happiness, while Obama’s “radical” agenda seeks to guarantee happiness for everyone through government welfare programs.

The problem with our society today is that millions of people, by virtue of their socioeconomic conditions, are denied the same ability to “pursue happiness” that is afforded to members of the upper class. The statistics detailing the rising income inequality in America have been widely cited during the past year, but the less frequently referenced data on social mobility are frankly much more disturbing. A recent piece in the New York Times summarizes some of the recent research on social mobility, finding that Americans are now less likely to climb up the social ladder than our counterparts in Western Europe and Canada. Sixty-two percent of those born into the top fifth of the income bracket will remain within the top two fifths, while sixty-five percent of Americans born into the bottom fifth of the bracket will remain in the bottom two fifths. Even conservatives are beginning to realize that our American Dream is rapidly fading to black.

What, precisely, are the reasons for this decline in social mobility? The answer is undoubtedly complex, and far beyond the scope of this blog post. My point here is merely that we should be focused on answering this question, rather than deriding the critics of income inequality as slackers who are just after government handouts. It is for this reason that a particular passage in this article struck a nerve with me. The authors write:

Inequality is a natural result of the expansion of liberty and the development of new technology and new products. Henry Ford, Andrew Carnegie, Sam Walton and Bill Gates caused the income distribution to become more uneven, but they enriched the world. To vilify success and the rewards it garners is an assault not just on capitalism but on liberty itself. As Will and Ariel Durant observed in "The Lessons of History" (1968), "freedom and equality are sworn and everlasting enemies, and when one prevails the other dies . . . to check the growth of inequality, liberty must be sacrificed."

This sentiment is representative of the larger conservative narrative on inequality. Ever since Mitt Romney attacked the “politics of envy,” the Right has attempted to portray Obama as a president who “vilifies success.” Obama’s defense of the Buffet Rule, as articulated by conservative pundits, goes something like this: we must tax the wealthy, because it is unfair that they have done so well![1] They call Obama a “class warrior” who demonizes the rich. This is, of course, a dramatic over-simplification of the liberal argument. Certainly, eliminating all inequality in wealth would require some assault on “liberty” (read: the right to keep “my money”). But creating equality of opportunity—making the “free market” truly neutral and open for all parties—would be not only consistent with, but integral to, the defense of liberty.

Why then, you might ask, am I frustrated with Obama? Because his campaign for the Buffet Rule has played directly into this conservative counter-narrative! Rather than focusing on “investing in the middle class”—the central theme of his state of the union—he has trumpeted a policy that is easily branded as “punishing the upper class.” Of course, he can justify his proposal in different terms; his proposal is simply an attempt to compensate for loopholes that give the wealthy an unfair advantage when they file their tax returns. This justification, however, does little to counter the Republican spin.

Obama hopes that the Buffet Rule benefits from unique circumstances; polling data show that most Americans support the idea. But tax increases are always controversial in American politics. While most Americans are frustrated that people like Mitt Romney can get away with paying a 14 percent tax rate, they are also hesitant to vote for a “tax and spend” liberal that would impose costs on “job creators.” Focusing his campaign on the Buffet Rule also distracts from the positive aspects of Obama’s “rebuild the middle class” agenda, leaving voters wondering what specific solutions the president can offer to create jobs and revive the economy. Equality is a much less promising prospect if it entails bringing everyone down the lowest common denominator, rather than raising everyone upwards.

The Buffet Rule is a useful proposal. Indeed, it is common sense; there is no reason that millionaires should be paying a lower rate than middle class Americans. On the other hand, it is problematic that Obama is making the issue central to his campaign, rather than focusing on a positive agenda to rebuild the middle class and create sustainable foundations for social mobility and growth. In the long run, Obama’s strategy may actually play into the conservative “class warrior” rhetoric, distracting the public from the legitimate structural issues that are producing inequality. I hope that Obama can maintain control of the narrative—and not lose sight of his broader agenda—as the campaign progresses.


[1] In reality, Obama has said: “Look, I want folks to get rich in this country … I think it’s wonderful when people are successful. That’s part of the American dream.” http://www.nytimes.com/2012/04/11/us/politics/obama-to-make-case-for-buffett-rule.html.

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If our re-educational system is second rate, as test scores in math and sciences worldwide demonstrate, it is specifically because they are too involved in social engineering and propaganda and not in teaching people useful skills. As Asians and Indians are proving, those who are smart, hard working and learn marketable skills and knowledge can still succeed. in this country Those who don't, probably won't for lack of jobs in the humanities. At this point, even arts majors earn more than psychology majors, so trying to push everyone into humanities has done nothing but make a higher percent of the population unemployable.
I'll no that we truly care about inequality and social mobility when there are no more "good" public schools and "bad" public schools. When any child in any neighborhood has the same ability to graduate from high school with skilled, dedicated, well-paid teachers, science labs, art studios, band directors, English teachers, and everything that makes a "good" comprehensive high school.

We all know this inequality is there. No one's willing to do anything about it.
That would be be the next logical and inevitable step to grade inflation and self esteem training. If we can't sto[ schools from failing we can just call them a success and throw them parades. Then everyone wins but the students or hiring managers.
Truly, you cut to the meat of the matter here: I, too, am frustrated with Obama in his reluctance to pick the right battle, namely, he has not articulated his plans clearly, concisely enough. He throws the heat of light -- yet not the energy for such to illuminate the essence of what must be apprehended. For example, he has not shown exactly how education, at a much higher level, is needed to sustain our economy: this investment must be shown with its sinewy muscles bending light; tell & show us the way. He could encourage students to pursue post-grad work. Let's quit babying kids with education only 2/3's of the year ... how can we compete with Asia, where they are in class 10 months + a year? Show us the goals, specify the way, the means ... he has to sharpen this vision on energy and economics in a micro sense. Then, find great talent to manage this. Then, my friends, we will have something to believe in. As it is, he must get on board with his detailed plan. Then sell what many will not want to hear. Hard work creates opportunity; is he not an example of this? We need to awaken to the fact of the slumber that the younger generation is in. We are not alone. 30% of Japanese youth, under 32, are not gainfully employed. This is endemic, in Europe, it's bad too. Where are the leaders for this generation? What do they really want?
The reason for income inequality is simple- the poor simply refuse to make enough money. If the poor would simply make more, they would catch up with the rich and end the gap!
Well written. Informative. Interesting. Thanks for sharing.
Inequality of opportunity is one side of the fairness deficit in our society. The other side is inequality of burden sharing. There's no ethical justification for a guy who makes his money as a "private equity investor" (corporate raider) to pay taxes ("capital gains") at a far lower rate than the average small farmer or store clerk or assembly line worker whose salary or wages are defined as "earned income" (the opposite of which, be it noted, is unearned income). And it's not just a matter of how much revenue a more equitable tax on extreme wealth would raise; it's fundamentally a question of fairness. That's the logic of a progressive income tax, an idea that was adopted with the passage and ratification of the 16 Amendment almost a century ago (in 1913 to be exact) and widely embraced in both principle and practice prior to the Reagan Revolution of the 1980s.
Thank you all for your input.

Tom - I certainly agree with you on that front. The "justifications" for taxing capital gains at a lower rate (investment involves more risk and is necessary for "job creation") are ultimately self-serving propaganda from the upper class. "Just keep giving us a favorable tax rate, and it will eventually trickle down, trust us! We're doing this for YOU!"

That being said, my concern is that Obama's "Buffet rule" might distract from the real issue you identify. Keep in mind that the Buffet rule does not change the capital gains rate, it only levies a tax on income that is in excess of a million dollars. The proposal is ultimately just political theater -- it will never pass in this Congress, and it would do little to address the growing wealth gap in America. To me, it is just the latest instance of Obama prioritizing easy political talking points, rather than following through on the implications of his rhetoric and staking out the difficult, but necessary, positions. If he actually does manage to pass the Buffet rule in 2013 (assuming he wins), he will almost certainly declare it a major victory, and then move on. We have a unique opportunity in this moment, with inequality becoming such a central issue in our political discourse, that I would hate to squander it by taking an extra $5 million per year in tax revenue and then declaring the war won. Mission Accomplished!

inthisdeepcalm - I think you hit on an important point, and one that is similar (to some extent) to what Snoreville is arguing. Hard work can create opportunity. There are certainly many folks who succeed in difficult conditions. But if you took two equally hard-working individuals, but one of them was born in inner-city Baltimore and the other in the Hamptons, well, suffice it to say that one of those two will have an easier time. There are too many places in America where our educational system is woefully underfunded (as froggy points out; and Snoreville - the point is not to just CALL all schools "good" so that people feel better, it is that social mobility would be much greater in a world where all schools actually had equal resources). Nevermind the fact that those born into privilege can afford private schools and other opportunities that are beyond most people's means. Creating a level playing field (or at least as close to level as possible) should be the goal.
Stephen - Good exchange. I can't disagree with anything you're saying here.

On a personal note: I see you're at CSIS. Please say "hello" to John Hamre. We go back a long ways...
Add student debt and healthcare to a mortgage and many, many people are starting a hole that will take them a lifetime to crawl out of. If they're lucky. This is a burden the rich do not share--and it gives them a huge advantage in life.
Education and Democracy
should be by birthright,
not simply by benign
grace, though that has
been welcome.

http://www.youtube.com/watch?v=PEMDps8G6Co&feature=related

The Co-Opting

http://www.opednews.com/articles/2/opedne_james_py_060422_warped_interpretatio.htm

and Slander of
Adam Smith, who argued against
abuse of labor and for social safety
nets by the Voices
for Billionaire Demagogues
Friedman



http://video.cnbc.com/gallery/?video=3000049121

-_-slightly altered, not in substance, to quotes:-_-
Abraham Lincoln, Dwight Eisenhower
and Alexander Hamilton were all leftist in that
-_-from CNBC's voice-to-text:-_- "they all believed
in that formula for success and all contributed to it.
after all, lincoln oversaw the building of the
national railroad from the atlantic to the pacific,
the one that started the
land grant universities, university of minnesota,
nebraska, wisconsin and can that all in the civil war.
lord knows eisenhower contributed to that,
the sea to state highway
system and launched a huge science and
technology push. all this people say i got all
this on my own, no, you didn't.
you did it thanks to a great public/private
partnership and when we have the
government creating the conditions
in infrastructure so entrepreneurship
and private energy can take off...."

(this: -_- is instead of brackets as the latter
is usually a HTML signal)


Incarceration
https://www.prisonlegalnews.org/(X(1)S(ceukwkzvjk5jc0fuqhnnjym3))/displayArticle.aspx?articleid=23838&AspxAutoDetectCookieSupport=1

is more expensive than education, including for
those living in wealthy communities, though, it
is extractive for some.

http://brief.ly/eo0nt3/

Education is the most important job.
It is the foundation of democracy.
It's the foundation of health and happiness.

There has never been a reason for it to
threaten anyone.

Everyone wants their children to be prosperous,
and that has never been attainable only at
others' expense.

However, control freaks have served those
who prefere "asymmetric" (heads I win,
tails you lose) economics, all the while they
hold in your face the fabulous free enterprise
principles they themselves trample on whenever
needed.

So. I say again. Education is the most important job.
Good explanation--the Buffett rule is a good first-start, quick fix, but no substitute for overhauling the many unfairnesses encoded in our tax system that preference the wealthy.
“Keep in mind that the Buffet rule does not change the capital gains rate, it only levies a tax on income that is in excess of a million dollars.”

The sentence above is but one example, of a post with examples, of your confusion as it relates to the Buffet rule, income inequality, fairness, etc. Currently, Warren Buffet, Mitt Romney and other very wealthy people, make their money via capital gains (see tax returns). Under current tax law capital gains are taxed at 15%. The Buffet rule will make it so that any money these people make is taxed at 30%. It’s nothing more than a thinly veiled doubling of the capital gains tax on wealthy people. I suggest you re-read the article with this fact in mind.
Thanks again everyone for the healthy discussion. MeatMonkey makes an important point about debt. Mitt Romney--to pick on the easiest target--claims that he made his money "the American way," but in reality, he wasn't burdened by student debt, didn't have to work through college, and had his parents buy him and his wife their first house (http://www.politifact.com/truth-o-meter/statements/2012/jan/20/mitt-romney/mitt-romney-says-he-didnt-inherit-money-his-parent/ -- disclaimer: I hate PolitiFact). Maybe he isn't living on Paris Hilton money, but he clearly had a leg up over most Americans.

evernewecon - I couldn't agree more about education. It's a difficult issue though; throwing more money at the problem won't necessarily create equality or informed, thoughtful citizens. We need to think more about our curricula and encourage teachers to train innovative thinkers, rather than just test takers. This could--and should--be a whole separate conversation.

Johnny Fever - I understand the argument that wealthy people (particularly CEOs and people working in finance) are advantaged by a lower capital gains rate. That's why I said:

"The "justifications" for taxing capital gains at a lower rate (investment involves more risk and is necessary for "job creation") are ultimately self-serving propaganda from the upper class."

I am making two separate points.

1) The Buffet rule does not actually change the capital gains rate. I believe that you recognize this, on a technical level, as you call it a "thinly veiled" attempt to double the capital gains rate. And in some ways, that is true. But there are a lot of economic and legal factors associated with actually increasing the capital gains rate that are not encompassed by the Buffet rule. Also, there are some misunderstandings about the Buffet rule, based largely off Obama's descriptions of it. The Buffet rule only applies the 30% rate to income IN EXCESS OF 1,000,000. This means that if you make 1,200,000, you would pay whatever rate you pay now (probably ~15% if that money comes from investments), and then pay 30% ONLY ON your extra 200,000. Source: http://www.washingtonpost.com/blogs/ezra-klein/post/everything-you-know-about-the-buffett-rule-is-wrong/2012/04/11/gIQAXbBmAT_blog.html.

2) This is the more important point. Tax rates are only one aspect of what is driving inequality in America. Taking more money from the wealthy in order to make them pay their "fair share" is a good start, but we need to make sure that money actually goes towards investing in the future for middle and lower class Americans. The problem is not just that endpoints are unequal, its that starting points are unequal. Obama has demonstrated a tendency to compromise too much and play up small victories at the expense of pushing a broader agenda. I simply hope that the Buffet rule does not become a distraction from a broader, more positive, agenda for addressing inequality.

I would be interested to know what other examples you have identified in my post of confusion regarding inequality or taxation. I certainly don't claim to be all-knowing, and I am always eager to learn more and adjust my views. I always appreciate healthy conversation, so if you'd like to engage specific issues, I'll be happy to respond.
“I would be interested to know what other examples you have identified in my post of confusion regarding inequality or taxation.”

I’d love to go back to your original post but you’ve written so much new stuff that I also find inaccurate. At this stage of any successful dialogue between us, I think it’s important we distinguish between fact and opinion.

Fact - On point #1 we agree on the technical aspects on how the tax will function.
(I personally like to call a spade a spade. If the tax works like a capital gains tax it should be called a capital gains tax. Whereas you are choosing to call it by what Obama wants you to call it.)

It's statements like the ones below, which you pawn off as fact, that irritate me.

“I understand the argument that wealthy people (particularly CEOs and people working in finance) are advantaged by a lower capital gains rate.”

"The "justifications" for taxing capital gains at a lower rate (investment involves more risk and is necessary for "job creation") are ultimately self-serving propaganda from the upper class."

I’ll let you choose, which statement would you like me to pour cold water on? Or do you want to go back to something you wrote in your post?
Johnny - I agree that it would be useful to distinguish between fact and opinion. Statements like this one:

"Sixty-two percent of those born into the top fifth of the income bracket will remain within the top two fifths, while sixty-five percent of Americans born into the bottom fifth of the bracket will remain in the bottom two fifths. "

Are things that I "pawn off as facts." Of course, you could dispute the methodology used to reach those figures, demonstrating that even "facts" are also often up for interpretation.

The statements you have identified I would consider opinions.

“I understand the argument that wealthy people (particularly CEOs and people working in finance) are advantaged by a lower capital gains rate.”

If I had meant to "pawn that off as fact," I would probably have said "wealthy people are advantaged by a lower capital gains rate," rather than adding the qualification "I understand the argument that." That qualification noted, I do agree with this argument. I think that the issue is up for debate. I have previously discussed that issue in more depth here (http://unreasonableworld.wordpress.com/2012/03/24/the-real-class-warriors/), drawing largely on an insightful book entitled "Winner Take All Politics." I recognize that there are arguments in favor of a lower capital gains rate, but have yet to be convinced. Feel free to persuade me.

The second statement should also be taken as opinion. Again, I am willing to defend my opinions. I'm really not sure what you want; do you want me to add a phrase like "I think that" or "It is my opinion that" to the beginning of every sentence?

My reasons for believing that statement are again outlined to some extent in the post linked above. I feel that wealthy investors/hedge fund types often advance the argument that "we're the job creators, if you tax us then we'll have to cut payrolls" in a very self-serving fashion. I see very little evidence that lower taxes on the rich and on corporations actually increase welfare for other Americans - it seems to be a deferred promise; "keep cutting our taxes and eventually it will trickle down, you'll see!" For example, Commerce Department data show that corporate profits increased 8.3% in 2009 and 10.8% in 2010, making corporate profits account for 14% of national income in 2010, the highest proportion ever recorded. Yet, in 2010, while corporations were making record profits, the share of national income afforded to employees (including non-wage compensation like health care) reached its lowest level since 1965. While corporate profits outpaced inflation, salaries did not. Why did these higher corporate profits not bring with them higher wages, or increased employment?

Sources: http://www.nytimes.com/2011/08/06/business/workers-wages-chasing-corporate-profits-off-the-charts.html?_r=1
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/PayBudgets.aspx

The figures that I cited I would contend are "facts." My interpretation of those facts should be considered opinion.

I appreciate you letting me choose which points you would like to douse with cold water. But ultimately, given that you have chosen to comment on my post, I believe it makes more sense for you to determine what you would like to criticize. You may find this difficult to believe given the overwhelmingly left-leaning slant of my post, but I am actually not dogmatic about my political views. I have engaged in many interesting and valuable debates with conservative friends over the capital gains issue (and many others), most of which I have found productive and have raised points that drove me to modify my views (or at least more rigorously and self-consciously defend my original assumptions and conclusions). I would be happy to continue this conversation with you, and you are welcome to criticize any aspect of my post that you find inaccurate.
I agree we need this law. Why so many benefits for the top %1 but average people are considered MUDs ? not fair imo
Why don’t we keep it simple and tackle one fallacy at a time. I find the quote below especially interesting because in addition to not understanding the human nature of capital gains taxes, you are also not able to recognize your own conjecture:

“I understand the argument that wealthy people (particularly CEOs and people working in finance) are advantaged by a lower capital gains rate.”

It’s not advantageous to have to pay a tax. What liberals always fail to understand is that capital gains taxes, especially for rich people, are optional. For starters, rich people don’t have to invest their money. They could park it in some bank (primarily for safe keeping not for the crappy interest rate) and never choose to risk it. For those that do choose to risk their hard earned capital, to the extent capital gains taxes are high, they will forgo selling. And when capital gains taxes are low, a higher incentive to sell exists. There is ample evidence of tax receipts falling, when capital gains taxes are raised and vice versa.

Furthermore, in case you haven’t noticed, we have a progressive income tax system. Accordingly, the “capital gains tax” taxes money that has already been taxed. But in spite of this double taxation you characterize the tax as an advantage. Based on that logic, I suppose it’s advantageous to have a property tax bill because by virtue of owning property you have the advantage of paying that tax.
Johnny – I think you make a couple of valid points. However, much of your argument relies on misconstruing my statement. Notice that I did not say “wealthy people are advantaged by a capital gains tax.” I instead said “wealthy people are advantaged by a lower capital rate” (implication: relative to a higher capital gains rate). Obviously being taxed is not advantageous. I never used that language or advanced anything resembling that argument. The caricature of my argument that you have created is, as you have demonstrated, very easily ridiculed.

So sure, in the abstract, wealthy people (and honestly, all people) would want zero taxation on capital gains. But, the fact that capital gains rates are lower than income rates provides a unique advantage for those who are wealthy (i.e. already have capital) relative to those who are not. Two major points:

1) The most notable example of this comes in the financial industry, and in compensation for CEOs. Over the past couple of decades, it has become more common (now widespread) for CEOs and for those in the financial industry to receive “compensation packages” instead of salaries. These people do not receive ANY income, and thus pay no income tax. Instead, these people receive “compensation” for their work in the form of capital gains, and thus their only “income” is taxed at the lower 15% rate. This is certainly not a case of double taxation. This is not an insignificant problem. As of 2004, 18% of those in the top 0.1% of earners were in the financial industry, and 41% were in non-financial corporate management. The absurd growth in CEO compensation and the increasing importance and size of the financial industry have both been major contributors to the growing inequality in America over the past couple of decades (many other causes have been discussed in my post and in this discussion: education, union decline, debt, etc). Figures are taken from Pierson and Hacker’s “Winner Take All Politics” (they use 2004, as they draw on certain CBO data for income that include a wide range of assets, and the most recent data that allowed for this particular stratification at the time of publication was 2004). There is a good general overview of their argument here: http://www.economist.com/blogs/democracyinamerica/2010/09/winner-take-all_politics.

2) Capital gains provide a disproportionate advantage for those who already have capital. Most lower and middle class Americans, especially in our current economic crisis, have little excess capital. Much of their income goes into things such as food, housing, education, etc. These problems are only exacerbated when people are held down by outstanding student debt or massive mortgages. Certainly, these people COULD invest some of their income in the hope of acquiring capital gains, but the risk is more salient, and they stand to make much smaller profits than larger-scale investors. Many wealthy folks are not as heavily burdened by these requirements, and thus are capable of investing some of their “extra” capital in order to generate returns, essentially allowing exponential extrapolation of their wealth (relative to the linear/non-existent progress of a paycheck-by-paycheck family). These additional returns help the rich to keep growing richer, while the poor sit on the sidelines. Yes, I understand that there are differences between the returns on these investments and salaries. Yes, I understand that investment involves a degree of risk. The situation still exacerbates inequality, and I find that to be problematic. The lower capital gains rate still provides more of a disproportionate advantage to the wealthy than it does to the poor.

As a final point, I wanted to address the issue of “double taxation.” This obviously is not an accurate characterization for CEOs and Wall Street types; they manage to cheat the progressive tax system all together and ONLY pay a capital gains tax. But, does the capital gains rate “double tax” those other hardy investors, who are simply putting some portion of their wages into the stock market? No. It does not. The capital gains rate only applies to capital GAINS, which is to say that the tax is not applied to the principal. For example, let’s say I made $1,000,000. I would then pay my income tax on this figure. From the amount I have left over, I decide to purchase some stock in Company X for $5,000. This $5,000 investment has already been taxed. Let’s say that one year later, the value of my stock has risen from $5,000 to $6,000. I then sell these stocks. My “capital gain” is $1,000, not $6,000. Thus, the only money that the tax is applied to is the NET GAIN from your investment, above and beyond your original, already-taxed investment. There is no “double taxation.” There is a separate argument that the capital gains tax causes double taxing on corporations, but that also rests on faulty logic. This post explains the confusion relatively well: http://heathenrepublican.blogspot.com/2012/01/capital-gains-and-double-taxation.html.

In sum, I agree with some of your logic. Capital gains involve an inherent risk (of losing your investment), and thus should be taxed at a lower rate than income. In theory, I agree. In practice, this situation has been exploited by corporate boardrooms and hedge funds to massively expand their share of national income while standard household wages have stagnated. In my opinion, this situation has been one of the major factors contributing to the growing inequality in America over the past two to three decades (other important factors have been mentioned in this post/discussion: education, union membership, debt, etc).
I’m losing interest in continuing this conversation. It has nothing to do with the subject matter, it’s the fact I no longer think I’m speaking to someone truly making an effort to comprehend. For example, you said:

“I understand the argument that wealthy people (particularly CEOs and people working in finance) are advantaged by a lower capital gains rate.”

But then you were very adamant that you did not say:
“wealthy people are advantaged by a capital gains tax.”

And then followed that up with the assertion:
“the fact that capital gains rates are lower than income rates provides a unique advantage for those who are wealthy”

Look, I see no salient difference in any of those quotes. What I do see is someone splitting hairs and dodging the issues I raised. The evidence that higher capital gains taxes often leads to lower tax receipts is readily available, if you choose to ignore the data, there is nothing I can say that will change your mind. Good night.
Johnny - sorry you feel that way, but yeah, our conversation probably needed to end. I was feeling the exact same way about you, so obviously no progress is being made.

I did want to get back to an earlier comment from baltimore aureole. I think I agree with the general thrust of your argument; taxing the rich alone doesn't address inequality if we don't also create an environment that allows everyone to work hard and succeed. Education is obviously the necessary starting point for that agenda. But, as you correctly observe, throwing money at the problem has thus far done nothing. The school to prison pipeline is growing increasingly problematic. School administrators often resort to out-of-school suspensions for minor infractions. We aren't fostering an environment conducive to education or creating a curriculum that engages with our students. There is also a weird cart/horse problem here, however. It is difficult to create conditions for educational achievement in our cities when poverty is widespread, but its difficult to address poverty without creating a stronger educational system. I don't consider myself an expert on education by any means, but it seems apparent that we need to do something. I will put in one plug, though. Throughout college I participated in competitive debate. My university (Emory) has been on the forefront of creating a network of "Urban Debate Leagues," starting in Atlanta (they now exist in Baltimore, Chicago, Milwaukee, Oakland, Boston, and a few other cities). I had the opportunity to work with a number of kids in the Atlanta Public School system through this program, and found it quite valuable. Teaching students to actually express their own opinions and consider both sides of an issue, rather than just memorizing formulas or being lectured as, seems to work as an effective tool for motivating and engaging students who would otherwise default to apathy. There have been a couple of studies attempting to research the impact of these programs on school performance, which are available here: http://www.urbandebate.org/emergingresearch.shtml

And general information here: http://www.urbandebate.org/value.shtml

I advise anyone interested in educational issues to at least give the program a look.
Political debate needs to be concrete if it is to gain and hold attention and present voters with distinct alternatives. Using the Buffett Rule was a way of putting inequality and fairness on the political agenda. A set of proposals on education and social mobility would produce a welter of plausible alternatives that would not clarify the underlying trends in American politics that have led to its current state of deadlock, confusion and impotence in the face of national problems.

If voters ask themselves how the tax code has been skewed so blatantly in favor of the 1%, and what can be done to reverse its effects, they may recognize why it matters who becomes president and who writes the federal budget.
mlino - I get your point, but I don't think proposing the Buffet rule was necessary to "put inequality on the agenda." Inequality has already been thrust onto the agenda and is a regular subject of discussion. The question is: what do we do about it?

You say we need to "clarify the underlying trends." And one of those underlying trends is a skewed tax code. But pre-tax income inequality has also been growing. Tax loopholes for the rich are one part of inequality (an important one, even), but hardly the whole story.

This gets at the heart of what I was trying to argue: we need to "clarify the underlying trends" such that people don't become convinced that the ONLY explanation for inequality is tax unfairness. If that narrative predominates and covers up the need for greater investment in education, labor protections, etc, then this unique political opportunity may end up being used counter-productively.

Along these lines, the Boston Review just hosted a conference on inequality that brought in a number of academics discussing various aspects of the issue. I advise checking it out, here: http://www.bostonreview.net/BR37.2/ndf_inequality.php. This discussion includes some people from both sides of the political spectrum attacking the issue from multiple angles. I think this sort of discussion is valuable. One presentation in particular focuses on a point very similar to my own, i.e. increasing tax fairness by itself is not sufficient to address the structural causes of inequality: http://www.bostonreview.net/BR37.2/ndf_david_b_grusky_inequality.php.
I know many who came to America with many disadvantages and now are home owners and do quite well while those who have had their families here for generations do poorly.

Life is what you make of it. No, it's not fair but having a group of politicians trying to 'make' it fair is more unjust.
Harrison:

The politicians aren’t really trying that hard. Lost on the far left here at Open Salon is the simple fact the Democrats could have easily passed the Buffet Rule. In other words, the Democrats were astutely aware that raising capital gains taxes was a certain kiss of death to a fragile economy. What’s happening now is just a show vote. The Democrats want to run television ads claiming to support something that polls well. They have already proven, by their inaction, to oppose the Buffet Rule.
Harrison - what exactly is "unjust" about trying to reduce inequality. I'm sure you have an argument, but its hard to infer your logic from just that statement. Sure, some people succeed from poor conditions (my father is one of them), and others do poorly despite starting off well. That doesn't change the fact that the majority of those who start off in poverty well end up there. Go to an inner-city school in a lower-income neighborhood in Atlanta, New York, Baltimore, etc and tell those kids that "life is what you make of it." I'm sure that makes everything OK.

This argument does ultimately come down to different understandings of what is ethical. If you truly believe that we should embrace a Hobbesian state of nature and just let everyone fend for themselves, then obviously: no, we should not have the government try and address inequality. But I personally think its worth making SOME effort, even an imperfect one, to help give other people the same opportunity to make something of life that I had.

Johnny - I actually agree with you that the Democratic push for the Buffet rule was pure political theater; that was actually the main argument of my post, albeit not the one you chose to hone in on. I would challenge your explanation for the situation though. I think that the Buffet rule was theater because the Dems knew that the GOP would never pass it, not because they "secretly" know that raising capital gains taxes would hurt the economy. What exactly do you think they should have done to "easily" pass it? The Buffet rule was blocked by a GOP filibuster. I suppose you are saying they could have used the reconciliation process to ram through a 51 vote version of the bill, as per health care? I at least hope that is your argument. But I would hesitate to say that is "easy." The reconciliation process brought the Dems a ton of political heat on health care, with Republican accusations of "circumventing" fair process, etc. The fact that Democrats could technically have passed the rule (it would take time obviously, not an overnight kinda thing) is not the same thing as saying they could have "easily" passed the rule.
What exactly do you think they should have done to "easily" pass it?

Following the 2008 election, the Democrats had filibuster-proof control of the Senate, a large majority in the House and the Presidency. Accordingly, they had the power to pass anything they wanted, without Republican support.

I suppose you are saying they could have used the reconciliation process to ram through a 51 vote version of the bill, as per health care?

That is not what I’m saying. The reconciliation process was used for Obamacare because following Scott Brown’s election; the Senate could not pass a revised Health Care Bill. They had to use the reconciliation process and the 51-vote threshold, otherwise Scott Brown and the Republicans would Filibuster new health care legislation.

If you have any more questions, I’ll be more than happy to answer them.
Johnny - That makes more sense. It was not obvious from your original statement that you were saying "The Dems could have easily passed the Buffet rule (in early 2009)." I obviously don't need you to explain why the reconciliation process is unnecessary if you have 60 votes.

I still disagree with your assessment of their motives, however. The Dems didn't hike capital gains taxes earlier because it wasn't on the agenda; the president was focused on Health Care, the stimulus, and the auto bailout. Moreover, income inequality didn't become a major issue until OWS and the subsequent discussion brought it into the forefront of our political discussions. In early 2009, the Democratic party was filled by Keynesians. I would argue that we have seen a genuine shift to the left by the Dems (and to the right by the GOP), which has now made issues like the Buffet rule more salient.

That being said, there are some legitimate arguments in favor of your interpretation as well. After all, Obama is the president who bailed out the financial industry, rather than using the opportunity to take a populist stand. His major economic advisors were largely ex-finance/ex-banking types (Summers, Geithner, etc) who almost certainly opposed major regulations and taxes on the financial sector. So yes, it's possible that Obama still doesn't support the Buffet rule, and only brought it up now because he knew it wouldn't pass (but he knew it polled well). I think there is some evidence of a more genuine populist shift by Obama, but given the general mismatch between his actions and words, I can see the merits behind your point.

But for someone so concerned with unjustified conjecture and the distinction between facts and opinions, I think it would be worthwhile to clarify that when we are speaking about the motives and intentions of politicians, neither of us can do much more than offer some reasons to believe our interpretation.
I freely admit that I’m offering my analysis of political happenings and supporting my opinions with facts, logic and arguments. Up until this comment, I did not feel you understood that your opinions require support. Yes, that was a backhanded compliment, but it’s rare any liberal gets my compliments, backhanded or otherwise.

There was one factual error from your comment. Basically the same Keynesian Democrats from 2009 remain today. It’s the Republican’s that saw a massive influx of new blood following the 2010 elections.

Look, we still disagree on just about everything you write, so I’m not sure if I see any benefit in offering my two cents regarding the Obama Presidency (or lack thereof). Regarding fairness, you should read the linked WSJ article from today’s paper; I took the liberty of cutting and pasting my favorite part.

If it were learned that the car driven by the average American is 10 times more likely to burst into flames than the car driven by the richest 1%, what should the policy response be? Should it be to mandate that cars driven by the rich burst into flames more often?
Income inequality is a strange obsession, at least to the extent the obsessives focus their policy responses on trying to adjust the condition of the top 1% rather than improving the opportunities of everyone else.

http://online.wsj.com/article/SB10001424052702304432704577349780876117356.html?mod=WSJ_Opinion_LEADTop
The authors’ central objective is to refute the argument that inequality has increased because the wealthy have not “paid their fair share” in taxes.

Gotta be honest here, Stephen, I see this sentence from the WSJ opinion piece, in large part, being a straw man.

Most of the people I’ve seen arguing this issue do not seem to be stressing that the inequality has increased because the wealthy have not paid their fair share of taxes…but rather that the rich ought to pay a higher portion of their total income in taxes whether it contributes to the increasing disparity or not.

We need the extra tax money; truly we do. The poor cannot give it…they have none. The middle class is getting so stressed financially, it will soon fracture if they must bear the burden. The rich are the only ones with extra money that can be taken as taxes and still not have their backs broken.

For the record, I do not think it is going to happen. I think the rich will do what the nobility of 18th century France did—tough it out and refuse to make concessions. They definitely can do it (they have the power)…and I think they will.

Perhaps that will result in the same result that occurred in day in France.

Things suck right now and I don’t see them getting appreciably better before getting much, much worse. The WSJ article makes some good points, but the WSJ and its adherents truly do not “get it!”

And nothing significantly ameliorating will ever take place until that lot does “get it.
Johnny – I appreciate the civility, but I think that you became so focused on attacking some points I made in my comments that you may have missed the central point of my original post.

Quickly, my point re: Dems was that increasing public pressure on the issue of inequality has pushed sitting Dems in a more leftist/populist direction, not that new, more populist Democrats were elected in 2010.

Returning to the central issue, you say:

“Income inequality is a strange obsession, at least to the extent the obsessives focus their policy responses on trying to adjust the condition of the top 1% rather than improving the opportunities of everyone else.”

I agree! Completely! The entire point of my original post was that Obama should be focused on articulating a positive agenda for rebuilding opportunities for the middle and lower classes, rather than making the centerpiece of his agenda an increased tax on the rich. That’s why my post was actually CRITICAL of Obama’s focus on the Buffet rule, pointing out that there are far more important efforts that should be undertaken to rebuild equality of opportunity in America. By focusing on the Buffet rule, it is easy for conservative opponents (like the authors of the WSJ article you linked) to point to Obama as someone “vilifying wealth.”

That being said, I would still defend that we should raise capital gains taxes. But this is simply a means to fund a broader agenda, rather than serving as a solution to inequality in and of itself. My argument is not that we should “adjust the condition of the top 1%” to bring them down to our level.” Rather, if we are going to create new opportunities for everyone else, then we will require more revenue to invest in things such as education. Given our massive deficit, that increased spending must be accompanied by increased revenue, and I think that the wealthy are the ones who can best handle that burden. Admittedly, the Buffet rule itself may only add $50 billion or so in revenue, but that is better than nothing. It would also help to rectify the situation wherein CEOs and financial types get paid with deferred stock options and other forms of “compensation” that aren’t counted under income taxes. Even if you think it’s unfair to raise taxes on a hard-working small business owner who just wants to invest some of his “hard won” capital, you can hopefully at least admit that something is wrong with the fact that a CEO can receive a “compensation package” worth 300 times as much as his average employee, yet that CEO will only pay 15% in taxes because his compensation is counted as “capital gains” and not income.

Of course, if you are correct that raising the capital gains rate would decrease receipts, then it would not be effective policy for raising revenue. Thinking about it further, I realized that I had not given enough consideration to that aspect of the argument. I did some research (nothing extensive), looking for the “readily available” data on rates vs receipts. I found that the debate is not as clear-cut as you make it out to be. There are some studies supporting your interpretation, but there are others than refute it. The CBO’s conclusion was:

“Because of the other influences on realizations, the relationship between them and tax rates can be hard to detect and easy to confuse with other phenomena. For example, a number of observers have attributed the rapid rise in realizations in the late 1990s to the 1997 cut in capital gains tax rates. But the 45 percent increase in realizations in 1996—before the cut—exceeded the 40 percent and 25 percent increases in 1997 and 1998 that followed it. Careful studies have failed to agree on how responsive gains realizations are to changes in tax rates, with estimates of that responsiveness varying widely.”

Source: (for some reason it wouldn’t let me post this link, so just google “Capital Gains Taxes and Federal Revenues” and CBO – it’s an October 9, 2002 report).

You may be right that raising taxes would not increase revenue as much as anticipated, as some people might hold back on realizing gains. But assuming that the increased rate is permanent, it seems to me that there would be little incentive to hold off. Sure, if realizing my gains now will be taxed at a 30% rate, and waiting will let me get a 15% rate, I’ll wait. And if I know my rate will go up, I’ll realize all my gains right now with the lower rate. But after that short-term effect, if the rate stays in place for several years, the market will stabilize. Investors aren’t going to stop realizing their gains entirely. If the CBO takes this into account and still estimates that the Buffet rule would be revenue positive, then I’m going to stick by that estimate until presented with strong evidence the other way.

Lastly, I think your car safety analogy is not quite fair. Blowing up rich folks’ cars stands no chance of improving the safety of others’ cars. Raising taxes is not analogous, as the increased revenue that comes from raising taxes can be invested in ways that help the middle and lower classes.

Frank – I get your main point, but I’m not quite sure what you criticizing as a straw man. Are you saying that the WSJ article creates a straw man, or that I have created a straw man of the WSJ article?

Regardless, I agree that most people (the sophisticated ones, at least) do not argue that the cause of inequality is tax evasion by the wealthy. The disparity itself is driven by a wide range of structural factors, and rich folks are still paying for a large share of our tax revenue. But, like you say, we need more money, and they are the ones who can best shoulder that burden. Our tax system may very well be progressive, but it is not progressive enough. If we are to invest more in education, and health care, and various services that help provide greater opportunities for average Americans, then we will need a lot more money. More than the Buffet rule can possibly provide. I can only hope that the pressure eventually builds to the point where politicians are forced to respond to the masses rather than the wealthy. Getting money out of politics would be a good start (in terms of greater restrictions on/transparency for both campaign donations and lobbying expenditures).
Frank – I get your main point, but I’m not quite sure what you criticizing as a straw man. Are you saying that the WSJ article creates a straw man, or that I have created a straw man of the WSJ article?

Definitely not you, Stephen...you were just reporting what the WSJ opinion writer wrote.

I was saying that the WSJ opinion writer (probably purposefully) created the straw man of “people suggesting that the inequality has increased because the wealthy have not paid their fair share of taxes.”

That is an easily defeated argument…and much more easily handled than the argument “the rich ought to pay a higher portion of their total income in taxes whether it contributes to the increasing disparity or not.”

(I am happy you seem to agree with that, Stephen.)

Tough topic. I wish you well with it.
Stephen:

In two sentences can you please restate your central point? For the record, you’ve once again written a novel of beliefs I/Republicans disagree with.

Frank:

The WSJ writer was not using a straw man. He clearly meant Obama, Democrats, your local Occupy Movement, pretty much anyone that thinks we should tax the rich or that Government should do something about inequality.
The authors’ central objective is to refute the argument that inequality has increased because the wealthy have not “paid their fair share” in taxes.

Fever, you wrote:

The WSJ writer was not using a straw man. He clearly meant Obama, Democrats, your local Occupy Movement, pretty much anyone that thinks we should tax the rich or that Government should do something about inequality.

I am not Obama, I am not a Democrat, I am not part of the local Occupy Movement…but I also agree that we should increase taxes on the rich. As I said, we need more tax revenue in order to run this country properly…and they are the only people who have extra money.

However, the WSJ author was saying that the increase in inequality (which definitely exists) is happening because the wealthy has not paid their fair share of taxes.

My point is that most of the people I’ve seen arguing this issue do not seem to be stressing that the inequality has increased because the wealthy have not paid their fair share of taxes…but rather that the rich ought to pay a higher portion of their total income in taxes whether it contributes to the increasing disparity or not.

So I do see the comment as a straw man.

In any case, I DO think the rich have to be taxes much, much more. The money has to come from somewhere...we have things that have to get done.

If the extra taxes do slow down the increasing disparity...good. But that is not the reason I am advocating doing it...and I do not think most people are advocating it for that reason.
Frank:
It’s safe to say both Stephen and I have no idea what you’re talking about as it relates to whatever points your trying to make about straw men. In fact, the more lip-service I give it, the more I feel I’m debating with a 4th grader.

Moving forward, I hate to be the bearer of bad news but the Buffet Rule is nothing more than a rounding error as it relates to the Federal Budget. More importantly, it’s a rounding error with the added detriment of sapping growth, killing jobs, hindering investment, etc. So when you say we need the Buffet Rule because “we have things that have to get done” I suggest you first roll up your sleeves and solve this math question: 4 billion (one year of added tax revenue) / 3.8 trillion (one year of Federal spending)

On a positive note, I’m glad you’ve seen the light on Stephen’s ridiculous income inequality argument for the Buffet Rule.
Frank – Gotcha. I figured that’s what you were saying, just clarifying. I agree; the WSJ folks pick the easiest version of the argument to answer. It’s true that the 1% pay a large share of our taxes, but it’s nothing close to the FDR-type levels when the top income tax rate was some 90 percent. There are some economists (I’m thinking Emmanuel Saez and Thomas Piketty) who argue that only a return to that rate will generate the revenue necessary to restore equality of opportunity and generate a more vibrant middle class.

Johnny – For a two sentence summary, I would advise looking at the conclusion paragraph of my original post. Here it is for you:

“The Buffet Rule is a useful proposal. Indeed, it is common sense; there is no reason that millionaires should be paying a lower rate than middle class Americans. On the other hand, it is problematic that Obama is making the issue central to his campaign, rather than focusing on a positive agenda to rebuild the middle class and create sustainable foundations for social mobility and growth. In the long run, Obama’s strategy may actually play into the conservative “class warrior” rhetoric, distracting the public from the legitimate structural issues that are producing inequality.”

You refer to my “ridiculous income inequality argument for the Buffet rule.” This demonstrates to me that you have basically locked in on one or two sentences you disagree with at the expense of actually trying to process what I’ve said before forming your opinion. You’ll notice that the line that originally sparked our debate was when I said “I understand the argument that wealthy people are advantaged by a lower capital gains rate.” As in, that is not the argument I am advancing, but I am aware of it. Now, I do agree with the position that it is unfair for professional investors to make their income in the form of capital gains, and have it taxed as such. I say it is unfair as a normative/ethical issue. I never said that “raising taxes on the wealthy will solve inequality.” You just jumped on this line and then started defending a lower capital gains rate, I happened to disagree with you so I engaged. But that entire conversation distracted from my original point. So, for example, you bring up the “math problem” – the Buffet rule only raises 4 billion (CBO says 5 billion, not much difference) per year. You’ll notice that in my original post I wrote:

“The authors are correct to observe that raising taxes on the wealthy would not be a silver-bullet solution to addressing inequality … Not only would the returns be relatively marginal (some $50 billion over 10 years), but as long as corporate special interests maintain disproportionate influence in our government, it seems unlikely that those revenues will be directed towards education, labor protections, health care, or other guarantors of social welfare.”

So my point, all along, has been – the Buffet rule isn’t a bad idea, but it’s not a great one either. It doesn’t generate much revenue, and it provides no guarantee that said revenue will actually go towards a positive agenda for re-creating equal opportunities for all Americans. I don’t OPPOSE the Buffet rule (unlike you, I would disagree that it stifles growth/investment; we can get into that debate if you really want), but I also don’t think that it “solves income inequality” by itself. It needs to be linked to a broader agenda of challenging corporate influence in politics (campaign finance reform, etc) and directing tax revenues towards the middle class instead of special interests. I assure you that if you go back and read my original post, you will realize that the argument I presented is somewhat different from the “traditional” liberal position you’ve been so quick to attack. I DO think that the government should do something about inequality. I DO think that the wealthy can afford to pay more taxes to help out with a dramatically under-funded government. I DO NOT think that taxation alone is a solution to inequality (i.e. I have never argued that we should make rich peoples’ cars blow up more just to adjust their conditions down to the median). This is why I started by post by saying that I am frustrated with Obama’s narrative on inequality. Because, as I wrote:

“Some level of inequality is inevitable. Some people will be more successful in their economic pursuits than others, whether from luck or from skill. This is simple mathematics; there will always be a distribution of talent centered on an average. … While this assessment is reasonable in the abstract, it ignores the true injustice that plagues America; an inequality of opportunity. In a fair society, everyone will not end up equally wealthy, but each person should have an equal chance to be successful. … The statistics detailing the rising income inequality in America have been widely cited during the past year, but the less frequently referenced data on social mobility are frankly much more disturbing. … Why then, you might ask, am I frustrated with Obama? Because his campaign for the Buffet Rule has played directly into this conservative counter-narrative! Rather than focusing on “investing in the middle class”—the central theme of his state of the union—he has trumpeted a policy that is easily branded as “punishing the upper class.””

You keep asserting that you disagree with pretty much everything I’ve written. Yet you’ve then quoted a WSJ article making the argument that we should be focused on “improving opportunities” rather than adjusting the conditions of the rich, which was the point I was making all along. Which seems to confirm to me that you just saw one or two lines you disagreed with, assumed you disagreed with everything I said, and failed to give a fair reading to my original argument. I suggest that you re-read my post with these facts in mind.
“So my point, all along, has been – the Buffet rule isn’t a bad idea, but it’s not a great one either.”

Wow, that’s quite a firm point you’ve been making. In case you didn’t notice, that was sarcasm. Let me help you out, The Buffet Rule is a terrible idea.

“I suggest that you re-read my post with these facts in mind.”

It’s the same story with each one of your comments/posts/novels, one sentence into it you make a statement I find preposterous and then you expect me to continue as if it never happened. I’ll be happy to answer your questions or point out falsehoods, but debate is simply not possible with you. Speaking of falsehoods…

“It’s true that the 1% pay a large share of our taxes, but it’s nothing close to the FDR-type levels when the top income tax rate was some 90 percent.”

Your comparing apples (tax rates) to oranges (share of taxes paid). There is no correlation (which makes logical sense) between tax rates and share of taxes paid. By way of specific example of which I have hard data to support, the CBO states “the share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007." The tax rate in 1979 for the rich was 70%, double what it was in 2007.
Johnny – Thank you so much for your helpful sarcasm decoder. You are correct that I have not made a firm point about the Buffet rule itself. That was never the objective of my post; you have simply tried to make that the center of discussion since you obviously have a lot to say about it. My argument was about the strategic and political implications of making the Buffet rule the center of Obama’s anti-inequality agenda. I think that it makes Obama prone to being labeled as a “class warrior” who is more interested in punishing the rich than helping the middle class. Your response demonstrates that perfectly.

You may not want to let any one sentence I type go unchecked, and that’s fine. You’re welcome to attack any point I’ve made. But you asked me for a summary of my argument. I gave you one. It was this:

“The Buffet Rule is a useful proposal. Indeed, it is common sense; there is no reason that millionaires should be paying a lower rate than middle class Americans. On the other hand, it is problematic that Obama is making the issue central to his campaign, rather than focusing on a positive agenda to rebuild the middle class and create sustainable foundations for social mobility and growth. In the long run, Obama’s strategy may actually play into the conservative “class warrior” rhetoric, distracting the public from the legitimate structural issues that are producing inequality.”

You then picked one line that was easy to ridicule (if you read my entire response, and then came away with the conclusion that my argument was simply “the Buffet rule is neither good nor bad,” and nothing else, then your reading comprehension skills obviously require improvement), ignored my actual argument (“it is problematic that Obama is making the issue central to his campaign, rather than focusing on a positive agenda to rebuild the middle class and create sustainable foundations for social mobility and growth”), and then pretended like I have said nothing useful. What sort of fruitful discourse are you hoping to generate? There is at least one thing we both have seemed to agree upon here—it is more useful to invest in opportunities for the middle and lower classes than to simply punitively tax the rich—yet you are unable to even acknowledge this point of agreement, as you are instead primarily interested in finding one line from my post you can quote and then attack. That’s what you think “debate” should look like?

As further demonstration of this, you pick one sentence—which, I would note, is almost entirely peripheral to the argument I am having with you—and then attempt to discredit it. Let’s say, just for the sake of argument, that everything you said about this sentence was correct (increasing the tax rate on an income bracket would not increase their share of taxes paid). Would that actually disprove (or interact in any way with) any of my arguments about “equality of opportunity”? The whole point of my post was to table the discussion of taxes and focus on more important issues and deeper structural explanations for inequality. I will still continue to defend the principles of progressive taxation for other reasons, but that is an entirely separate discussion that has nothing to with the arguments I’ve presented in this post. If all you really want to do is have a discussion about why the Buffet Rule is bad, then feel free to create a post of your own about why the Buffet Rule would stifle growth and investment. I’ll come comment on your blog and we can start a separate discussion there about the merits of the Buffet rule itself. But the entire reason I said “The Buffet rule isn’t bad, but it’s not great” is that the merits of the Buffet rule are not the subject of this post. This entire conversation has been directed away from the strategic/political discussion I attempted to advance about the best way of FRAMING the anti-inequality agenda.

But I’ll take you on your random point anyway. You are correct that “tax rate” and “share of taxes paid” are not identical terms. I never said that they were. I said that IF the top 1% paid taxes at the same rate as during FDR’s time (~90%), THEN the “share of taxes” paid by the top 1% would be higher. There is obviously a correlation between tax rate and share of taxes paid. If you take a person with income level X, and increase their rate from 30% to 50%, they will pay more. I don’t understand what you could possibly dispute about that. Obviously if you only make 30K, but pay 90%, your share of taxes paid will still be lower than someone paying 30% on 4 million. I suppose that could be what you are saying. But, holding income as a constant, an increase in rate will result in an increase in payments. That’s all I was saying. Your desire for semantic nitpicking seems to overwhelm your capacity for substantive engagement. In fact, YOU are the one comparing apples (“share of taxes paid”) to oranges (“share of INCOME”).

Ultimately, this entire comment thread has been hijacked by your desire to debate about why the Buffet Rule is bad policy. If you want to engage with the arguments I have made about the necessity for creating equality of opportunity through investment in education and other social welfare programs, then I am happy to continue this dialogue with you. If you want to continue with your strategy of taking one random sentence and pointing out some semantic flaw, then I advise you to go elsewhere.
Stephen,
You keep taking the Fever bait. He's not interested in what you say, he's interested in getting you to react. Please restate the premise you restated after the first attempt at clarifying the obvious....
Fever has nothing but dogma, others opinions-as-his and a laughable, naive, grade school economics template. And he can't even get that right.

The real tax problem is based on a dysfunctional distributive template and an ideologically-driven impoverishment of workers/consumers. This reality defies dogma, but empiricism has never come between a dogmatist and his dogmafood.

Meanwhile, Stephen, the most you can accomplish with Fever is a Carpal Tunnel injury.
Paul:

Thanks, Stephen and I were in desperate need of some comic relief. If Stephen develops a Carpal Tunnel injury, it will be no fault of mine as I have repeatedly asked him to type less. However, with every comment I’m provided an even larger platform of material. At this phase of the conversation, my comments type themselves.

Stephen:

Let’s step back, on April 18th, 10:13pm I asked you to give me a central point. You responded with another long-winded diatribe, but I was able to identify what I felt to be your central point

"So my point, all along, has been – the Buffet rule isn’t a bad idea, but it’s not a great one either"

My apologies if I picked the wrong central point, but for fear of making a similar mistake, will you once again give me your central point? Please note, you do not need to support this point, I just want to be sure I know what it is.
Fever

It’s safe to say both Stephen and I have no idea what you’re talking about as it relates to whatever points your trying to make about straw men.

I guess it is safe. You will not go to prison for it. But it is incorrect, as Stephen just indicated he does get what I was saying.


The WSJ writer was not using a straw man. He clearly meant Obama, Democrats, your local Occupy Movement, pretty much anyone that thinks we should tax the rich or that Government should do something about inequality.

That was NOT my point…as I have now pointed out a couple of times.

Sorry you cannot understand what I am saying, but if you read it again and still cannot understand it, I will try to make it clearer.

In fact, the more lip-service I give it, the more I feel I’m debating with a 4th grader.

I am definitely not a 4th grader…and I do not think nor write like one. This kind of insult should be beneath you—but that is a decision you have to make on your own.
Excellent essay. I prefer the term income inequity to income inequality. The lack of such equity is tied to 20th Century historical norms of tax rates that allowed "job creators" to keep more than adequate shares of wealth while holding income and wealth concentration by the top .01% in check to a degree. Having given that up, we see the ultra-rich getting ultra-richer to the detriment of the 99.99%. I would like to increase the top tax rate to just a portion of where is sat between the 40s and the 80s.