The following are quotes from Obama's 2009 budget:

Quote :

""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." "Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected." "There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few. . . . It's a legacy of irresponsibility, and it is our duty to change it.""

This language is very disconcerting for two reasons:

1) One of the primary factors that has lead to our widening income gap is rapid technological progress that has increased the returns of skilled workers (i.e. those with college degrees) The demand for higher skilled workers has outpaced the supply, leading wages for jobs requiring advanced skills to increase much faster than wages for less-skilled jobs. According to economist Tyler Cowen:

Quote :

"Starting about 1950, the relative returns for schooling rose, and they skyrocketed after 1980. The reason is supply and demand. For the first time in American history, the current generation is not significantly more educated than its parents. Those in need of skilled labor are bidding for a relatively stagnant supply and so must pay more. Improvements in technology have raised the gains for those with enough skills to handle complex jobs. The resulting inequalities are bid back down only as more people receive more education and move up the wage ladder. Income distribution thus depends on the balance between technological progress and access to college and postgraduate study. The problem isn’t so much capitalism as it is that American lower education does not prepare enough people to receive gains from American higher education."

http://www.nytimes.com/2007/05/17/business/17scene.html

For Obama to say that our most productive citizens did not "play by the rules" is very disingenuous. It seems his plan is not to help those at the bottom climb to the top, but rather to pull those at the top down to the bottom. This has severe implications for future economic growth. A lot of those in the top 1% are small-business owners who employ a large share of the American workforce. Severely taxing these individuals not only causes them to hire fewer workers, but also decreases the incentive for future entrepreneurs to engage in the very risky endeavor of starting a new business. Secondly, punishing high earners reduces the returns on education and thus reduces the incentive for unskilled workers to pursue additional educational opportunities, which ultimately exacerbates the shortage of skilled workers.

2) Obama also makes the mistake of ignoring income mobility. As per a study by the Treasury Department, there is hardly a set group of individuals who perpetually remain in the top 1%. On the contrary, the vast majority of those in the top 1% were not in that group 10 years later. To treat the top 1% as a bunch of wealthy families may make Obama sleep better at night, but it is inconsistent with reality. https://treas.gov/press/releases/hp673.htm

Pursuing policies to pull down those at the top will undoubtedly lead to a host of unintended consequences. If there is anything we have learned from 60+ years of redistributing wealth it is that it simply does not work. As Aristotle put it, “the worst form of inequality is to try to make unequal things equal. “

[Edited on March 24, 2009 at 3:31 PM. Reason : .]

3/24/2009 3:31:05 PM

Quote :

"A lot of those in the top 1% are small-business owners"

o rly?

3/24/2009 3:51:16 PM

1 study from the govt

and really - 1% of the top - small business owner - what do you define small business owner as?

3/24/2009 4:06:53 PM

You talk about the rich being attacked as if they aren't capable of defending themselves.

3/24/2009 4:26:58 PM

Quote :

"You talk about the rich being attacked as if they aren't capable of defending themselves."

lol

3/24/2009 4:41:09 PM

Quote :

"and really - 1% of the top - small business owner - what do you define small business owner as?"

There's this perception among people on the left that the top 1% is comprised entirely of people like AIG executives earning $10 million + a year, sailing around on private yachts, and sipping their champagne

If you have a household income of $250,000 or more you're in the top 1%, therefore, top 1% easily = small business owner

The people on wall street earning $10 and $20 million a year are more like the top 0.001%

3/24/2009 4:57:39 PM

Quote :

"and really - 1% of the top - small business owner - what do you define small business owner as?"

Quote :

"About 1.3 million tax returns would pay an extra $30.1 billion under Obama's plan to raise the top two tax rates. Depending on how we define "small business," these higher tax rates would raise taxes on 45 to 55 percent of small business income. Using an inclusive definition of "small business"—every individual tax return with any business income (IRS Schedules C, E or F)—a majority of the nation's small business income, 55 percent, would see a tax increase, and the total additional tax collection would amount to $16.4 billion. Using a more restrictive definition of "small business"—every individual tax return with business income greater than 30 percent of wage income—50 percent of small business income would see a tax increase, and the total additional tax collection would amount to $15.1 billion. If we restrict the definition of "small business" further—including only those tax returns where business income exceeds 50 percent of wages-even then, 45 percent of the nation's small business income would see a tax increase. ...[Small Businesses] are an important source of innovation and risk-taking, creating between 60 and 80 percent of net new jobs, employing over half the labor force, and generating more than one half of the nation's gross domestic product. Higher income tax rates reduce the investment spending of entrepreneurs and the likelihood that they invest at all, discouraging the growth or expansion of small businesses."

http://www.taxfoundation.org/news/show/23860.html

[Edited on March 24, 2009 at 5:08 PM. Reason : .]

3/24/2009 5:07:51 PM

Quote :

"If you have a household income of $250,000 or more you're in the top 1%, therefore, top 1% easily = small business owner"

I thought I heard/read a stat during the Joe the Plumber bullshit that said the majority of small businesses don't make 250k a year.

3/24/2009 5:08:16 PM

^ JtP was confused about many, many things, obviously.
1) he didn't understand progressive tax structures
2) he apparently didn't know the difference between $250k income per year and $250k of built up wealth

and most importantly, 3) he didn't understand the difference between revenue and profit. Obviously most/many small businesses have >$250k of revenue, but not many of them have over $250k profit

3/24/2009 5:14:29 PM

Interestingly the IRS doesn't understand the difference either. Which cost me a couple of hours of time explaining to the IRS why I didn't owe them a few thousand dollars.

That being said, this is not relevant to the topic.

[Edited on March 24, 2009 at 5:36 PM. Reason : "this" being my comments in this post]

3/24/2009 5:35:05 PM

^^
Also, the tax increases are marginal tax increases above the $250,000 profit margin, right? So small businesses would only see a tax increase on every dollar of profit earned above $250,000. At least, I think that's right.

Quote :

"There's this perception among people on the left that the top 1% is comprised entirely of people like AIG executives earning $10 million + a year, sailing around on private yachts, and sipping their champagne If you have a household income of $250,000 or more you're in the top 1%, therefore, top 1% easily = small business owner"

I would fall into this category of leftists holding this perception. I wouldn't imagine that $250,000 would be anywhere remotely close to the top 1% of income earners. However, I haven't seen any concrete data, so I'll give your assertion the benefit of the doubt.

[Edited on March 24, 2009 at 5:35 PM. Reason : ]

3/24/2009 5:35:10 PM

I googled.

In 2006, the income threshold to break into the top 1% was $388,806. I would imagine that for 2009, this number will be a little lower.

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

3/24/2009 5:51:30 PM

Those poor, poor folks earning a few hundred thousand dollars a year.

3/24/2009 6:02:01 PM

Quote :

"Also, the tax increases are marginal tax increases above the $250,000 profit margin, right? So small businesses would only see a tax increase on every dollar of profit earned above $250,000. At least, I think that's right. "

yes, that's how the "progressive tax system" i cited in #1 works.

There have been business owners and talk show people encouraging businesses to do what they can to make just under $250,000 so they "aren't taxed more" or aren't "punished with higher taxes" or whatever. i heard a quote from some woman business owner saying she was going to do whatever possible so that her income next year was "$249,999".

These people are obviously just hurting themselves, and denying themselves more money, and probably don't deserve to own their own businesses if they don't understand how the tax structure works.

3/24/2009 6:03:55 PM

Quote :

"Those poor, poor folks earning a few hundred thousand dollars a year."

I would worry more about those poor, poor folks that work for small businesses, which is where 60 to 80 percent of new jobs are created.

Raise taxes on business owners and you are likely to see higher and more sustained unemployment levels, as well as reduced investment. Sure, the Fed has to collect revenue from somebody, but are you sure you want to take a bigger bite out of business owners and investors at a time when we desperately need them to help get us out of this recession?


[Edited on March 24, 2009 at 6:08 PM. Reason : 2]

3/24/2009 6:07:01 PM

Quote :

"Raise taxes on business owners and you are likely to see higher and more sustained unemployment levels, as well as reduced investment."

yes, yes, we've heard all that before. But how about coughing up some proof of this?

Quote :

" but are you sure you want to penalize business owners and investors at a time when we desperately need them to help get us out of this recession?"

obama has said he will allow the Bush tax cuts to expire naturally in 2011. Until then, nothing will change. Hopefully in 2 years, the worst of this will be behind us and the gov't can hope to start increasing revenue again

3/24/2009 6:09:58 PM

Quote :

"But how about coughing up some proof of this? "

C'mon, man, this is something that you learn in high school. It's something that (almost) every economist will tell you. It is one of the backbones of capitalist economic theory. I really don't have time to explain this shit.

All things being equal, higher taxes on business owners and investors will have a repressive effect on employment and investment. This is not a radical statement. It's a concept that is pretty much established in economic circles.

[Edited on March 24, 2009 at 6:21 PM. Reason : 2]

3/24/2009 6:17:41 PM

3/24/2009 6:18:07 PM

Quote :

" backbones of capitalist economic theory"

lol

3/24/2009 6:19:02 PM

It figures that moron would jump in to this fray, since he is the only other poster I can think of who would question the concept that raising marginal tax rates would have a negative effect on investment and employment, all other things being equal.

[Edited on March 24, 2009 at 6:24 PM. Reason : 2]

3/24/2009 6:22:52 PM

Quote :

"All things being equal, higher taxes on business owners and investors will have a repressive effect on employment and investment. This is not a radical statement. It's a concept that is pretty much established in economic circles. "

I would seriously like to see what exactly a tax hike from 36% to 39% does for employment and investment. We're not talking about going to 50% or anything here - 3 percent.

And you have to go back to the idea of what taxes are for - to run the government and to "spread the wealth" (OMG SOCIALISM!) Reaganomics have been a failure and the Laffer Curve was never proved right, where decreased tax rates have not resulted in higher overall tax revenue because of the supposed reinvestment in business from tax savings. That money either goes into the company's bank accounts, or out to the shareholders in dividends.

3/24/2009 6:29:15 PM

Quote :

"For Obama to say that our most productive citizens did not "play by the rules" is very disingenuous."

Why do you assume that only the most productive citizens are the ones who got rich? What about the people who got rich by playing the stock market in the short term, or embezzled from their companies, or received a huge inheritance? Large sums of money does not logically imply that its acquisition was through hard labor alone. It's the assholes who scammed their way into the upper class or otherwise didn't "earn" their money that Obama is mainly referring to.

3/24/2009 6:30:33 PM

Quote :

"all other things being equal"

all other things are never equal, especially when you mess with something like a marginal tax rate.

3/24/2009 6:31:20 PM

Quote :

"I would seriously like to see what exactly a tax hike from 36% to 39% does for employment and investment. We're not talking about going to 50% or anything here - 3 percent. "

Yeah, I don't believe that reverting to the pre-Bush tax levels would be disasterous, especially if we are a year into our economic recovery at that point.

Quote :

"And you have to go back to the idea of what taxes are for - to run the government and to "spread the wealth" (OMG SOCIALISM!) Reaganomics have been a failure and the Laffer Curve was never proved right, where decreased tax rates have not resulted in higher overall tax revenue because of the supposed reinvestment in business from tax savings. That money either goes into the company's bank accounts, or out to the shareholders in dividends."

Now you are just jumping right into democratic talking points. I said nothing about Reaganomics, the Laffer Curve, or increased revenue from decreasing tax rates. I simply said that higher marginal tax rates will have a negative effect on growth, capital formation and employment, which I stand by. I don't like the rhetoric coming from the Obama campaign about those evil rich people gaming the system. It distracts from the more important point of how his proposed tax increases will affect the rest of us.

3/24/2009 6:36:19 PM

I think the best way to "attack the rich" is with extremely high, yet progressive, sales taxes on luxury goods and services:
Wanna legally buy an hour with a super-model quality hooker? 40% tax
Wanna legally play the slots in all 50 states? 50% tax
Wanna buy a yacht? 55% tax.
Wanna buy a diamond tennis bracelet? 60% tax
Wanna buy a multi-million dollar mansion on a mountain-top? 65% tax
Wanna buy expensive business or industrial equipment? 1% tax

(And I'm a libertarian. If we can pull off no taxation at all, great... but until then, fuck the top 0.1%)

[Edited on March 24, 2009 at 6:56 PM. Reason : ]

3/24/2009 6:51:44 PM

Quote :

"Reaganomics have been a failure and the Laffer Curve was never proved right"

Nor has it been disproven. On the contrary, the OECD acknowledged a laffer curve-like effect:

Quote :

"…additional government revenue should be balanced against the risk that high corporate tax rates will reduce economic activity and Japan’s potential growth rate, in the context of growing international tax competition. Given the serious fiscal situation, the government has thus far resisted pressure from domestic business groups, such as Nippon Keidanren (2006), to reduce statutory corporate tax rates. However, the impact of lower tax rates on government revenues is likely to be limited by positive supply-side effects. Indeed, in some OECD countries, revenue was boosted by lower tax rates, thanks to higher profitability and the increased size of the corporate sector (2007 OECD Economic Survey of the United Kingdom). Indeed, the amount of taxable income in the corporate sector tends to be higher in countries with low corporate tax rates (Figure 12). Consequently, corporate income tax receipts show less variation across countries as the impact of higher tax rates is negated by the lower level of taxable income. As a result, there is almost no correlation between the statutory corporate tax rate and corporate tax receipts as a share of GDP (Panel B). …The weak degree of progressivity in the personal income tax system thus has a positive impact on both labour inputs and on human capital and labour productivity. Maintaining the relatively low degree of progressivity, or even reducing it further subject to the fiscal constraints, would be beneficial for Japan’s growth potential."

http://lysander.sourceoecd.org/vl=1610936/cl=30/nw=1/rpsv/cgi-bin/wppdf?file=5kz839rkxlxt.pdf

Quote :

"Why do you assume that only the most productive citizens are the ones who got rich?"

For the most part, wages are a function of marginal productivity. Sure, there will be exceptions to the rule as you have noted, but these are exceptions that should not be the cause of policy changes. I suggest the following IMF paper for further reading:http://www.imf.org/external/pubs/ft/wp/2008/wp08185.pdf

[Edited on March 24, 2009 at 7:08 PM. Reason : /]

3/24/2009 7:04:45 PM

Quote :

"It figures that moron would jump in to this fray, since he is the only other poster I can think of who would question the concept that raising marginal tax rates would have a negative effect on investment and employment, all other things being equal. "

all other things being equal? When is that ever the case?

3/24/2009 7:12:56 PM

That's what I said, that shit never happens.

3/24/2009 8:05:28 PM

Quote :

"You talk about the rich being attacked as if they aren't capable of defending themselves."

Oh they can defend themselves and their businesses. Its called moving it out the US, which of course is a boone for the economy here.

Quote :

"These people are obviously just hurting themselves, and denying themselves more money, and probably don't deserve to own their own businesses if they don't understand how the tax structure works."

I read an opinion article from someone who works for Citi. He had nothing to do with their dire straits, and only started working there in April 2008. Since he works for a firm that received bailout money, under that bonus tax bill that passed the House he'll be taxed on any bonus after he reaches an income of $250,000. So he says he'll just take an unpaid sabbatical for the last 3-4 months of the year. I don't see how that hurts him too much, but it sure hurts the economy when productivity nosedives.

3/24/2009 8:07:14 PM

I disagree with steeping the progressive tax

Never every wealth american is some AIG exec making a bonus off the tax-payer dollar.

I think there should be a flat tax. The lower classes should at least chip in for all these free services they feel they deserve but are unable to responsibly budget enough to provide for themself.

3/24/2009 8:30:05 PM

Another interesting insight into the top 1%. The below is a letter to the editor appearing in the WSJ:

Quote :

"In regard to the appearance of French economists Thomas Piketty and Emmanuel Saez in President Barack Obama's budget ("The Obama Rosetta Stone," by Daniel Henninger, Wonder Land, March 12): In their use of statistics of the top 1% of income earners, Messrs. Piketty and Saez make the same false assumptions that the Internal Revenue Service does. In 1980 income disparity began to take off in the U.S. leaving the top 1% of income earners with a greater share of the income pie. Like the IRS, these French economists use "household" income as their measure. But consider that 1980 was about the time when large percentages of college-educated women began to enter the workforce. Many of these professional women would go on to marry other professionals. This in effect created a doubling of "household" income for many families. At the same time out-of-wedlock birth rates and divorce began to skyrocket creating large percentages of single-parent households. It should be no surprise that a two income household has a much higher income than a single-income household even if all workers make exactly the same income. Surgeons will always make more than janitors, as anyone who has ever gone "under the knife" will agree with, and their income should not be distorted because they are married to a fellow surgeon. My working wife and I often find ourselves in this 1% bracket, but if we were to divorce we would never come close. It's ironic that the left decries the income disparity between men and women, but in the instance when women earn equal pay it is used to inflame class warfare. Steve Walde Easton, Conn."

http://online.wsj.com/public/page/letters.html

3/24/2009 8:50:59 PM

250,000 is not really that much money for two married professionals anyways

I mean, it's more than my future wife and I will probably have but everybody acts like households that make over 250k are high-rolling, mansion-living fatcats

3/24/2009 9:26:50 PM

It's comfortable as fuck everywhere except NYC and inner beltlines in all the big cities.

My wife and I were making over 100k combined up until I got the pink slip. To see our income go up to 250k, or even to 175-200k would be almost like winning the lottery and our continued prudent money managing mentality would guarantee a cush as fuck retirement. It's a lot of fucking money for anyone not already accustomed to that type of income.

3/24/2009 9:37:13 PM

Quote :

"It's comfortable as fuck everywhere except NYC and inner beltlines in all the big cities."

Which is where NONE of the rich people live.
http://www.visualizingeconomics.com/wp-content/uploads/income_map.gif

3/24/2009 9:41:15 PM

^^There has actually been research in this area:

Quote :

"A large literature has documented a signicant increase in the return to college over the past 30 years. This increase is typically measured using nominal wages. I show that from 1980 to 2000, college graduates have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. This implies that college graduates are increasingly exposed to a high cost of living and that the relative increase in their real wage may be smaller than the relative increase in their nominal wage."

http://www.econ.berkeley.edu/~moretti/inequality.pdf

3/24/2009 9:51:33 PM

^^

I mean, no one says they have to buy the condo downtown, they can commute to work like the rest of us.

3/24/2009 9:54:55 PM

Quote :

"Why do you assume that only the most productive citizens are the ones who got rich? What about the people who got rich by playing the stock market in the short term, or embezzled from their companies, or received a huge inheritance? Large sums of money does not logically imply that its acquisition was through hard labor alone. It's the assholes who scammed their way into the upper class or otherwise didn't "earn" their money that Obama is mainly referring to. "

This statement is amazing..so full of class warfare ignorance.

The people who got rich playing the stock market --the vast majority of them did play by the rules. They risked their capital in order to make a profit. They invested money into businesses, so those businesses could expand and grow.

People who recieve inheritances also play by the rules. There's nothing illegal in leaving money to your family. There's nothing evil in passing along the fruits of your life's labor. You're just ticked that somehow, in your twisted class-warfare world, the family didn't "deserve" it.

Most rich people didn't "scam" their way to success. Most of them worked their asses off. And at the point when their income was finally growing the fastest, that's when the gov't came in with its punishing progressive income tax.

The super-rich are now living off their wealth and investments. They aren't too worried about the income tax. If the gov't keeps going after them, they'll simply move to a country that appreciates the benefits the wealthy bring to a society.

But the young wage-earners who are in their prime income-making years. When they are building a family and career...that's who gets hit the hardest with progressive rates.

With his cruel statement, Obama assumes everyone who is successful somehow made it by breaking the rules. He ignores the value of hard work, risk, sacrifice. He spits on the millions of people who earned their riches honestly. We need a leader who will re-affirm to the country that success is a good thing, and that a rich person isn't evil just because he is rich.

3/24/2009 10:42:52 PM

I get a nice chuckle out of you people who on one hand demand that everyone "pick themselves up by their bootstraps" and make something of themselves and then on the other support unbridled inheritance entitlement. It's actually rather revolting and hypocritical.

3/24/2009 10:50:35 PM

I AM OUTRAGED AEROSMITH COULD SAY SUCH A THING

3/24/2009 10:50:59 PM

Quote :

"With his cruel statement, Obama assumes everyone who is successful somehow made it by breaking the rules. He ignores the value of hard work, risk, sacrifice. He spits on the millions of people who earned their riches honestly. We need a leader who will re-affirm to the country that success is a good thing, and that a rich person isn't evil just because he is rich. "

-->
"This statement is amazing..so full of class warfare ignorance."

3/24/2009 10:57:54 PM

Quote :

"It's the assholes who scammed their way into the upper class or otherwise didn't "earn" their money that Obama is mainly referring to."

Those assholes make up a very, very small percentage of the upper class but they did manage to do a disproportionate amount of damage to the economy leading up to this recession and as a result have become the poster children for the mess that we're in. Obama's using that to gain support for, and to justify, hiking the tax rate on the "rich".....something he was intent on doing long before this recession and something he was going to do recession or not. This mess just gives him a nice brush with which to paint the entire upper class, probably 95% of which are hard working, honest, individuals, so that he can rally people behind this class warfare that he was intent on practicing long before we got into this economic mess.

[Edited on March 24, 2009 at 11:36 PM. Reason : ]

3/24/2009 11:20:00 PM

^ huh?

The intent is not to punish "the rich" for something you allege 5% of them are responsible for.

How exactly do you expect the looming $60 trillion debt to be handled without raising taxes? And if you're going to raise taxes, you get more bang for your buck (no pun intended...) taxing "the rich."

And, if only 5% of "the rich" were dishonest in their acquisition of wealth, what percent of the "non-rich" are fat, lazy leeches on society?

And how much is Obama going to tax the rich? More than Clinton? More than Bush I? What did the beleaguered rich people do up to the 70s?

3/24/2009 11:40:08 PM

Quote :

"What did the beleaguered rich people do up to the 70s?"

They hid their money from the government

3/24/2009 11:42:19 PM

Quote :

"But the young wage-earners who are in their prime income-making years. When they are building a family and career...that's who gets hit the hardest with progressive rates."

I go to work proud everyday knowing that LaShaeda is counting on me to provide her and her 6 children with their foodstamp payments, gov't funded housing, and free health care services.

Or to pay for Ricky Smith who instead of saving for retirement throughout his life decided to squander his income buying new cars, gambling on horse races, and boozing down everynight at the bar down the street. Now he's looking for uncle sam to fund his retirement and pay for his medical expenses many of which are increased due to his obesity problem.

3/24/2009 11:43:41 PM

And I was just thinking to myself HUR missed last weeks window for his stupid fucking racist rant about welfare.

I bet if we dig far enough there are lazy fucks in your genealogy who sucked on the governments teat you prick.

3/24/2009 11:49:23 PM

Quote :

"I get a nice chuckle out of you people who on one hand demand that everyone "pick themselves up by their bootstraps" and make something of themselves and then on the other support unbridled inheritance entitlement. "

The problem comes when someone wants to pick themselves up using my bootstrap.

There is a difference between bequeathing your money to people you value, rather than to some strangers via politicians.

3/24/2009 11:50:35 PM

^ one benefits society as a whole, and one doesn't?

3/24/2009 11:52:54 PM

rich people have to be loving this bank plan that came out yesterday

[Edited on March 24, 2009 at 11:54 PM. Reason : holy shit this thread was made today?? wtf]

3/24/2009 11:54:18 PM

^^ That's right. Bequething your wealth to someone you value benefits society as a whole, while having the police take it for complete strangers does not.

3/25/2009 12:09:29 AM

Quote :

"Bequeathing your wealth to someone you value benefits society as a whole"

Please elaborate. . .

3/25/2009 12:11:30 AM