I've seen this on the internet thought I'd share Bar Stool Economics Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this: The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59. So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.! And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant the men began to compare their savings. I only got a dollar out of the $20, declared the sixth man. He pointed to the tenth man, but he got $10! Yeah, that's right, exclaimed the fifth man. I only saved a dollar, too. It's unfair that he got ten times more than I! That's true!!' shouted the seventh man. Why should he get $10 back when I got only two? The wealthy get all the breaks! Wait a minute, yelled the first four men in unison. We didn't get anything at all. The system exploits the poor! The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and h ad beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
Observers, perhaps, but not objective ones. "Objective and accurate statistical analysis" supporting supply side economics? Please provide me with this evidence. Really. I'll wait. On the supply-side nostrum that top-end tax cuts would trickle down to produce unparalleled growth, Galbraith the farm boy was colorfully clear: "After feeding oats to the horses, one should not gaze too closely at what trickles down to the sparrows." http://www.johnkennethgalbraith.com/index.php?page=articles&display=176&from=12
I don't think small gov is the cause per se, I think small gov is necessary until something like this happens. The gov had to drop interest rates to save over leveraged and under capitalized companies, who in turn affected good companies, which in turn affected everyday people. What the hell do you mean "requiring lender to lend to high risk individuals"?? The gov didnt MAKE that happen, they stood by (small gov) and let it take place...."let the markets work". The companies were lending to every top, dick, and harry because the heavily leveraged secondary market was buying up all the paper. They were lending to everybody because wall street was BUYING everything...and making boatloads until it all came crashing down resulting in billions in write downs and the undermining of a lot of companies in the same sector who didnt necessarily make the same mistakes. It also caused the credit crunch making in f'ing impossible for people and companies to get new loans despite the fact that they have a decent credit history or balance sheet etc. Then the whole market starts to tank b/c there is no credit and all these big companies that looked great aren't...that creates panic. so the fed has to step in to drop rates. Look at how far the s&p fell despite way lower rates and tell me what would have happened if the fed hadn't dropped rates. The secondary market was taking advantage of every thing it could and there was no one looking over their shoulder to say stop. The american people then have to suffer for the profits of few. Once again I think this is just a natural cycle. But if you really think less regulation is required to fix all this you're smoking crack IMHO
A Treasury study done at the request of the Joint Economic Committee of Congress traced the income reported by 14,351 taxpayers between 1979 and 1988. One result is that 85.8% of those who started in the bottom quintile in 1979 had climbed to a higher quintile by 1988. In fact more of them were in the top quintile in 1988 than were still in the bottom quintile. After WWI the top income tax bracket was a high 73%. But the Revenue Acts lowered it to 25% in a set of reductions starting in 1921 and completed in 1926. This was done because it was argued that high taxes were restricting economic growth. Tax revenue surged during the 1920's from $719 million in 1921 to $1.16 billion in 1928, an increase of over 61%. There is no escaping the fact that when the taxation of large incomes is excessive, they tend to disappear. In 1916 there were 206 incomes of $1,000,000 or more. Then the high rate went into effect. The next year there were only 141, and in 1918, but 67. In 1919, the number declined to 65. In 1920 it fell to 33, and in 1921 it was further reduced to 21. http://www.bigissueground.com/politics/blair-trickledownreagan.shtml The story of the guys in the bar above proves the point nicely.
Wouldn't that be expected?: as people get older they earn more. In fact I could have been one of them (banking wasn't such a great payer in 1979).
I am curious as to what, exactly, is the problem that you are referring?!?!? We are living better, living longer, have a very high literacy rate, worry more about whether we are going to get the 58" or 72" t.v or wait until the 96" models come than we are about whether we will eat tonight. My taxes on adjusted gross income of over 150K last year was 13.5%: the lowest in the industrialized world. Things are exactly as they should be or there would be enough crybabies to demand changes. The vast majority are fine wth the current situation because the current situation is fine. Currently, the biggest crybabies are those wanting Lower taxes and Smaller gov't. If you think that is the answer to your problems then, please, move to the 3rd world and you can have both.
Sure that is what is expected in a system where you keep most of what you earn. It isn't a given in a system that taxes most of what you earn. People then have incentive to find ways around paying the tax which often times aren't legitimate ways. So you end up with people who should be moving up, but are actually either remaining stagnant or moving down. The more critical question is whether the tax structure is accomplishing the objective. The objective in this country is almost always to increase tax revenues AND get the rich to pay most of the tax. There are times that one or the other is accomplished, but getting both to happen simultaneously is the trick.
The average american actually pays about 15% federal income tax, so you were a huge 1.5% off. But point well taken.
This may be true in Latin America or even Italy, but there has never been an epidemic of conducting business off the books here. The same people who were doing it in the '70s are probably still doing it today; it's not how much they have to pay, it is that they have to pay. BTW, I don't recall the government taking most of what I earned in the '70s. So again, you follow a group of people across time they are going to rise through the brackets.