How do you define “just redistribution”? Probably as one that doesn’t take from you

I don’t know anybody who is suggesting that we revert to the 91% top rate of the Eisenhower years, but the current rate is too low if we want to discourage yet more crazy speculative activity. Effectively cutting the payroll tax would be even more helpful.

If you hoard money it leads to deflation not inflation. Keynes banana economy illustrates this. Increased demand for money is inherently deflationary not inflationary. Your argument is hard to understand because it seems like your confused. Increasing money supply is inflationary. Increasing credit is generally inflationary since banks since loans result in more money.

Additional demand for something increases its price whereas increasing supply for something decreases its price. When the price of money (i.e. the goods required to purchase a dollar) increases this is called deflation and the reverse is called inflation. When you go to a grocery store you can think of it as the grocery store purchasing money from you using food.

He never mentioned socialism but you did. Republicans calling Obama a socialist is bad. But you talking about socialism when someone brings up a reasonable criticism of Obama is just as bad. BTW, it does not bode well for reasonable discussion when you get basic facts wrong. Obama will not restore the tax burden of the top 0.1% to Clintonian levels…he will increase it far beyond that. If Obama only rescinded the Bush tax cuts then you would be right. But he is forcing the rich to pay for social security. This is a massive tax increase which might not even increase tax revenues if it puts us on the wrong side of the lafler curve (Matt describes this above).

“The great expansion of the American economy in the 30’s, 40’s, and 50’s took place when the highest marginal rates were astronomically high by current standards.”

You need to re-read your history books. The American economy contracted by over 50% during the 30s alone. We also had recessions during the late 40s and 50s. The tax hikes (among other bad policies, ex. contraction of the money supply by 33%, hike in tariffs) of the early 30s took us from a recession to a depression.

Take a simple, albeit extreme example: suppose we live in a society where we can consume either pizzas or hamburgers (not a very healthy place . Both hamburgers and pizza’s cost $10, and equal amounts of both are consumed. Now suppose a ‘pizza tax’ of $1000 is imposed. Pizza consumption would plummet to zero, pizza production would fall and no pizza tax revenue would be collected. Additionally, consumption of hamburgers would skyrocket.

Now slowly decrease the pizza tax to say $10 (so that pizzas now cost $20). Pizza consumption would rise, but it would still be less than if there were no pizza tax in the first place. People would simply consume more hamburgers because it was more economical.

So it is with work. If you impose taxation on work (income tax) of say %100 people will not work, they have no economic incentive to do so (they will have an awful lot of leisure time however). If anything, the experience with communist countries backs up this argument. If you raise income taxes to %100 (effectively communism) labor supply will diminish and economic growth will drop to zero. Now lower from 100% to something less than %100 and people will work, just not nearly as much as if they had no income tax at all.

Of course, with no income tax there would be a huge drop in government revenues, so that is not optimal either. The key is to find the tax rate that optimizes both labor supply (hence economic growth) and tax revenues.

for every extra dollar someone earns above $40k, they only make 60 cents. This provides a disincentive for people to work harder.

I think that the idea that people work ‘harder’ to earn more money is largely false. I don’t think a big oil executive making $50,000,000 a year is working 1,000 times harder than a construction worker making $50,000 a year.

You can increase your income somewhat by working harder, but only up to the point where you’re working ‘very hard’. Beyond that you have to improve your income by working at things that are higher value, generally by gaining experience and skill, or applying skills in different markets (say, managing a plumbing company instead of doing skilled plumbing work)

So to say that a progressive tax rate is a disincentive for people to work harder is, I think, completely wrong. It might be disappointing to find that one has to pay more taxes as one’s income increases, but because that advancement isn’t linear with an increase in the exhaustiveness of the work, it doesn’t provide a disincentive to increase one’s income.

The monetary view states that there needs to be enough money in an economy to meet the demand for the efficient exchange of goods and services. Excess money is necessarily and naturally devalued (inflation). Hoarding money creates false demand. If you save more than you will ever actually need in your life that excess will eventually dilute the value of all money in circulation (inflation). The wealthy person’s demand for ever more money and the creation of false demand through financial speculation is more destructively inflationary than a tight labor market or the wage demands of unions. The current bailout plan is an attempt to prevent the evaporation of a huge amount of artificially created wealth (created through the false demand of speculative derivatives) while preventing the inflationary effects of injecting hundreds of billions into the general economy. The only way to do that is to take it back through taxes. The only fair (and least disruptive) way to do that is to tax the wealthy individuals and institutions who are primarily benefiting from the bailout.

Jane Goodall tells what happened when a large pile of bananas is presented to a troop of chimps. The alpha male sat on top of it and wouldn’t let any other chimp near. He sat there and ate what he wanted while most of the fruit rotted away. Humans are social animals that are supposed to be smarter than chimps. We shouldn’t be fooled by promises that in a capitalist economy anybody who wants can become as wealthy as they want. Soon the dollar would be worth exactly one rotten banana. Progressive taxes can moderate inflation and protect the reasonable levels of savings that reasonable people aspire to.

People who make a lot of money tend to spend a larger fraction of their money on goods and services that benefit foreign countries. E.g. they tend to travel more abroad. So, by taxing the rich more and spending the tax money on projects at home (and not on Iraq), you benefit the economy.

If you make increase the costs of companies to hire low skilled workers, then the production involving cheap labor goes abroad, e.g. to China. This is why the US has a trade deficit with China.

The net amount of taxes the governement collects should also go up a lot. This will allow the government to start big projects like building bases on the Moon and on Mars, developing nuclear fusion. The money needed to fund these projects are not that big compared to the net output of the US economy. By engaging in these difficult projects, a lot of new technologies will be developed that will benefit everyone.

Currently, a lot of the output of the economy goes to waste in the form of things like the production of beer, lipstift, Big Macs etc. etc.

What’s wrong with increasing taxes which may lead people to buy a little less Big Macs and leading to some job losses at McDonald’s and Fatburger, if you get more jobs for highly skilled people at NASA and if we get nuclear fusion a few decades earlier?

The fact is high rates of taxation do constrain the economy by limiting disposable income. My income has increased dramatically over the past 5 years, but when it went through the ranges of what might be considered upper middle income my taxes also jacked up so much that my take home pay barely increased. So as the Republicans point out, where is the incentive to innovate? The best thing is the flat tax so you aren’t punished for going up the ladder. If everyone is taxed at the same rate wealthy people are still paying much higher taxes.

The fact is, a worker can be a “taxpayer” whether or not they owe any income tax. Just about every worker is subject to federal Social Security and Medicare taxes totaling 7.65 percent on every dollar of earnings, up to $102,000 per year. (For earnings over $102,000, only the 1.45 percent Medicare tax applies.) Low-income workers, and retired and jobless persons as well, also pay federal excise taxes whenever they buy gasoline or pay a telephone bill, for example. Obama and other Democrats argue that for low-income workers, refundable tax credits are not “welfare” but, in effect, a reduction in their overall federal tax burden, counting payroll taxes.

Congressional Budget Office figures show that even those in the lowest-earning fifth of households pay an effective federal tax rate, on average, of 4.3 percent of their income, despite benefiting from existing federal refundable tax credits to a major degree. This group had average income of $15,900 in 2005, the most recent year for which CBO has done the calculations. But despite receiving “a federal check” through the income tax system that boosted income by an average of 6.5 percent (this shows up as a negative tax rate in the CBO tables), they still paid an average of $600 in federal taxes. That’s true even after subtracting the effects of refundable tax credit “welfare.”

But this argument ignores the fact that Americans who don’t pay income taxes still pay payroll taxes. The factcheck.org article on this says:

That’s it, you get what your employer “thinks” you’re worth, which proves nothing about “how hard you work” etc. Is there anything objective in that? How can we know the actual magnitude of work, it isn’t like mass or charge. No Yvette and Roman, I’m not saying I do know how to measure net utility; I’m saying that nobody really does, including employers and economists they might hire to get “objectivity” in the equation. So, how can they possibly pay people according to objectively “how hard they work”? That’s the point.

Hence psychology, class sentiments, etc. are mostly behind what people get paid. Therefore, it’s hard to argue, it’s wrong to tax soandso who “earns” (is paid, according to someone/s’ mere opinion in most cases) 10x of me at a higher rate than me – because we don’t have a way to prove that other person really contributed 10X worth of output, productivity, whatever you want to call it – to the economy.

Actually, consider that employers can offer higher gross pay to offset taxes anyway. If net pay is the actual “sale” of the labor from being the “observed quantity” – that likely means that higher-earners aren’t even losing out in relative terms compared to without the taxation. Few appreciate this issue.

Haven’t you wondered, how companies can complain about “worker salaries” making them uncompetitive for export, but still paying so much to CEOs? The pressure to do so derives from corporate Boards not really paying for value in a free market. In a true market economy, purchasers must allocate (as money, a zero-sum game at a point in time) from their own scarce buying power. If I spend my own money, I won’t pay $400 for a haircut unless it is damn good for me, because I’d have $400 less to buy other things. But the Board members don’t use their own personal money! They use control to allocate company funds – if they decide to pay the CEO 10 M instead of 5M, no skin off their personal backs. They still have whatever they earn as members regardless. Hence there is no responsible pressure for thrift as there is for a genuine market buyer.

As for B&J’s: Their main problem was, they couldn’t compete with other companies that used the system above. If employees had to be paid in such a way that the allocator had that much less remaining for his own use, that would be like a single proprietor or direct shareholder control. There would be little incentive to pay huge salaries. If all companies were organized differently or faced tax disincentives to pay a wide gap, the ones that wanted a smaller gap could compete.

Well, does “capitalism” require letting companies do as they please? No, it doesn’t. Regardless of how much “natural freedom” individuals may have to buy and sell including of labor, corporations are artificial entities given rights, from the government, of limited liability and limited (and not by enough) legal personhood. Groups like that, versus individuals, do not have such rights by natural law or whatever source you think offers them to individuals. Hence government/society has the right to demand conduct according to some permitted rules and charter for corporations, including how much to pay, etc. I can’t prove that individuals (like tree-trimmers asking householders for work) are subject to such a quid pro quo, but corporations certainly are.

Note of course that nothing in the argument “of principle” over taxation and regulation rights proves that high rates or many regulations etc. are good. It only shows that taxation and regulation have a right and foundation for their very existence.

A CEO, on the other hand, has his salary decided by the board of a company. If they think he’s worth $250k a year then fine, it’s their company and if that’s the sort of money they think they need to pay it is literally their business. IRC, Ben and Jerry’s ran into a problem in the 1980s where they had salaries capped at 5x whatever the lowest salary was for an employee in the company; they ended up changing that rule when the ~$80,000 for a CEO wasn’t enough to entice an outsider.