In which Richard proves supply side economics

Key USTax Facts

  • 15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
  • 361,000: The number of households in 2011 estimated to have $1 million in taxable income.
  • 43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
  • 23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
  • 47.4: Percent of profits corporations paid in taxes in 1961.
  • 11.1: Percent of profits corporations paid in taxes in 2011.

So, err,cut the tax rates, wages rise, the economy expands and loads n\’ loads get stinking rich.

And the problem with this scenario is?

7 comments on “In which Richard proves supply side economics

  1. Ideologically speaking I’m closer to you than Richard so this isn’t a rhetorical trollish comment – more of a genuine question.

    I suspected he’d say that real or median wages over that period – arguably the degree to which those benefits acrue to ordinary people – are, as far as I know, almost flat. In other words, yes the economy expands and lots of people get rich but those outcomes are massively skewed towards a relatively small proportion of the country.

    That’s the response I often have difficulty countering – thoughts?

    Tim adds: Mr. Masters has it below. That flatlining income is an artefact of the way that the US statistics are presented. Once you adjust for smaller household size (as he says…over that time period I think it’s as much as 1/3 rd smaller) and also adjust for total compensation, not total wages (most important in the US as health care insurance is such a large part of total compensation) then median income has risen strongly over the period.

    It’s very much true that growth in incomes has been skewed. That the incomes of the high earners have been growing faster than that median. But the median has been growing strongly as well.

    The interesting question is whether that rising level of inequality has been necessary to get the growth in general….or even whether it’s a side effect of that growth. Or even, would the growth have even occured under the older tax system?

  2. Not enough of the people getting stinking rich are semi-retired accountants with a fetish for insane burblings about the morality of tax?

  3. In the period that we are talking about, individual average (usually median) income has about doubled. However, the commonly quoted statistic is about household income, which has increased by a small amount over the same period (about 6%). This is because households come in all shapes and sizes, and have been getting smaller on average over this same time period.

  4. If we take more (and we should ‘cos wealth is naughty) then we as government (and with me to advise) can do more things.

    That’s the really scary thing. What more things? Give more away? Have even more than 20,000,000 people in the UK (yeah I know its the US but he lives in the UK) receive some form of benefit? Create an even bigger under-class of initiative-free benefit recipients?

    Pay first class air tickets for europoliticians for travelling in Europe where the average flight time is 2 hours??? Big scandal yesterday in Spain.

    Oh yes we can do so much more. Oink, oink, think Animal Farm at the top and ‘It’s my right’ at the bottom.

  5. I agree with you Tim on many things but playing devil’s advocate. Is it possible that housing costs have gone up so much to wipe out the gains for many people?

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