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August 01, 2012

More on Federal Tax Rates and Revenue over Time

Because I'm an annoying sort of Blog Princess, I have more tax charts. Over the last few weeks I have been trying to make sense of the ongoing arguments about tax rates, paying down the deficit, et cetera, ad nauseam. It's tough when so many charts grossly oversimplify or game the numbers (mostly by omission). Hopefully some of these charts will help.

Here's the first one: what it shows is Total Federal Tax Revenue over time, broken out by the type of tax, as a percentage of GDP. The data comes from the ever-helpful Tax Policy Center website.

fedtaxrecpts_overtime.png

Why did I waste my time on this? Because I see too many charts that lump all federal tax revenue together and then use it to make claims about what will happen if we raise specific taxes. This is misleading because the composition of federal tax revenues changes over time and these changes muddy the waters. Now the same problem affects this chart, because the composition of the tax base (income wise) also changes over time. I tried to address that with the chart I put up last week and we'll be looking at it again later in this post.

Meanwhile, here's what I see in this chart:

1. For the past decade, total federal tax receipts have been BELOW the historic average (18% of GDP).

2. For 6 of the past 10 years, individual federal tax receipts have been BELOW the historic average (7.9% of GDP).

3. Corporate income tax receipts have been below their historic average (2.89% of GDP) since 1973. Three decades.

So my first question is: with our debt to GDP ratio increasing over time, how do we justify a decade of individual, corporate, and total federal tax receipts that are all below their historic averages?

It's a bit odd to see so many folks talking about a return to historic average rates and/or revenues as "Taxmageddon". Even this article admits, we're not talking about new taxes. We're talking about the expiration of tax cuts that were temporary.

The federal debt is money we already owe. It can't be "unspent". In what world are we seriously going to cut spending so much that we not only halt several decades of growth in federal spending (and several decades of federal revenues that don't match spending), but pay down the debt?

Discuss amongst your ownselves.

The next chart comes from intrepid VC commenter Yu-Ain Gonnano. It shows the change in the share of total federal income tax receipt over time, by income quintile:

taxshare.png

The two takeaways here are:

1. The top earning 20% are paying over 90% of federal income taxes received.

3. The other 80% of earners are paying a far lower share than they used to.

This is one area I wish Republicans would hit harder. The two themes the Dems keep hitting over and over are that we need to make the well to do pay their "fair share" and that we don't have a spending problem, we have a revenue problem.

What this chart makes crystal clear is that the well to do are already paying far more than their fair share, and that you can't have 80% of earners pay less without reducing total tax revenues. If we have a revenue problem, it's because a full 80% of taxpayers aren't paying as much as they used to.

Posted by Cassandra at August 1, 2012 05:51 PM

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Comments

In what world are we seriously going to cut spending so much that we not only halt several decades of growth in federal spending...?

In what world are we seriously expected to accept steady growth in Federal spending as the new normal?

I'm not willing to throw in the towel just because the struggle is hard and will be long.

Eric Hines

Posted by: E Hines at August 1, 2012 07:18 PM

The reason people call it "Taxmageddon" is that all of these various and several cuts end at the same time, suddenly imposing a significant jump in the tax rates.

But I'm not sure why you're worrying over the point; you're going to get this tax increase. Congress would have to take action to stop it, and Congress shows no sign of having the capacity to do so. The question for the incoming Congress/President will be whether to further raise taxes, or take steps to reduce them, and if so just where, etc.

Mr. Hines remembers the reason that the anti-tax pledge was so important when it first began. It was part of a comprehensive agenda to shrink the size of the government: "Starve the beast."

The problem is that the beast can be fed with future debts. So, Congress agreed to the tax cuts, but kept right on spending like bandits.

Almost the required number of states have passed laws calling on Congress to convene a Constitutional Convention for the purpose of considering a Federal Balanced Budget Amendment. That's what we really need: then the Keynes-followers would need to put aside during good times, rather than just running up debts in bad times. And also good times. And really any time.

We need to retrench around that issue, and look to starve the beast anew once its alternative food source is removed.

Posted by: Grim at August 1, 2012 09:33 PM

Odds are that Taxmageddon (and any tax increase) won't lead to paying off debt. It will lead to spending increases.

Make large, permanent cuts in the size and cost of the federal government. Then I might trust the government with temporarily increasing taxes to pay off the debt.

Also, when you say 'a return to historic average rates,' you're ignoring all the years prior to 1942. I think you'll find we're still WAY above the historical rates if you take the graph back to 1789.

Finally, those tax increases to pay for WWII were intended to be temporary as well.

Posted by: Tom at August 1, 2012 11:36 PM

Congress would have to take action to stop it, and Congress shows no sign of having the capacity to do so.

I'm both more, and less, sanguine about this. I don't think we'll get the Obama tax increases on 1 Jan stopped this year, unless the Republicans fold again, and agree to selling out a particular Progressive-disfavored (yes, I'm attributing a motive) group of Americans in favor of getting a compromise for compromise's sake. I am confident, though, given a favorable election outcome, that those tax increases will be rolled back in Jan 2013--thus limiting the cost of taxmageddon to the cash flow cost of a month.

But as Tom points out, those tax increases, if they stand, will go for increased spending, not for paying down the debt. Others have pointed out, in another thread, the power of the special interests. This is one of the reasons I think we need a series of very firm elections: those politicians whom we elect who then fail our instructions because they still think their special interest paymasters are more important will need to be fired at the next election. This part of the series of elections actually gets easier with each cycle: as the special interests see their subordinates repeatedly fired, they'll tend to lower their willingness to commit the funds to buy their politicians. Cruz' primary victory in Texas last month, Mourdock's primary victory in Indiana earlier this year, and all those Tea Party candidates who ousted entrenched Republicans in 2010 primaries show both the path in this regard and the possibilities.

Tom is also right about Federal revenues as a per cent of GDP. This averaged well south of 10% in the period 1910-1917, then there was a non-reduced jump for WWI. This also includes a significant period of no income tax revenue prior to 1913.

Eric Hines

Posted by: E Hines at August 2, 2012 12:28 AM

Mr. Hines remembers the reason that the anti-tax pledge was so important when it first began. It was part of a comprehensive agenda to shrink the size of the government: "Starve the beast."
The problem is that the beast can be fed with future debts. So, Congress agreed to the tax cuts, but kept right on spending like bandits.

Bingo :p

That's the problem with the "starve the beast" idea - it doesn't work as long as the money can be borrowed.

Posted by: Cassandra at August 2, 2012 08:36 AM

when you say 'a return to historic average rates,' you're ignoring all the years prior to 1942. I think you'll find we're still WAY above the historical rates if you take the graph back to 1789.

Tom is also right about Federal revenues as a per cent of GDP. This averaged well south of 10% in the period 1910-1917, then there was a non-reduced jump for WWI. This also includes a significant period of no income tax revenue prior to 1913.

What happened in 1913? Oh yeah?

...the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system. The amendment gave Congress legal authority to tax income and resulted in a revenue law that taxed incomes of both individuals and corporations. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $5.4 billion by 1920. With the advent of World War II, employment increased, as did tax collections—to $7.3 billion. The withholding tax on wages was introduced in 1943 and was instrumental in increasing the number of taxpayers to 60 million and tax collections to $43 billion by 1945.

Read more: History of the Income Tax in the United States — Infoplease.com http://www.infoplease.com/ipa/A0005921.html/#ixzz22OO9mU15

Posted by: Cassandra at August 2, 2012 08:46 AM

Eric:

The problem isn't just special interests.

The problem is VOTERS. For a long time, household deficit spending has been just as bad as the federal government's deficit spending. If voters felt the same way you do, we wouldn't be having this conversation.

Posted by: Cassandra at August 2, 2012 08:48 AM

Sorry - I was in a hurry earlier.

First of all, it doesn't really make a whole lot of sense to calculate the average historic tax rate including years when we didn't even have a federal income tax. Nor does it make sense to include years when we didn't have social security taxes.

That's what's known as comparing apples and oranges - it's not a valid comparison.

Secondly, the assumption that collecting less revenue will force Congress to spend less money isn't supported by the historical record. It just isn't.

What we *should* be talking about is a law that makes deficit spending very difficult (and that would require either overwhelming bipartisan support or some kind of executive order by the President). That would leave us an out for emergency situations.

I found it interesting that excise taxes have gone down as a share of GDP. Romney made up much of the Massachusetts deficit by raising fees and excise taxes.

Finally, it would also be a good idea to start dedicating some portion of federal tax receipts to paying off existing debt. This is what households do - if you're in over your head, you have to step up payments on what you already owe.

Posted by: Cassandra at August 2, 2012 09:22 AM

Two comments:

There's a third takeaway from my tax burden chart: It puts the lie to the Tax Cuts for the Rich™ claim. The share of the federal tax burden has been increasing at a steady rate through both Republican's "Tax Cuts for the Rich™" and Democrat's "Make Them Pay Their Fair Share™" administrations.

Both are increasing the progressivity of Federal income taxes at about the same rate.

Posted by: Yu-Ain Gonnano at August 2, 2012 10:04 AM

In what world are we seriously expected to accept steady growth in Federal spending as the new normal?

Isn't that exactly what we've done for the past 75 years or so?

This is not an argument that *you* should accept it, Eric. But there's no denying that enough of the voting public (I would go so far as to say a majority of the voting public) have done so.

And until a minority can overrule a majority of voters, that determines the outcome.

Posted by: Cassandra at August 2, 2012 10:08 AM

There's a third takeaway from my tax burden chart: It puts the lie to the Tax Cuts for the Rich™ claim. The share of the federal tax burden has been increasing at a steady rate through both Republican's "Tax Cuts for the Rich™" and Democrat's "Make Them Pay Their Fair Share™" administrations.

Yes - thanks for pointing that out. I thought of it a while back, but then forgot when I was typing this post!

Posted by: Cassandra at August 2, 2012 10:09 AM

Next comment:

It looks like the historical average income tax is skewed by a handful of outliers. I count something like only 10-11 years (out of 77 where tax receipts were above average).

Posted by: Yu-Ain Gonnano at August 2, 2012 10:36 AM

I could live with tax increases if they were across the board and accompanied by spending cuts. But I doubt the spending cuts will happen, and I'll do everything in my power to oppose increasing the tendency to pay for the free stuff we want by levying taxes on that guy over there. Even if that didn't work out in fiscal disaster, it would corrode the civilization.

I've been amused to read this week about efforts to cut Spain's borrowing costs. I know of only one way to cut Spain's borrowing costs, and that's for Spain not to borrow more than anyone believes it can pay back. The same will be true for the U.S. Unsustainable deficit spending won't be sustained.

Posted by: Texan99 at August 2, 2012 10:51 AM

Some other quick thoughts:

Whether the growth of gov't should be normal or not, it *is* normal. Second, just as inflation means your income has to go up just to keep your current standard of living constant, the same would apply to the gov't too. To keep the gov't at it's current size and scope spending will have to increase equal to inflation.

Given a more highly progressive tax structure we should expect that recessions and growth would have stronger effects on the tax revenue-to-GDP ratio. Given that the economy really hasn't been doing too well the last decade (Bush II started with a recession too) it shouldn't be surprising that revenues (even compared to GDP) are down. Losing 25% of 40K/year is devestating to the family, but represents only a small change to gov't revenue. Losing 25% of 400k/year is a small(ish) change to the family, but is devestating to gov't revenue. Not only is 100k>10k, the 100K is taxed at a higher rate.

Corporate taxes are a nightmare. Unlike personal income taxes rates down always go up with increases in income. Sometimes they go up, and then back down, and then up again, and back down again. Makes it near impossible to tell when there are tax increases and tax reductions.

Posted by: Yu-Ain Gonnano at August 2, 2012 10:58 AM

Almost the required number of states have passed laws calling on Congress to convene a Constitutional Convention for the purpose of considering a Federal Balanced Budget Amendment. That's what we really need:

That's the problem with the "starve the beast" idea - it doesn't work as long as the money can be borrowed.

Strictly speaking, you don't need a balanced budget amendment. Simply refuse to raise the debt ceiling.

Without the ability to borrow more money, expenses must equal revenue.

Structurally, it will still allow borrowing in lean times, but must be counter-acted with paydowns in the good years.

Posted by: Yu-Ain Gonnano at August 2, 2012 11:23 AM

Without the ability to borrow more money, expenses must equal revenue.

Exactly. Grim's had some really good posts lately - haven't had time to respond to them, but one thought keeps coming to me: politicians can't honest with us about spending because we don't really want to hear it.

Is there anyone - anyone? - who doesn't understand that we've been spending money we don't have for my entire lifetime (and the lifetime of most voters?).

We know. It's just that we are never directly confronted with the consequences of spending money we don't have. It's pretty much impossible to "hold Congress accountable" (as we're so often advised to do) because you can't trace Congress's actions back to a single lawmaker and assign responsibility.

Responsibility is collective, but we don't vote collectively.

Structurally, it will still allow borrowing in lean times, but must be counter-acted with paydowns in the good years.

But here's the question: can we point to a single government - state, local or federal - that has had the self discipline to do this for any length of time?

I am really beginning to believe that borrowing needs to be made SO difficult that it will only happen in times of great need. And I would prefer that that happen by way of bonds issued to US taxpayers, not loans from other nations.

Posted by: Cassandra at August 2, 2012 12:24 PM

On that theme, how many progressive entitlement programs would have been passed if they depended upon the public purchase of bonds to support them?

This would be a way to return power to the people - to individuals.

Posted by: Cassandra at August 2, 2012 12:26 PM

With the advent of World War II, employment increased, as did tax collections....

Of course--against an exceptionally...depressed...baseline. Most of the rest flows from increased employment, so that there actually was income against which to collect tax, and tweaks to the collection mechanism--which are entirely appropriate, to the extent that it forces everyone subject to the law to comply with it.

The problem is VOTERS. For a long time, household deficit spending has been just as bad as the federal government's deficit spending.

No doubt, but the remark to which I was responding was special interests and the resulting potentiation of incumbency. As to the voters, it may be that they--we--are learning that lesson. The Tea Party movement has become, apparently, self-sustaining, and household debt as a per cent of household income has been falling through the current economic dislocation--despite falling or flat household incomes.

...doesn't really make a whole lot of sense to calculate the average historic tax rate including years when we didn't even have a federal income tax. Nor does it make sense to include years when we didn't have social security taxes. That's what's known as comparing apples and oranges....

Sure it does. You're conflating income tax, in particular, with taxes generally. It's also why I talked about Federal revenues--which include income taxes, social security taxes, and so on--and not just income taxes. It is hard to construct a useful series of taxes as a per cent of GDP since the structure of taxes has changed so much. Another reason why I talked about Federal revenue, and not Federal taxes. It is, after all, total revenue that government collects that gets (over) spent.

...it would also be a good idea to start dedicating some portion of federal tax receipts to paying off existing debt. This is what households do - if you're in over your head, you have to step up payments on what you already owe.

The Federal government already does that. It just alternately prints money for the interest payments, or borrows more and uses those receipts (albeit not tax) for the purpose. Households, though, don't create more money out of the æther like the central government does--they cut spending or borrow new to pay the current. That last is like the government's behavior, but households reach their borrowing limit rather sooner.

What we *should* be talking about is a law that makes deficit spending very difficult....

That would require a Basic Law--an Amendment to the Constitution. A mere Congress-passed statute would be undone by the next Congress--or bypassed by the current. See all the "emergency" spending bills put up after the spending limit that came out of the debt ceiling rise agreement.

And I think the Amendment would be preferable to a refusal to raise the debt ceiling. The latter is a political decision that is easily undone. The former would give the politicians cover for fiscal discipline.

Eric Hines

Posted by: E Hines at August 2, 2012 12:33 PM

First of all, it doesn't really make a whole lot of sense to calculate the average historic tax rate including years when we didn't even have a federal income tax ...

I agree with Eric on this. This is exactly what we are talking about: increases in government revenue and size. It wouldn't make sense to leave those years OUT of the comparison.

What we *should* be talking about is a law that makes deficit spending very difficult ...

Exactly. I'm for a constitutional amendment, myself. Anything less will be too easy to change back as soon as the political climate changes.

Posted by: Tom at August 2, 2012 01:18 PM

This is exactly what we are talking about: increases in government revenue and size. It wouldn't make sense to leave those years OUT of the comparison.

I agree that what years you include depends upon what you're trying to establish or learn from the chart.

If (as I suspect you and Eric are trying to do) you're arguing that historically speaking, we're paying more taxes than we did in 1789, that's one thing. Though I would point out that no one needs a chart to do this, thus making quibbling over the axis range on the chart rather pointless.

But if you're trying to ascertain (as I am) how the current level of income taxes and federal revenues as a % of GDP fit into what we've paid in the past, you can't compare today to time periods before income tax existed. It doesn't make sense: I'm looking at income tax rates and revenues over time. You can't do that sensibly if you include years when we had no income tax.

You're looking at types of taxes. Different question entirely.

Yu-Ain said something incredibly important here:

Whether the growth of gov't should be normal or not, it *is* normal. Second, just as inflation means your income has to go up just to keep your current standard of living constant, the same would apply to the gov't too. To keep the gov't at it's current size and scope spending will have to increase equal to inflation.

He's right. You want to go back to the level of government we had... when? 1789? When the population of this country was... what? 3 million.

Now it's 100 times that.

In 1789, there were 12 states. Now there are 50... or 57, if you believe our current president :p

Back in 1789, there was no interstate highway system. We didn't maintain the armed forces as we know them today.

The notion that government should have stayed the same size while the population grew by a factor of 100 and the number of states more than quadripled doesn't seem like a winning argument to me. Add technology (and the resulting issues with travel, commerce, immigration, etc) into the mix and the argument gets even weaker.

I think we all agree that government is too big and is trying to do too much now. But I don't buy the notion that 1789 is any kind of reasonable baseline for the size of government and I don't think conservatives could sell that idea to the voting public.

Posted by: Cassandra at August 2, 2012 01:54 PM

You want to go back to the level of government we had... when? 1789?

I'll eschew your straw man. I'll settle for Federal government the size we had in the 1920s and the level of government response to the Depression of 1920-1921.

We can lose a lot of the present government, to good effect.

I don't buy the notion that 1789 is any kind of reasonable baseline....

You're the one dragged that red herring.

Eric Hines

Posted by: E Hines at August 2, 2012 02:03 PM

You're the one dragged that red herring.

No, I was responding to Tom's suggestion that 1789 should be included:

Also, when you say 'a return to historic average rates,' you're ignoring all the years prior to 1942. I think you'll find we're still WAY above the historical rates if you take the graph back to 1789.

Posted by: Cassandra at August 2, 2012 02:22 PM

It probably should be included on a graph, along with important amendment or SCOTUS decisions that altered the balance of power. We might discover something interesting about what we should roll back, in order to get to where we want to be.

I doubt that will be 1789 for most people (I doubt you could readily talk almost any TEA Party member into undoing the 13th Amendment, however they may feel about the 14th). It might be the 16th or the 17th Amendment, though: Zell Miller made a cogent argument for repeal of the 17th a few years ago, while he was a Senator. By giving state governments an actual voice within the Federal legislature, we could stop Congress from doing things like forcing the states to bear unfunded mandates.

Posted by: Grim at August 2, 2012 02:25 PM

I'll settle for Federal government the size we had in the 1920s and the level of government response to the Depression of 1920-1921.

So you think the population can increase threefold and government can stay the same size?

Or are you saying that you want government to perform the same services it did in 1920 (which makes very little sense, by the way) for three times as many people and that level of growth would be satisfactory?

Not being snarky - this is a serious question. Don't you think advances in travel and technology and weapons make a difference here? Look how they've impacted defense alone.

Government growth was inevitable, even if one accepts that government should not do one single thing more than it did in 1920 because due to changes in technology and population size, it can't perform the same tasks in the same way and still get the job done.

FWIW, I don't think you could sell 1920s government to the voting public either :)

Posted by: Cassandra at August 2, 2012 02:27 PM

I doubt you could readily talk almost any TEA Party member into undoing the 13th Amendment, however they may feel about the 14th). It might be the 16th or the 17th Amendment

But I'll bet they'd buy off on the 19th :p

Posted by: Cassandra at August 2, 2012 02:28 PM

We might discover something interesting about what we should roll back, in order to get to where we want to be.

Do you believe the Tea Party (not to mention the rest of America, who aren't going to go away) would agree on "where we want to be"?

Because I don't.

Posted by: Cassandra at August 2, 2012 02:30 PM

Do I believe they agree right now? No; but that's mostly because nobody's asked the question, and they haven't discussed it.

I think they could come to an agreement. In fact, if they're going to become a real party, they'll have to sort out at least a basic agreement in principle on just what the goal is. "Smaller" is a good start, but it would be nice to have an exact principle.

Mine -- so far -- is limited to enforcing the 10th Amendment. I think that would solve most of the problems by itself. But I could go for repeal of the 17th, and a balanced budget amendment, as additional considerations.

Posted by: Grim at August 2, 2012 02:33 PM

By the way...

Why do you think that changes in technology mandate a bigger response? The usual trend in technology is to make each actor more powerful, which improves efficiency. In principle, that ought to permit us to do the same thing with less resources and less personnel -- that's how it's worked in the corporate world, where there have been serial rounds of downsizing. Every executive is now his own secretary, typing his own memos in MS Word instead of dictating them like his ancestor would have done.

There may be particular challenges where a broader scale is required -- anti-chemical/nuclear proliferation, for example -- but not necessarily a bigger government. Even in defense, we can bring to bear forces with a brigade of the US Army that would have required a Corps or larger sized element fifty years ago. I would think technology ought to be a force for shrinking the size of the government, if its mission were held steady.

Posted by: Grim at August 2, 2012 02:37 PM

...bet they'd buy off on the 19th :p

I'll take that bet. Most of the leadership is female.

Posted by: Grim at August 2, 2012 02:40 PM

Why do you think that changes in technology mandate a bigger response?

I think national defense/national security is a great example. Two words: asymmetical warfare.

In the 1920s there were panics about anarchists with bombs. But a bomb back then did limited damage.

A modern bomb could wipe out entire cities and contaminate the land with radioactive waste. And then there's the cyber threat (probably the most underappreciated threat of our time). It wouldn't take much for a single hacker to take out our communications or power grids and that would wreak havoc on pretty much every facet of our lives. It could bring the country to its knees.

Military threats used to be mostly foreign armies or navies. Now individuals or tiny groups can do just as much (and in some cases, more) damage.

Posted by: Cassandra at August 2, 2012 03:09 PM

I would think technology ought to be a force for shrinking the size of the government, if its mission were held steady.

But technology itself ensures that the mission will grow over time.

Posted by: Cassandra at August 2, 2012 03:11 PM

So you think the population can increase threefold and government can stay the same size?

Or are you saying that you want government to perform the same services it did in 1920 (which makes very little sense, by the way) for three times as many people and that level of growth would be satisfactory?

These two actually are the same question--or I'm going to treat them that way, anyway--so I'll give one answer: Yup.

The only thing driving government size growth along with population growth is the services government provides that it has no need of providing. Sure there might be a need of more clerical help, and as we add States to the union, the elected government must grow, but that's about it.

On what basis, by the way, are you claiming that it makes sense for government to provide more services, just because population has grown?

Don't you think advances in travel and technology and weapons make a difference here? Look how they've impacted defense alone.

Defense first: this is outward looking, which is most of what the Federal government is for. But at that, Defense growth is more appropriate in the sizing of our combat forces. The support froo-froo that is in DoD staffing and the Pentagon has no need of being there. Either we trust our commanders in the field, or they shouldn't be in the field--or in uniform. 18th and 19th century navies needed their ship, squadron, and fleet commanders to be capable of independent action within orders framework. A modern military isn't different from that. In fact, technology got in the way of that as we discovered how to let Pentagon armchair commanders look over the shoulders of companies in contact. It took awhile to get them to back off. Yes, I'm simplifying quite a bit, but the concept remains. We don't need that much growth.

As to inward looking functions, there's no need for the Federal government to grow all that much--particularly with the growth of technology. That, especially, produces no necessary impetus for growth.

We have State governments, and county/parish/etc governments, and town/village governments, and--gasp!--local communities and individual citizens who are fully capable of seeing to domestic--and individual--affairs.

What we're getting as the Federal government grows is exactly what John Jay feared: States in the same relationship to the central government as counties then were relative to their States: merely as districts to facilitate the purposes of domestic order and good government.

I don't think you could sell 1920s government to the voting public....

Not yet. As I've said many times, this is a long, generational struggle. Its likely duration, though, just puts a premium on getting after it.

Eric Hines

Posted by: E Hines at August 2, 2012 03:13 PM

I think national defense may be not a great example, but the counter-example. It's also not clear that we really need a larger military to address the changing threats. We already talked about how increases in firepower and accuracy allow us to do more with less in ground forces, but it's also true in naval and air forces.

As for cyber warfare, yeah that's a new threat, but it's not clear that technology isn't our friend here also. A great deal of cyber warfare defense is attack recognition and interruption, which can be automated once a form of attack is recognized. You don't necessarily need tens of thousands of guys sitting in front of keyboards at work; you need to get a few of the best guys, whose job it is to think of new ways to attack systems and then plot out how to automate a defense.

There might be a similarity in terms of epidemiology, because increased travel exposes us to pretty much every disease worldwide. But that's not necessarily (or necessarily most effectively) a government response. Private universities and hospitals, or nongovernmental organizations of other kinds, can and do handle a lot of that kind of work. A government response is possible, but not required -- certainly the government needn't bear an ever-increasing weight. Besides, once you've crossed the threshold of global exposure, the threat ceases to grow at the same rate.

Aside from that, the reason we think of new stuff for government to do for us isn't because technology is forever creating new tasks. It's because of a negative feedback loop: government takes on a function to help a failing social institution, which crumbles further because much of what holds social institutions together is our reliance on them. Once we don't need them, they dissolve. So then there's a need for more government intrusion, since the institution isn't as strong as it was, which leads to more dissolution, etc.

In these cases, it's a mistake to accept an increasing government role. We should be looking for ways to shore up the institutions. Otherwise you end up with all power, sooner or later, concentrated in the government alone.

Posted by: Grim at August 2, 2012 03:26 PM

The only thing driving government size growth along with population growth is the services government provides that it has no need of providing. Sure there might be a need of more clerical help, and as we add States to the union, the elected government must grow, but that's about it.

Wrong, Eric. The idea that you can provide the same services to 3 times as many people (we're holding the services constant here) is not supported by reality.

If we freeze federal services (and laws...) at the 1920s level but increase the population threefold, the cost of government (and its size) have to grow. Otherwise you have not held the services constant.

Defense first: this is outward looking, which is most of what the Federal government is for. But at that, Defense growth is more appropriate in the sizing of our combat forces. The support froo-froo that is in DoD staffing and the Pentagon has no need of being there. Either we trust our commanders in the field, or they shouldn't be in the field--or in uniform. 18th and 19th century navies needed their ship, squadron, and fleet commanders to be capable of independent action within orders framework. A modern military isn't different from that. In fact, technology got in the way of that as we discovered how to let Pentagon armchair commanders look over the shoulders of companies in contact. It took awhile to get them to back off. Yes, I'm simplifying quite a bit, but the concept remains. We don't need that much growth.

"That much" growth is not the same as just plain growth. I won't argue on DoD being bloated, but you're flat out wrong about the mission of defending the country not scaling up with technological advances in weaponry and communications.

Posted by: Cassandra at August 2, 2012 03:28 PM

As for cyber warfare, yeah that's a new threat, but it's not clear that technology isn't our friend here also. A great deal of cyber warfare defense is attack recognition and interruption, which can be automated once a form of attack is recognized. You don't necessarily need tens of thousands of guys sitting in front of keyboards at work; you need to get a few of the best guys, whose job it is to think of new ways to attack systems and then plot out how to automate a defense.

It's not that simple. Not by a long shot. This is what my husband does now.

I wish to God it were.

Posted by: Cassandra at August 2, 2012 03:29 PM

The support froo-froo that is in DoD staffing and the Pentagon has no need of being there. Either we trust our commanders in the field, or they shouldn't be in the field--or in uniform.

Back in Caesar's and Alexander the Great's time, historians understood that logistics was a crucial factor in the success of warfighting.

The notion that this job got simpler when we moved from rifles to the complex weapons we use today is ... well, I don't even know what to say about it. When technology advances, we have to advance along with it or we're vulnerable.

A soldier with a rifle requires far less support (and training, and education) than a soldier with all the latest equipment. You can't train a jet pilot as quickly as you can train an infantryman, and the jet pilot needs much more support (both in staff and materials) to do his job.

I don't believe what I'm reading.

Posted by: Cassandra at August 2, 2012 03:39 PM

Well, let's step back a bit.

The Pentagon performs an important function as the gear between the civilian policy makers and the uniformed services. That's the main thing they do at the Pentagon, and it's very important to keep that off the warfighter's plate.

Then there's a major bifurcation between those who issue orders to combatant commanders, and those who arrange for the general needs of the force. Both sets of tasks are necessary, so it's good not to impose them on the same headquarters to make sure that both sets get done no matter how hectic the war gets.

The 'good of the force' part goes all the way down to the ground, too. They're not interfering with the warfighter, they're making sure (among other things) that other warfighters are there to rotate in at the proper time.

The combatant commander, meanwhile, has a huge list of support tasks to ensure that the commander downrange has everything he and his forces need. They also serve to bounce back any civilian-leader foolishness that the Pentagon was too close to, to provide the guy on the ground with a level of protection from politicized nonsense. And, they handle major logistical arrangements that are outside the nation where the war is being fought -- theater-wide stuff.

So the guy on the ground isn't being mistrusted. He really needs all those layers above him to do his job. Cass is right about that.

But the total numbers of the force can still be smaller -- much smaller -- than in, say, WWII. Technology makes both the extra complexity, and the smaller force, possible.

Posted by: Grim at August 2, 2012 03:50 PM

This is what my husband does now.

Really? That's very interesting to me. I've been involved with IO for about ten years now, in one way or another; but cyber isn't my strong point. (My strong point is what they are currently calling the human domain and military information support operations and integration with intelligence, although I've done all that from the tactical to the strategic level.)

Cyber is one of those things I've engaged with from time to time, so I know a bit about it, but I'm not a full time expert in it to be sure. I'd be interested to hear more about it sometime.

Posted by: Grim at August 2, 2012 03:53 PM

The 'good of the force' part goes all the way down to the ground, too. They're not interfering with the warfighter, they're making sure (among other things) that other warfighters are there to rotate in at the proper time.

The combatant commander, meanwhile, has a huge list of support tasks to ensure that the commander downrange has everything he and his forces need. They also serve to bounce back any civilian-leader foolishness that the Pentagon was too close to, to provide the guy on the ground with a level of protection from politicized nonsense. And, they handle major logistical arrangements that are outside the nation where the war is being fought -- theater-wide stuff. So the guy on the ground isn't being mistrusted. He really needs all those layers above him to do his job.

I can't remember if we've ever talked offline about what my husband did when he was still on active duty, but a lot of it involved what you just described. That's why I get so annoyed with people who only see the tip of the spear as important.

The Unit spent most of his career in the combat arms, so I get the importance of pointiness. But keeping the pointy end supplied with food and weapons (and pay, and medical treatment when they're wounded) and getting them to the battlefield on time are not trivial exercises. Can't fight if you have no food/weapons/transportation/fuel, etc. That was true in ancient times and it's even more true now. It has been a huge factor in Afghanistan.

And we can't just run out to the local gunsmith and buy MRAPs and ships and jets and LAVs and UAVs. We're no longer using the same weapons people used to hunt down their dinner in Colonial times. Acquisitions is a HUGE "bfd", as Joe Biden would say.

The technology that gives us such a huge advantage in battle carries its own support burden all the way from how it is designed and manufactured and acquired to how the people who operate it are trained and how it gets where it needs to go.

There's a reason we left a LOT of gear behind in Iraq. Just moving it around from place to place takes more planning, money, and resources than people understand.

So thanks :)

Posted by: Cassandra at August 2, 2012 04:18 PM

We already talked about how increases in firepower and accuracy allow us to do more with less in ground forces....

And with carefully selected systems, with decreases in firepower, too: we're not often loading 1,000lb warheads into our drone-delivered weapons, for instances--accuracy lets a relative firecracker do the job because we can put that firecracker where it needs to be, and not just shoot for an overlarge targeting window.

As for cyber warfare, yeah that's a new threat, but it's not clear that technology isn't our friend here also.

Getting individuals and private businesses to do a proper job of securing their personal PCs/laptops and their business (W)LANs would go a long way toward eliminating an enormous cyber threat: all the zombie nets and botnets that are lurking. Getting government out of the way so that businesses could better coordinate their cyber-defense development--and there are lots of third-party private enterprises that make a living at this--would vastly improve things. Partnership with DoD would potentiate these efforts both for privates and for government--but that needs no particular growth in DoD. Or DHS.

The idea that you can provide the same services to 3 times as many people (we're holding the services constant here) is not supported by reality.

If we freeze federal services (and laws...) at the 1920s level but increase the population threefold, the cost of government (and its size) have to grow. Otherwise you have not held the services constant.

Umm, as you're wont to ask of me: based on what fact pattern, exactly, do you make this claim? And you're holding services constant here. Recall that I want to reduce/eliminate them.

Related to this: do you think we have about the right amount of Federal laws today, or do we have too many (without suggesting that the 20s level is the alternative)?

...you're flat out wrong about the mission of defending the country not scaling up with technological advances in weaponry and communications.

You're conflating mission growth--and I'm not convinced it has grown--with DoD growth. Technology, as Grim has been suggesting, lets us to more with less. Which may not work out to less in absolute terms, but that growth is a puny log of the growth in mission (unless I've screwed up my arithmetic analogy--but you get the idea).

A soldier with a rifle requires far less support (and training, and education) than a soldier with all the latest equipment. You can't train a jet pilot as quickly as you can train an infantryman, and the jet pilot needs much more support (both in staff and materials) to do his job.

The general thrust of this is that you actually think an F-22, or an F-35, or a Paladin are good ideas. Is that an accurate reading?

The bureaucracy that we have in place of a serious weapons development/procurement/support system routinely overcomplexifies because their jobs depend on cramming the latest engineering gee-whiz onto the platform. Which overcomplexifies the associated maintenance, support, and training tasks.

He really needs all those layers above him to do his job.

No doubt. But those layers don't need to be so big. And they develop their own bureaucratic imperatives when they get above a size.

Eric Hines

Posted by: E Hines at August 2, 2012 04:21 PM

Cass:

You're welcome!

Mr. Hines,

Not to speak for Cassandra, but a Paladin is a great idea. We used them in Iraq with tremendous success. Even given the counterinsurgency nature of the fight, there were times in 2007 that I saw it turn an engagement from al Qaeda destroying one of our newly established Sons of Iraq checkpoints and killing our newfound tribal allies, into the Sons having tremendous confidence that America would ensure they were never overrun.

You're not thinking of the Crusader, are you?

Posted by: Grim at August 2, 2012 04:35 PM

I don't have time to reply to everything right now, but I would like to point out that I just said the years from 1789 on should be included on a graph of historical federal tax rates, especially one labelled "Federal Tax Receipts" which includes all kinds of taxes, not just income tax.

I did NOT argue nor imply that we could or should go back to that level of government.

I'll argue the rest later.

Have fun!

Posted by: Tom at August 2, 2012 04:38 PM

Eric, you're shifting the goalposts. First you say that you're willing to go back to 1920. Now you want to cut further than that:

...you're holding services constant here. Recall that I want to reduce/eliminate them.

Which is it? I accepted your framing. I'm happy to discuss either one, but I have to know which one we're talking about.

Posted by: Cassandra at August 2, 2012 04:41 PM

...as you're wont to ask of me: based on what fact pattern, exactly, do you make this claim?

This is simple logic, Eric.

A store that serves 3 times as many customers will need more people (and stock... and space.. all of which are "growth").

A post office that serves 3 times as many people, likewise.

To process 3 times as many tax returns? You'll need more staff.

You can't seriously argue that this isn't the case.

Posted by: Cassandra at August 2, 2012 04:44 PM

...I just said the years from 1789 on should be included on a graph of historical federal tax rates, especially one labelled "Federal Tax Receipts" which includes all kinds of taxes, not just income tax.

Again, it depends on what you're using the chart for.

If you're looking to calculate the historical average for income tax, including years in which income tax was zero b/c it did not exist yet skews the historical average. It's misleading. Same for corporate income taxes.

I think we can all agree that when Obama talks about making the Evillest 1% pay their "fair share", he's not talking about Excise taxes :p

Posted by: Cassandra at August 2, 2012 04:52 PM

You're not thinking of the Crusader, are you?

Grim,

Yeah, that's the one. Sloppy research on my part.

Thanks.

Eric Hines

Posted by: E Hines at August 2, 2012 05:02 PM

re: the Paladin - I'll defer to Grim on that one!

I'm sure he knows a ton more about it than I do :)

The general thrust of this is that you actually think an F-22, or an F-35, or a Paladin are good ideas. Is that an accurate reading?

The thrust of this is that advanced technology doesn't always mean fewer resources or people. I don't think there's a whole lot of question that a military equipped with shotguns or rifles isn't going to fare well against a military equipped with modern weapons.

The bureaucracy that we have in place of a serious weapons development/procurement/support system routinely overcomplexifies because their jobs depend on cramming the latest engineering gee-whiz onto the platform. Which overcomplexifies the associated maintenance, support, and training tasks.

That's a separate issue. I've already conceded that DoD could be cut somewhat. That's an entirely different argument from saying no greater effort/expense is needed to keep a jet in good repair and train pilots than would have been needed to keep a rifleman and his gun going in 1920.


Posted by: Cassandra at August 2, 2012 05:03 PM

First you say that you're willing to go back to 1920. Now you want to cut further than that:

...you're holding services constant here. Recall that I want to reduce/eliminate them.

They're your goal posts, Ma'am. It's your argument (with which I agree) that the 1920 government provided fewer services than today's. And then it was your argument that you were holding services constant.

So, which is it? Are you holding services constant at today's level in your argument, or not?

A post office that serves 3 times as many people, likewise.

Aside from the small matter that government has no need of providing a post office at all....

As to the next, perhaps I shouldn't have combined your two questions, after all. The thrust of my responses were to this: you want government to perform the same services it did in 1920. And I did acknowledge a need for some growth in the clerical help needed to provide the same services for more people.

The bureaucracy that we have in place...
That's a separate issue.

Not at all. It's a major part of the growth in government.

...a military equipped with shotguns or rifles isn't going to fare well against a military equipped with modern weapons.

No doubt. To handle what threat, exactly, was the F-22 designed, for instance?

On the other hand, "modern weapons" might not be as well suited against your asymmetrical foe as a shotgun. Kind of depends on the fight we're fighting.

Eric Hines

Posted by: E Hines at August 2, 2012 05:16 PM

Related to this: do you think we have about the right amount of Federal laws today, or do we have too many (without suggesting that the 20s level is the alternative)?

I'm inclined to think we have too many.

But I'm also quite aware that that's an uninformed opinion, Eric. Neither you nor I has ever had to sit down and figure out how things would work if we swept all these laws away tomorrow, or how antiquated laws would work in a modern world.

Just as I'm extremely skeptical of intellectuals and academicians who think they can foresee everything ("Let's just sweep away centuries of human trial and error/experience in favor of some untried theory based on utopian notions of global justice!!!!"), I'm skeptical of laypersons who think all this just sprung up out of nowhere like Venus, fully formed and nekkid as she wants to be, from a clamshell ("Let's ignore the fact that the world has changed radically since whenever it is we want to turn the clock back to! I just *know* it will work! What could possibly go wrong?").

You don't know, because you've never lived in that world and neither have I. Hubris is an eternally human trait, which is why conservatives have always favored slow, gradual changes. They give us time to adjust to all the errors in our thinking. They allow time for making mistakes and fixing them, and they take into account the yawning gap between our utopian theories and an often depressing reality.

Isn't this the same mistake you decry in progressives? You have a theory of how the world should work. You're sure it would be "better", and you assume there's no good reason for the way things work now.

You're smarter than all the people who have been trying to solve problems over the past 100 years or so. All I'm saying is, no one's that smart.

Maybe going back to the level of government that worked "whenever" (a time that isn't even remotely like the time we live in) would work, maybe not. I don't know, and you don't either.

This is not an argument anyone's going to win, but history suggests that people do a lousy job of foreseeing the results of sweeping changes.

Posted by: Cassandra at August 2, 2012 05:18 PM

To handle what threat, exactly, was the F-22 designed, for instance?

Other countries with F-22s, for one.

Posted by: Cassandra at August 2, 2012 05:19 PM

Isn't this the same mistake you decry in progressives?

Not at all. I think their ideas are...foolish...but I don't decry them for having them. I decry them for trying to impose them on me, either without debate, or against my will, or both.

I make no bones about thinking my ideas are terrific (when I was born and got to the head of the line, they were all out of humble pie, so I took a second helping of hubris to make up for it), but I'm willing to debate my ideas, too, rather than just thrust them onto people.

Other countries with F-22s, for one.

1) Can you name any? Actually, Russia and the PRC both began developing their attempts at equivalents when our prototype started flying.

2) More importantly though, are you suggesting we should fight a spear with a variant on a spear? We shouldn't, instead, develop a long bow, or a set of spring-loaded nets, or something else with which to fight the spearman, and avoid his spear?

One problem with weapons development--and this is no knock on governments or defense establishments within the context of this discussion--is that we spend so much treasure looking for improvements to existing weapons--in order to match the other guy's weapons types--and not enough on looking for counters to the man wielding those weapons, or his support systems that produce those weapons, or stuff to defeat the results of his weapons use.

But those are harder nuts to crack.

Eric Hines

Posted by: E Hines at August 2, 2012 05:46 PM

I make no bones about thinking my ideas are terrific (when I was born and got to the head of the line, they were all out of humble pie, so I took a second helping of hubris to make up for it), but I'm willing to debate my ideas, too, rather than just thrust them onto people.

:)

More importantly though, are you suggesting we should fight a spear with a variant on a spear? We shouldn't, instead, develop a long bow, or a set of spring-loaded nets, or something else with which to fight the spearman, and avoid his spear?

No, not necessarily. That's why I said, "for one".

Debating the relative merits of jets or other weapons systems is never going to be my strong suit. Saying this system or that system isn't perfect is not the same as saying we don't need something like it.

If the last two wars have taught us anything, it's that there's no substitute for boots on the ground. But there's also very little question in my mind that technology can be a decisive advantage.

Posted by: Cassandra at August 2, 2012 05:56 PM

Saying this system or that system isn't perfect is not the same as saying we don't need something like it.

Hmm.... We actually agree....

But as a commander of mine once said, "Better is the enemy of good enough." And that's why I decry the overcomplexification of our stuff--our weapons systems in particular in the present thread.

I will say flat out, though, that the F-22 and the F-35 are wastes of the taxpayer's money and add very little of combat value to the battlefield.

But that's a separate argument.

Eric Hines

Posted by: E Hines at August 2, 2012 06:02 PM

I defer to your vastly greater knowledge on that subject, Mr. Hines :p

My only concern here is that we broke a lot of very old and very tired equipment in Iraq and Afghanistan. The lead time required to design and build new weapons systems and jets is huge, and I really wonder what people think will replace the gear we have that's wearing out/worn out?

I wouldn't mind so much if we canc'd huge defense contracts knowing there was an alternative. It's when we do it with no alternative in mind that I worry.

Posted by: Cassandra at August 2, 2012 06:21 PM

My only concern here....

Again, we agree.

But a prior question that needs to be asked--and seems too little asked--as we set about designing and building those new weapons systems, is what is the threat we're designing to defeat? It's proverbial that we prepare for and train to fight the last war. That seems especially true of our weapons systems design and acquisition.

What's wrong with just building more of the stuff that we used up in Iraq and Afghanistan? That's readily, and relatively quickly done. It's true that our conventional enemies are developing new as fast as they can; we shouldn't put away our drafting tools for conventional weapons--if we can figure out what we'll need. It's also true that we need to develop capabilities for the asymmetrical warfare that evolving enemies are thrusting on us.

But that needs new political thought, too. The Bush Doctrine, which I believe is fundamentally sound, has a very strong political component--after all, we've reserved the right to enter any classical nation-state that is harboring terrorist enemies.

Eric Hines

Posted by: E Hines at August 2, 2012 06:51 PM

Tax cuts went binto effect jusrt as the defecit exploded

Posted by: john at August 2, 2012 07:21 PM

First, the technicalities:

If you're looking to calculate the historical average for income tax, ...

Your original post addressed "total federal tax receipts" as well as income tax. Total receipts have been at an all-time high since 1942.

This was in reply to your first question, which was: ... with our debt to GDP ratio increasing over time, how do we justify a decade of individual, corporate, and total federal tax receipts that are all below their historic averages?

(Emphasis mine.)

Posted by: Tom at August 2, 2012 11:26 PM

OK, I've caught up. What are we arguing about, again?

Mostly it seems we agree, or, we disagree only in degrees, except where pedantry (my own!) is included.

Can we still disagree on calling it Taxmageddon?

Posted by: Tom at August 2, 2012 11:51 PM

One point I'd like to make WRT keeping government at 1920 levels. Costs will rise even if we funded no more projects or mandates than we did in 1920. I can't find a pay scale from 1920, but I did find one for 1949:
http://www.navycs.com/charts/1949-military-pay-chart.html
Compared to today:
http://www.navycs.com/2013-military-pay-chart.html

Now I don't know about you, but if you tried to get me to enlist today for $75 per month, I'd laugh in your face. And one interesting fact is that the size of the active duty Army of today is roughly the same as it was in 1949. So given today's pay (which is still ridiculously low) you're talking an almost twenty-fold increase in pay alone (and again, that's from 1949). So with no allowances made for hardware, just talking manpower cost, you'd never be able to run a 1920's government without an increase in costs (which may or may not joss with your definition of "size").

Posted by: MikeD at August 3, 2012 10:36 AM

That's why we're suddenly hearing this talk about drafting young Americans into 'national service.' They want to make all these 'investments' into 'infrastructure,' but they want the kids to do the work for room and board, plus a few pennies and promises.

Which, if it were voluntary instead of a draft, might be better than having no work at all, and having to move home with your parents... like is the case now. You might be able to talk some of the ones pursuing 'unpaid internships' into room and board, plus seventy-five dollars a month, plus promises that you'd help send them to college (or void their existing student loan debt). The CCC was a similar plan, and it did a lot of good in its day.

Once the economy improves, though, you'd pretty much have to force people to take that deal. So, naturally, forcing them is part of the plan.

Posted by: Grim at August 3, 2012 10:46 AM

Well. sure. They've been driving around on the roads, haven't they? So why aren't we entitled to a big hunk of their working lives, just as we're entitled to a big hunk of working people's paychecks? For good measure, maybe we should commandeer a fraction of their children.

Posted by: Texan99 at August 3, 2012 11:47 AM

Costs will rise even if....

Inflation certainly is a factor, and it goes to Cassandra's point that spending and taxing are only tools for implementing the principle, rather than the principle itself.

But if the revenue and spending increases were limited to covering inflation--if the tools were properly controlled--government itself wouldn't increase in size.

They've been driving around on the roads, haven't they?

It's more fundamental than that. I'm waiting for the Commerce Tax. All these brand new children are going to participate in commerce at some time in their lives; they should pay a tax to support the provision of that commerce. But while they're living at home, they aren't capable of making adult decisions; thus, Mom must pony up in their stead.

But wait--there's more: a woman's decision to have children--or not--also has an impact on commerce, since her children--or lack of them--will impact the number of participants in the provided commerce. Therefor, the Commerce Tax will have an additional component: every woman must pay a per child born Commerce Tax, and/or a per child foregone Commerce Tax.

Given the fertility capacity of the average human woman, that last alone will cover the nation's debt.

TIFIFY.

Eric Hines

Posted by: E Hines at August 3, 2012 12:06 PM

Mike:

I know I've mentioned this before, but when we toured the New Jersey the tour guide mentioned that in 1947 (I think) it cost the Navy $11 a day to send a sailor to sea.

Of course they didn't have all the benefits we have now!

Posted by: Cassandra at August 3, 2012 01:02 PM

One thing about an increase in population forcing growth in government:

While it's true that government & government revenue would have to grow, what isn't clear is that the tax rate would have to grow. If you have 3x the population to provide services for, you also have 3x the taxpayers to pay for those services.

The same is true of inflation. While goods & services would cost the government more, personal & corporate income would also go up and, since tax rates are percentages, so would tax revenues.

Posted by: Tom at August 3, 2012 01:53 PM

While it's true that government & government revenue would have to grow, what isn't clear is that the tax rate would have to grow. If you have 3x the population to provide services for, you also have 3x the taxpayers to pay for those services.

I agree with this, in principle. In practice, I'm not sure that the cost of government scales directly with the number of people served: I can think of cases where more infrastructure might need to be added to serve an additional 10% but the cost of that added infrastructure would be disproportionate.

But it's a valid point :)

Posted by: Cassandra at August 7, 2012 08:58 AM

An example would be schools. Say, maybe, after a baby boom?

You would have an increase in costs now, but you wouldn't have an increase in taxpayers until 20 years later.

There are others, that are as much a function of density as of population. Wyoming would have to spend more on roads for their 6-700k population than New York City would have to pay for their roads for their 8mm because Wyoming is more spread out. Conversly, NYC has to have a rather elaborate and expensive sewer system, where much of Wyoming would be on wells and septic tanks (that individual property owners and not gov't pays for).

Posted by: Yu-Ain Gonnano at August 7, 2012 09:35 AM

I've seen this happen with schools. When we bought our first house, the schools were overflowing with children, but the city voted down a new bond issue to build a new elementary school on land donated by our developer.

And we're running into many of the road/sewer access issues out here right now.

Posted by: Cassandra at August 7, 2012 10:15 AM

Your first graph is nicely done. Your second graph is deceptive. The reason that the top quintile is paying more taxes is because they are earning more money. Essentially it is a result of the huge increase in income disparity. A clearer way of looking at taxation is as a percentage of income. Here's that: http://tinyurl.com/98u7dt5

Posted by: Nathan Ulrich at September 30, 2012 11:08 AM

Nathan:

I'd really like to see your chart, but I got a message that I don't have access or permission to see the chart (or that it's no longer there). If you can give me a link that works, I'll be happy to look at it :)

Posted by: Cassandra at September 30, 2012 11:40 AM

Sorry about that, it's a facebook image. Maybe this will work?

https://picasaweb.google.com/lh/photo/kTDJLfLjFIK3jvGTs1giqdMTjNZETYmyPJy0liipFm0?feat=directlink

Posted by: Nathan Ulrich at September 30, 2012 12:01 PM

Nathan,

I was the one that actually put together that second graph. So any fault lies with me.

That said, I did put together one that looks at the ratio of taxes paid to income earned over the same time period (all that the CBO report contained). The story is pretty much the same. Over the past 30 years, the top 20% bears an increasing burden of taxes.

I don't have a way to post the graph easily myself. I'll email the graph to Cass.

Cass, if you would be so kind to include the new graph as an update. Thanks.


Posted by: Yu-Ain Gonnano at October 1, 2012 09:43 AM

In the meantime, looking at the chart you linked. It is a point in time chart but doesn't specify the point in time.

In any case, it does show that as income increases, the percentage of income paid in federal taxes goes up, with the exception of the 400 richest people in the country. The same is true for states, but suffers from the same accounting problem as the federal taxes.

As you go up the income ladder your income switches from wages to investments. As seen with Romney's taxes, a good deal of that income is dividend derived.

The double taxation of dividends is not reported in the tax numbers and so those taxes are under-reported. (Or rather, they are reported, but the credit is given to another entity).

As a stockholder let's say your share of the company's profits is $100. The company pays $35 in taxes on *your* money (corporate income tax). So this $100 that belongs to you looks suspiciously like $65 when it shows up in your hands. But the IRS isn't done yet. They want an additional 15% before you put it in the bank. Which means they take yet another $9. At the end of the day, your $100 looks a whole lot like $54. But you don't get credit for having paid a 46% tax rate. You're just another rich bastard who isn't paying his fair share.

Posted by: Yu-Ain Gonnano at October 1, 2012 11:02 AM

Sorry, $56 and a 44% tax rate. Fingers got ahead of myself, there.

Posted by: Yu-Ain Gonnano at October 1, 2012 11:05 AM

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