Tuesday, November 29, 2011


While most of America was either feasting or shopping over the late November weekend, middle class people continued to occupy strategic parks in major cities across the country. The 99%, who represent all households making less than $300K/year, have finally manifested a tax plan for public consumption. 

   This is a simple concept of tax fairness. Just the idea makes certain media moguls quiver. Its central component is that it is based on current US income distribution. These are the figures from 2011 as of September.  
This plan will increase U.S. Federal Government annual revenue from $3.4 trillion to $4.7 trillion for a net gain of $1.3 trillion per year. Depending on what our leadership decides to do with this additional revenue, it could be used for deficit reduction or economic stimulus. Either way, it would help jump start this country's economy. But then you'd have to want that to happen.
Anyone making less than $125K/year as an individual or $250K as a couple would see a tax rate drop from the current 36% cap to 33% but no lower than 1%. This may strike anyone paying attention as odd since all we hear about from the advocates for the wealthy is that they pay more than their share of taxes. That rate shown here has them shifting from as high as 51% to about 33% with us 99% paying 66% of the tax burden. 
If you study the graphic above you'll see the tax plan is designed to run the Fed on one-third of all American income to include income made from estates and personal investment. It would also be useful in enforcing social responsibility upon multinational corporations whom would then be forced to compete with smaller firms. As the new tax structure matured, you'd see increased hiring in the American small business world. Our small business community provides most of the jobs in this country. 
In one WaPo article they mention that the bottom tax rate for the Top 1% of all earners is 42%. Taxation does not approach 50% until individual AGI is $500,000 and remains at 51% until $312M Individual AGI. 
Another issue that would be addressed is that the Federal government offers well over $1 Trillion every year in tax breaks, subsidies for individuals and companies that are often substitutes for direct government spending. The bank bailouts fostered by the previous administration because they were "Too Big To Fail" is a prime example. They got their assets saved through public funds while the middle class saw drastic cuts to vital services and those in most need are left to the curb. The little graph on the right shows green for current rates, blue for what would be added if those subsidies were to go away.

Again, the graphic at the top shows how income distribution consists of exactly the middle-third of current American income distribution and provides a wide and deep tax net. It was pointed out in the NYTimes how the lower-third of the Tax Revenue Diamond consists of the lower middle class and the poor. Persons living in poverty, or less than $22K/year are exempt from taxation in this model. Essentially leaving them to offer government revenue in the form of sales and property taxes.
For a nomadic herd of individuals seeking economic justice, they have come up with a fair and sustainable tax structure that may actually address what ails this country. Income and wealth disparity in this country has never been this extreme and the fact that so many people in position of power are shifting the tax burden even further to the middle class has prompted this public outcry. Not that you'd hear this on the GOP channel, but it's grown none the less. 
Lets see this tax plan implemented and get our country going again. Lets live up to the American Exceptionalism we hear about in all those speeches, shall we?


Anonymous said...

The people with extremely high incomes are not statistically significant. It is the people with incomes between $100K and $300K who constitute the ruling class, and decide on how the country will be run. They tend to be evenly split politically, although they are now leaning more conservative. If taxes were raised substantially, they would have to pay them, because the extremely rich are too few to yield significant amounts of revenue.

Anonymous said...

While the number of people with extremely high incomes may be small, their income, wealth, and share of taxes paid is highly disproportionate to their representation in the population. Although their votes may be insignificant in number, their ability to sway the political process through contributions to campaigns/PACs is quite large.

Anonymous said...

Looking closere to the income graph, the income distribution up to about $150k is Gaussian and its average, when adjusted for inflation, is constant in time. This means that all those below about $150k are like gas molecules in thermal equilibrium. This empirical fact goes against the business school propagated lie that the income distribution is Pareto. It turns out that only the tail of the chart in this blog post is Pareto and its inflation-adjusted average is increasing faster and faster in time.

Those mathematically inclined can calculate the probability for an income earner who now is in the Gaussian part of the distribution to exit upwards to the Pareto tail (in other words, to become rich)...what this so-inclined reader will find is that this probability is vanishingly small.

The above has been happening since Reagan's time. The median and mean have been diverging (with the mean moving up and up and up) for about 30 years now. Welcome to the reality of "trickle-down voodoo economics."