The End of Welfare as We Don't Know It

James Devine jdevine at popmail.lmu.edu
Mon Oct 12 08:06:19 PDT 1998


Max writes: >The tax burden on middle class has been very stable
>for the past twenty years. The share of taxes paid
>by the rich has gone up a lot (because their income
>share has). I don't see how you can get from this
>to the above statement [by Ehrenreich].

doesn't this statement depend on what you mean by "tax burden"? for example, if one defines "tax burden" as taxes paid per dollar reaped, then the tax burden on the rich may have fallen, since "their income share has" risen at the same time their "share of taxes paid" rose. (If TO = total tax burden, TOR = tax obligation of the rich, YR = rich people's income, and Y = total income, then Max is saying: TOR/TO has risen, because YR/Y rose. I'm asking, what about TOR/YR? vs TO/Y?)

also, when one discusses tax burden, one's tax incidence assumptions should be made clear. Most economists would agree that the part of the payroll tax paid by corporations is shifted to workers and thus shouldn't be treated as part of the rich folk's tax burden. Similarly, by subsidizing labor, the benefits of the earned income tax credit might be shifted to business. Max, what are your assumptions? What is the model you use to understand tax incidence?

Jim Devine jdevine at popmail.lmu.edu & http://clawww.lmu.edu/Departments/ECON/jdevine.html



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