>>>>>NN:
Hey no contest here, I think Max is swell and his work on tax policy is a
wonderful advancement for progressives. We just disagree on how much
credit the 1993 tax bill should get for the increased revenue coming into
the treasury.
Here are some basic numbers that Max and I would not disagree on:
Since 1993, total income tax revenues have gone from about $500 to $980
billion per year.
>>>>>>
I don't know where you get $980. For 1999 it's $879b. Though the important part of the argument is conceptual, not numerical.
NN: Part of the increase in total revenue is due to overall increases in personal income due to the expanding income
[mbs] right.
NN: The top 1% of taxpayers pay roughly 30% of those income taxes, or roughly $300 billion per year.
[mbs] we can assume this is true for the sake of argument.
NN: The 1993 tax bill increased the top rate on them from 31% to 41%
[mbs] note this is the marginal rate. the average rate is always lower. so a 33% increase in the marginal rate cannot yield a 33% increase in revenue, no way no how. Also, this rate only applies to 'ordinary income' (i.e., everything except capital gains). Another reason the change in the 31% rate is larger than the change in revenue.
NN: Where we disagree is how to interpret the relationship between the last number and the first two, especially in the context of a booming economy that has delivered much of the income benefits to the wealthiest Americans.
Since the rates on the wealthy would be roughly 25% less without the 1993 tax bill, my position is that the top 1% would be paying roughly $60-75 billion less per year without the 1993 bill. That seems like a strong contribution to the surplus.
[mbs] no no no. your base for the '25% less' (which is wrong in and of itself, but that's a different mistake) is 1999 revenue. But the extent of this revenue is not solely attributable to rates, as you admit, but to base changes. So you can't go backwards from $300b with your 25% calculation, since $300b is inflated by base increases, not just rate increases.
note that "25% less" (presumably moving from 41 to 31) applies to the marginal rate, not the average rate. Only the latter speaks to revenue changes in a proportional sense.
NN: Max seems to argue that since the growing economy increased the taxes of the wealthy by increasing their income, the 1993 bill shouldn't be credited for those increases.
[mbs] not for as much of the increase as you make out.
NN: My response is that I would only credit the 1993 bill for the increases that have been paid because of the 1993 tax bill - namely the $60-75 billion per year I estimated.
[mbs] By CBO numbers, it's more like $15-20b, tho I have not demonstrated it here. The surplus is now projected at $240b annual for FY2001.
NN: BTW we both agree that the media concentration on capital gains' contribution is overrated, since capital gains makes up such a small portion of total government revenues- something like 5% of all federal receipts. -- Nathan Newman
[mbs] right. tho it's as much a left concentration as a media one.