If voters ever wrest America’s government away from the Keystone Kops who are currently hijacking it, we might see a return to thoughtful policy discussions.
By “thoughtful,” I mean good-faith debates over the best way to approach various governmental tasks, conducted by people who actually understand the role and operation of government–and want it to work.
In other words, people other than Matt Gaetz and Marjorie Taylor Green and their ilk.
As readers of this blog know, I spent 21 years teaching classes in Law and Public Policy. Those classes explored both government’s policy processes and the legal and constitutional framework that constrains those choices. Ever since 2016, and the election of a buffoon whose entire administration was blatantly and proudly ignorant of both, I’ve missed the exploration of genuine policy differences –and the approach taken by public servants like former Senator Richard Lugar, who often referred to policy differences as “something about which people of good will can disagree.”
I thought about the current absence of “good will” when I read this paper issued by the Brookings Institution.The paper addressed the thorny issue of taxes, and how the American tax system distinguishes between–and differentially taxes– sources of income.
As the paper begins,
In a famous conversation, the author F. Scott Fitzgerald is credited with saying that “the rich are very different than you and me,” to which Ernest Hemingway replied “Yes, they have more money.”
Our work highlights another key difference: the most affluent Americans not only have more income; they receive it—and pay taxes on it—in vastly different ways than the rest of us.
For policy makers concerned about long-term fiscal shortfalls and high levels of economic inequality, our work reinforces the notion that raising the tax burden on the wealthy requires a special focus on how those households gain wealth and skirt taxes. We highlight four ways to effectively raise taxes on the wealthiest Americans.
The research focuses on an issue that serious policymakers understand, but that all-too-often is missing from public conversations about taxes. Those conversations tend to feature politicians appealing to voters with unrealistic promises to reduce the “tax burden” or eliminate certain taxes. ( Worse, when most voters think about taxes, they focus primarily on tax rates–and a not-inconsiderable number of Americans fail to understand the way marginal rates work. They think the highest marginal rate is applied to the taxpayer’s entire reportable income.)
The Brookings report focuses upon a related element of the tax system: the different ways in which we tax income generated differently.
Most Americans receive almost all their income through wages and retirement income (pensions, 401(k)s, social security, and individual retirement accounts). The most recent available IRS data (2014) shows that wages and retirement income made up 94% of adjusted gross income (AGI) for households in the bottom 80% of the income distribution. Even for households in the 98th to 99th income percentile, wages and retirement income accounted for 71% of AGI.
At the very, very top, though, these sources are less important, accounting for just 15% and 7% of the income of the top 0.01% and the top 0.001% of households, respectively. These households receive most of their income from investments (interest, dividends, and especially realized capital gains) and businesses (including sole proprietorships, partnerships, and S corporations). These items constituted 82% of income for the top 0.01% and 88% for the top 0.001%, compared to just 7% for the bottom 80% of households.
These patterns are robust over time and data sources. And in practice, the tilt toward capital income at the top is even larger than these figures suggest because AGI does not include the massive unrealized capital gains and very sizable inheritances that accrue to many affluent households.
The researchers proceed to suggest changes to the tax code that would have the effect of reducing the disparities that have contributed to our current gilded age, and I encourage you to click through and see whether you agree or disagree with their particular policy recommendations.
My point in highlighting this study, however, isn’t to endorse–or rebut–particulars.
This research –and similar investigations of the economic realities of American governance–is a welcome reminder of the way lawmakers should conduct policy debates: examining the evidence (what are we doing now, and what are the outcomes of what we are doing?); highlighting problems that such examination discloses (here, the widening gap between the rich and the rest); and considering policies that might solve or ameliorate those problems.
Budgeting and taxation are complicated issues about which people of good will can differ. But instead of people of good will–and thanks primarily to gerrymandering,–we have elected profoundly ignorant (and arguably crazy) people who think they were sent to Washington to destroy the federal government.
I miss policy…Comments