I have given up with the long answers. The US had a marginal rate this high before: wrong, this doesn't reflect tax paid which, for the top 1%, is only down slightly since mid-1960s (and not worth anywhere close to what the US needs).
Other countries do this successfully: wrong, other countries are far less progressive than the US with many more paying top rates. The lazy "we can be Sweden" thinking also indicates a fairly weak understanding of political theory.
Assuming no reductions in revenue, the only solution is raising taxes substantially on the wealthy below 1%. Simple.
If you make the tax system substantially less progressive, as in Sweden or other often mentioned examples, I think it is quite possible to reach a sustainable level.
I partly agree though in that US spending really makes no sense. Other countries that raise more revenue are generally quite targeted in their spending, the US govt is not...at all. It makes no sense to say that the solution to bad spending is to generate more revenue...but it is also not particularly clear that there is any desire to think about how to spend more effectively, outside of slashing everything.
Btw, just generally this reflects how far the US is behind when it comes to intellectual discussions on policy. Most (but not all) discussions about these topics in the US take intellectual force from anti-scientific dogma. Elsewhere, politics has become an evidence-based study of the merit of policies. The former approach just isn't sustainable, the level of poverty in the US is quite shocking (to this outsider's perspective).
The debt is about 3x higher in real dollars, and about 2x higher relative to GDP. That doesn’t seem like the sort of change that would take you from “moderate” to “truly massive.”
Now we enter the area where almost no commenters understand how sovereign currency debt works, and what is required for a healthy economy.
It would take a mini-treatise to summarize what's wrong with this statement, so suffice it to say that there are several scenarios where such a debt is absolutely healthy and encouraged, and no one should use it as an excuse to put their foot further on the neck of the lowest rungs of socio-economic status.
The chief complaint is that many people have almost no money and a few people have almost all the money. Where is this money? It is in bank accounts. Where does the money in the banks comes from? The banks borrowed the money from the central banks. Where did the central banks get the money from? The central banks borrowed it from themselves. How will the central banks pay themselves back? They central banks hold, among other assets, a large quantity of US Treasury bonds. The central banks pay themselves back whenever the US government pays interest on its bonds. If we want people to have more money, then the banks need more money from the central banks, and the central banks need a larger quantity of US Treasury bonds. If we want to redistribute money using taxes, we probably would want even more US Treasury bonds to be issued.
According to https://www.ssa.gov/policy/docs/ssb/v75n1/v75n1p1.html we reached peak social security surplus back around 2008, and cross the line into deficit real soon now. So instead of having extra revenue that can be spent, the budget now has to take into account redemptions of special social security bonds to fund current operations. From the Social Security Administrations perspective they have years of funding because of the trust fund. From a congressional perspective its a double hit to the budget No Surplus + have to pay back redemptions now.
So this was a wonderful time to give a trillion dollar tax cut to corporations.
I do not know how you reduce the size of the state with the baby boom bubble entering retirement. The paranoid part of me thinks the secret solution will be a 1918 Influenza resurgence that disproportionately takes out people over 70. Solves Social Security and Medicare expenditure at the federal level and the pension problem at the state and local level.
Debt isn’t a problem in reality. Especially as the world’s reserve currency. If that ever becomes not the case, we’ll the whole monetary system will be touched. I would google modern monetary theory. I think that is the future more or less.
Let's assume you're right and the US really hasn't ever had a marginal tax rate of 70% in the past. Introducing it now would be the first time it's ever been done.
That is fair, I didn't explain that. But it is fairly simple: progressive tax systems don't reduce inequality. The US already has one of the most progressive tax systems in the world? Is it working? The US is one of the most unequal countries in the world. Look at other similar systems, are they working? Also, no...they are also amongst the most unequal in the world.
More broadly, this is totally out of step with what is happening everywhere else in the world. The US is still trying to catchup even after Trump's tax cut, the issue is that US has a tax system that is from the 1950s when capital movements between nations were essentially banned. That kind of works for the US as the dominant world power but it is becoming more unsustainable as time goes on.
Great, try new things...but what is being proposed isn't a new idea. It is more of the same. The US system is already the most progressive, it already doesn't work, and the idea is to go even further. The new idea, which is being vigorously rejected, is to just do something that actually works. Crazy, right? You don't need to believe in crazy conspiracy theories, you don't need to re-invent taxation...just do the stuff that works.
> But it is fairly simple: progressive tax systems don't reduce inequality.
Ceteris paribus, they do (and certainly inequality has gotten worse in the US since Reagan's tax burden shift reduced tax progressivity), but particularly progressive tax systems are often pared with spending systems with less downward redistribution (or more upward redistribution) than those they are compared with, which counteracts the effect of greater tax progressivity; the US has less downward-redistributive spending than many other developed-world systems. [0] And obviously the tax system alone has less impact on inequality the smaller share of the economy taxation represents, and while the US tax system may be unuusally progressive, but it is also unusually light for the developed world (representing, at all levels of government, about 1/4 of GDP, compared to the OECD average of around 1/3.) [1]
OTOH, the people pushing for more progressive taxes in the US today aren't pushing for that alone, they are pushing for more downwardly-redistributive spending funded by the taxes, as well, and mostly also for taxes representing a greater total share of the economy, as well.
I agree. As I have said elsewhere, US spending is also unusually bad. But I have seen nothing to suggest that the tax-hike crew have any good ideas about spending either. Their idea seems to be "let's just be Denmark", this is exceptionally dumb ("you can't be like Denmark" is the first lesson in most comparative policy analysis courses).
And the issue with progressive systems is that all other things aren't equal. Great, something works in theory...no-one cares. If you are analysing policy, it isn't economics, no-one cares about theory...all that matters are results. Progressive tax systems don't work.
The idea of upward and downward redistribution also sounds like something beloved of theoreticians. Something is only upward or downward re distributive after the fact. The US needs to find its own path (as an example: the idea of a "single payer" health system is just preposterous).
> But I have seen nothing to suggest that the tax-hike crew have any good ideas about spending either. Their idea seems to be "let's just be Denmark”.
I've seen none where this is the case.
> And the issue with progressive systems is that all other things aren't equal.
You can compare situations where things outside of the tax system are, if not perfectly ceteris paribus, at least more comparable than in normal country-v.-country comparisons, like comparing the US before Reagan's tax burden shift to the US after. And when you do that, suddenly progressivity and inequality become opposed. It's only when progressivity is offset by something that mitigates it's ability to drive down inequality that it doesn't have that effect.
> Progressive tax systems don't work.
But they do. The fact that they can (and in the case of the US absolutely do) have their effects offset by larger effects of other aspects of policy that are directed at opposing ends doesn't mean they don't work, it means that if you want reduced inequality, you can't crank those opposed policies up when you crank up progressivity, you need to at worst leave them alone or, better, dial them down.
> The idea of upward and downward redistribution also sounds like something beloved of theoreticians.
It's simple fact if you take money in and send money out, you are either sending the average dollar back to someone who has greater, equal, or less wealth, income, or whatever measure you are concerned about than the person the average dollar came from.
> as an example: the idea of a "single payer" health system is just preposterous
That isn't really an example that clarifies and supports your conclusion, since it is itself an unsupported and equally controversial conclusion to the one it is offered to support.
http://gabriel-zucman.eu/files/PSZ2017.pdf - my reply was sufficient, you are just having trouble because it doesn't match with whatever you conclusion you jumped to without data.
“Effective marginal rate” is a nonsense phrase. We can discuss marginal rates or effective rates but you can’t combine the two.
I assume the other commenter is doing the standard, “that rate doesn’t really count because nobody really paid it.” Which is a perfectly good point, but it’s not accurately expressed by pretending that marginal rates weren’t that high.
You can absolutely compare effective marginal rates; if you have effective rate data by income level, you can calculate from that effective marginal rates, which are simply the effective rate on the difference between the nth and (n+1)th dollar.
OTOH, because one of the big ways this is manipulated is by income that isn't “counted” as income, getting good data from which to estimate effective marginal rates is tricky and you end having to make assumptions that are hard to validate.
Other countries do this successfully: wrong, other countries are far less progressive than the US with many more paying top rates. The lazy "we can be Sweden" thinking also indicates a fairly weak understanding of political theory.
Assuming no reductions in revenue, the only solution is raising taxes substantially on the wealthy below 1%. Simple.