Tax The Rich to Reduce the Disparity

Emmanuel Saez, professor of economics at UC Berkeley, has done in-depth studies of income disparity between the 1% and the 99%, across the world and across a century of U.S. data. At a public lecture last night, he presented many enlightening graphs – see bibliography in this blog and check out his articles.

One graph showed the relationship between Top 1% Income Shares and Top Marginal Tax Rates. The income and tax lines mirrored each other, showing that when the tax rates go down, the 1% shares of income go up, and vice versa.

Significantly, when a young audience member asked whether the current Democratic federal income tax rate proposals would be better than the Republican tax rate proposals regarding the disparity, his answer was “It would not make much difference.” Saez said the debate needs to be between the 35% top rate of today, and the 70% top rate of the 1970s, not between 35% and 39.6%.

And yet the media calls the Republicans and Democrats polarized on this issue?! Gee, who owns the media, and speaking of income, where do media outlets get their income? Our dollar bills for the newspaper, or their advertisers? And why isn’t Emmanuel Saez the expert they turn to when they present perspectives? In the media’s own terms Emmanuel Saez would be a great person to interview on TV: fresh perspective, concise, young, tall, dark, and handsome; he even has a French accent. More importantly, not in media terms but in the terms of the 99% and our future generations, he has the facts that show the Occupy and Tax The Rich movements are heading in the right direction.

What can we do? Spread the word. California showed  it’s ready to listen. We voted to increase taxes on the richest a tiny bit via Prop 30. True, it was a watered-down version of the real Millionaires Tax that voters preferred over Jerry Brown’s initial tax proposition. The good news is that the Tax The Rich movement – which includes Occupy, student movements, and California Federation of Teachers – forced Governor Brown to increase the tax rates in the compromise that became Prop 30.

Saez said, “The public will favor more progressive taxation only if it is convinced that top income gains are detrimental to the 99%.” What can we do? Spread the word and keep up the pressure.


The following are PDFs:

Striking it Richer: The Evolution of Top Incomes in the United States” (March 2, 2012)

“Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities” with Thomas Piketty and Stefanie Stantcheva, NBER Working Paper No. 17616, November 2011, revised October 2012

GRAPH: Black line is top 1% income, red line is top tax rates. If it’s hard to read, see page 40 of “Optimal Taxation” article above (page 42 of the PDF).

Picture 1

%d bloggers like this: