Realism from David Leonhardt

by Russ Roberts on February 25, 2009

in Taxes

Here. He argues that down the road, taxes are going to have to rise over time to fund Medicare, and not just on the top 1%. He presumes that Americans will continue to support Medicare and demand that it stay in place. He's probably right. He mentions in passing that the top 1% pay 25% of the Federal taxes. Not income taxes, because that number is almost 40% in the latest available data. I assume he is accounting for payroll taxes.

By the way, the share of income going to the top 1% and the share of taxes paid are both probably going to be lower in 2008 and 2009 than in years past, because of the recession and the Wall Street layoffs.
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Jacob Oost February 25, 2009 at 8:20 am

I am scared that people will continue to support socialization of medicine as long as no big name politicians are proposing true, market-based reforms.

Most Republicans seem to only want to come up with more efficient ways of paying for health care, but doing nothing to lower actual provider costs.

Even among conservative/libertarian commentators, pushing for true market-based health care reform is indeed a rarity. Focusing on the drawbacks of the NHS or Canadian health care system are one thing, but people who want their kids to have decent health care don't give a crap.

Provider costs must come down. Socialized medicine won't do it. Technological advancements are marginal. What's needed is the abolition of occupational licensing and its replacement with voluntary certification.

Moehler February 25, 2009 at 8:47 am

"I assume he is accounting for payroll taxes."

Why assume? What is the actual Federal tax burden on Americans from all sources ?

What's the total Federal/State/Local burden on Americans (..including indirect taxes) ??
Well over 50%, no doubt.

Clairvoyance is unnecessary to correctly forecast ever higher taxes.

I guess the point of the above post is some mild objection to the distribution of tax burden — but the relevant issue is the absurd magnitude of that burden itself — current & future.

Matt February 25, 2009 at 9:42 am

The link to the 40% statistic is broken.

RVTurnage February 25, 2009 at 10:19 am

Here's the latest info I could find, from 2006 tax year, showing the top 1% paying 39.89%:

John Dewey February 25, 2009 at 10:22 am

Moehler: "What's the total Federal/State/Local burden on Americans (..including indirect taxes) ??
Well over 50%, no doubt."

I know that burden is high, but can it really be as high as 50%? Perhaps you are meaning the marginal tax burden for wealthy taxpayers. Not sure what you would include as "indirect taxes", of course. Taxes on American businesses are passed on to customers, some of whom are Americans. Business taxes can easily be totalled. But I don't know how one would determine the cost to American businesses of meeting regulatory requirements.

Total government spending at all levels is well below 50% of U.S. GDP. In 2006, total federal, state, and local government spending was $4.6 billion, or about 36% of GDP. That's an outrageous level, of course.

Bob Guzzardi February 25, 2009 at 11:31 am

Thanks for the link to Tax Foundation and big thank you of John Dewey for the link to government spending. Useful if depressing information.

Sam Grove February 25, 2009 at 12:11 pm

Tax the rich all you want, that will not improve productivity which is how the resources to be consumed are created.

Sam Grove February 25, 2009 at 1:36 pm

IOW, the burden of taxation will always be borne by those who labor to create value.

Sam Grove February 25, 2009 at 1:36 pm

IOW, the burden of taxation will always be borne by those who labor to create value.

raivo pommer-Eesti February 25, 2009 at 4:05 pm

Hamlet-bin oder nein

von raivo

So zwischen 40 und 60 Veranstaltungen absolviert Klaus Michael Groll im Jahr. Zuletzt informierte der Präsident des Deutschen Forums für Erbrecht die Menschen in Nordhorn, Bad Nenndorf und Stuttgart über die neue Erbschaftsteuer. "Die Säle sind nach wie vor proppenvoll", berichtet Groll. Die Menschen wüssten zwar, dass nun neue Regeln bei der Erbschaftsteuer gelten. "Viele sind aber verunsichert und wollen wissen, was denn nun genau auf sie zukommt", ergänzt der Düsseldorfer Erbrechtsanwalt Claus-Henrik Horn. Hier die Fragen, die den beiden Fachleuten am häufigsten gestellt werden:

Für welche Fälle gilt das neue Recht überhaupt?

Zunächst einmal für alle Erbfälle und Schenkungen nach dem 31.Dezember 2008. Beim Erben gilt stets der Todestag des Erblassers als Stichtag, bei Schenkungen ist es der Schenkungstag. Aber es gibt eine Ausnahme: Ist ein Erbfall zwischen dem 1. Januar 2007 und dem 31. Dezember 2008 eingetreten, haben die Erben ein Wahlrecht. Sie können entscheiden, ob für sie das neue oder das alte Recht gilt. "In bestimmten Fällen kann es sinnvoll sein, einen bereits abgeschlossenen Erbfall neu aufzurollen und dafür das neue Recht in Anspruch zu nehmen", sagt Anwalt Groll.

tiger February 25, 2009 at 5:05 pm

I don't know why Russ didn't address the obvious in the article. Leonhardt's insistence that it's "real" to insist taxes go up to cover increased Medicare costs. That really can't help if we understand taxation-the more you push the rate the less, in the long run you collect (direct from Athur Laffer). Folks who make a lot of money will stop being as productive and hide their wealth and income to avoid more taxes. The realistic view is the cut massive amounts of expenses in the government and lower taxes to pay for future Medicare costs.

jorod February 25, 2009 at 5:27 pm

He is not going to nationalize the banks, just health care.

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