The uppers vs. the ultras

Lets hear it for a more progressive tax system on the oligarchs...

The gap between the rich and ultra rich is class warfare!!!!!

"They include government officials -- and, yes, SEC lawyers -- who didn't make or inherit fortunes before entering public service. If people no smarter or better than you are making $10 million or $50 million or $100 million in a single year, while you're working yourself ragged to scrape by on a million or two -- or, God forbid, $300,000 -- then something must be wrong."

Could you please point me to that cadre of government officials making, god forbid (literally), more than $300,000?

The Onion is on the case:

http://www.theonion.com/video/in-the-know-are-americas-rich-falling-behind-the-s,14165/

In this modern age do we really need brackets? Couldn't the tax rates be done on some kind of curve approaching a limit? I mean it's not like people are doing this stuff by hand anymore. Every $ you make effects your rate.

""Could you please point me to that cadre of government officials making, god forbid (literally), more than $300,000?""

Well, if they're a married couple of high level SEC lawyers, their household salary could get that high.

But who are the engineers making $300,000?

In any case, this is the upper-middle vs. upper-class version of John Edwards' "wealth vs. work" dichotomy. The "lower upper class" is making their money by performing tasks for which they are compensated. The upper-upper-class they're revolting against are making their money by working nearby huge amounts of cash flowing past them and taking a cut for themselves as it passes by.

Plenty of government officials make $100k or more. Plus, they tend to get more frequent raises and enjoy greater overall job security.

That being said, slightly higher taxes for folks at every 100k increase in income makes a lot of sense and seems fair, and is much less regressive than a VAT. If combined with cuts in capital gains and corporate tax cuts, and an increase in taxation on companies that take their profits overseas to avoid paying Uncle Sam, I think we'd have a nice, middle-of-the-road tax policy going on.

Speaking as a member of tyromania's "lower upper class", I don't resent that they earn more than me. I resent that I spent years educating myself, work long hours, and live a frugal lifestyle so that I can save for my retirement. Those bastards then proceed to help themselves to my savings. They don't even spend my money on something good, they waste it on tasteless, luxury crap.

""slightly higher taxes for folks at every 100k increase in income makes a lot of sense and seems fair ... if combined with cuts in capital gains""

One thing you don't realize, Kevin, is that the hedge fund managers and CEOs pulling down millions of dollars in compensation are packaging their income as "capital gains" specifically so it gets taxed at a lower rate, which is another source of the "upper vs. ultra" tension. The doctor or lawyer working 100 hours a week pulling down $1 million/yr is taxed at a higher rate than the hedge fund manager getting a $200,000 salary and a $10 million dollar bonus repackaged as "capital gains."

Capital gains taxes are _already_ low. Cutting them, especially without reforming how we classify certain forms of compensation favored by the "ultras" is going to just exacerbate the problem.

"One thing you don't realize, Kevin, is that the hedge fund managers and CEOs pulling down millions of dollars in compensation are packaging their income as "capital gains" specifically so it gets taxed at a lower rate, which is another source of the "upper vs. ultra" tension."

I think we can get away from or lower a capital gains tax and go with a modest wealth tax on financial assets, similar to the real estate tax that homeowners pay. Give it a generous floor, exempting retirement funds below 3 million indexed for inflation, and exempting the first 100K of assets also indexed for inflation.

I think we should add a derivatives tax that targets naked speculation and a modest financial transaction tax that targets day and computer arbitrage trading. Its time for the financial industry to pay for the havoc they wreaked on our economy.

Ezra,

This is *really* good stuff. I know that this category is real because it's a more precise description than any I've heard of my parents and their political views. They understand the arbitrariness of hyper-success, precisely because they were close enough to it to understand how it worked. They were lucky enough, but they know that a little additional luck is the only reason they didn't end up 10x as well-off.

It would be *amazing* if you could pursue researching this trend, and the policy prescriptions that go with it (like additional tax brackets)--the same way you researched the history of the filibuster and filibuster reform for Newsweek! To answer such questions as:

1. In real terms, how has the marginal tax rate threshhold changed over time in the U.S. and why?
2. How does it compare to other developed countries? (Again, over time? And why?)
3. How much additional revenue can we derive from new tax brackets?
4. How does this method of generating revenue compare to raising taxes on the under-$250,000 crowd? (Which critics say that the Obama admin will *have* to do in order to raise revenue. The hypothesis for your research, of course, is that new brackets are both more feasible and more just.)

This could be an amazing way to solve a political problem (how do the Dems avoid alienating the upper middle class?) and a fiscal problem (how do we balance the budget without cutting too much of the safety net?)--at the same time.

--intrptdbyfirwrks
(@sowhatquestion on Twitter)

P.S. And while I'm imagining a dream team of wonks taking on this issue, Nate Silver should evaluate the claim made by the previous poster: "In this modern age do we really need brackets? Couldn't the tax rates be done on some kind of curve approaching a limit? I mean it's not like people are doing this stuff by hand anymore. Every $ you make effects your rate"

Hey, I'll sign up for that petition!

I agree. The amounts these people make are completely out of proportion to the actual value they bring.

Couldn't agree more on the premise. Fundamentally though, you'd be much better staggering the capital gains rate, rather than adding income tax brackets.

The basic problem is you can't raise that much revenue from the $1M+ crowd. Even if you taxed them at 70%, it honestly wouldn't make much of a fiscal dent at all. The golden pot of money is in the upper-middle class households making $100k-$300k/yr. But that's politcally dicey.

Couldn't agree more on the premise. Fundamentally though, you'd be much better staggering the capital gains rate, rather than adding income tax brackets.

The basic problem is you can't raise that much revenue from the $1M+ crowd. Even if you taxed them at 70%, it honestly wouldn't make much of a fiscal dent at all. The golden pot of money is in the upper-middle class households making $100k-$300k/yr. But that's politically dicey.

"The golden pot of money is in the upper-middle class households making $100k-$300k/yr. But that's politically dicey."

So true. Making 100k will easily put you into the top 20% of households. But most folks consider 100k/yr not really all that "rich".

There's one more aspect to this interesting and valid idea: the lower-uppers, as one poster pointed out obliquely, know damn well that the upper-uppers make money on the backs of the lower-uppers. Where does everyone think all those Wall St. profits come from? For the most part, fees on transactions and trades. In other words, money that would otherwise be going to the very people in the 100K-300K world. It's arbitrage on the life savings of real people. Happily ensconced in the lower-upper group, I realize that my Wall St. friends are skimming profits of money that should be going to me, and I don't much like it.

I think this premise is silly. The class resentment described here is a neo-Marxist textbook fantasy that just doesn't exist in the real world. The super-rich $50 million people are essentially lottery winners, and everyone working for them at the $100,000 level knows that. Everyone dreams of winning the lottery, but only a fool resents it when it doesn't happen. The point of being at the $100,000 level is to make a decent living off of the super-rich, not to wish for lightning to strike so that you become one of them.

"Lower Uppers are doctors, accountants, engineers and lawyers."

No these occupations are about as middle class as you can get. They fall into what Marx called the petit-bourgeoisie.

Not many accountants, engineers, or lawyers make $300,000. $100,000, maybe.