Tuesday, December 26, 2017

Incomes Grew After Past Tax Cuts, but Guess Whose?

For all the backslapping over a job well done, however, Republicans are proving notably more reluctant to acknowledge the true impact of the tax changes that Reagan wrought. That's because Reagan's cuts didn't quite work as advertised. Gross domestic product grew quickly during his two terms, averaging about 3.5 percent a year, pretty decent compared with the current measly pace. For one in two Americans, though -- those in the bottom half of the income pile -- income actually shrank on Reagan's watch. In 1980, the year he was elected, they earned $16,371 a year on average, in today's dollars, according to the World Wealth and Income Database. By 1988, Reagan's last year in office, they had to make do with $16,268.

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Reagan promised to "continue to fulfill the obligations that spring from our national conscience," to help those who legitimately could not help themselves. But even throwing in the impact of taxes and transfers from all government programs, Americans on the bottom half of the income scale did not fare much better. By 1988, they were taking in $21,614, on average, $8 more than in 1980, after inflation.

The sliver of America that did get ahead was, you guessed it, the one at the tippy top: the richest Americans, those in the highest 1 percent of the income distribution. Their earnings grew by about 6 percent a year.

During Mr. Bush's two terms, and tax cuts, the average income of the bottom half of Americans slid from $17,827 to $17,473, accounting for inflation. After factoring in taxes and transfers, that sum did increase -- 3.5 percent, or about 0.4 percent a year.

The bottom half of Americans fared better under President Bill Clinton, who actually raised taxes. On average, their incomes rose by a fifth over his two terms, after taxes and transfers, a gain of over 2 percent per year, after accounting for inflation. Their lot also improved during President Barack Obama's administration, census data shows. (The series from the World Wealth and Income Database ends in 2014.)

In 2014, the economy was 2.5 times larger than it was in 1980, but the bottom half of the population made only 21 percent more, on average, even after including government benefits. America's middle -- families earning more than the bottom 30 percent but less than the top 30 percent -- gained only 50 percent in those 34 years. By contrast, the after-tax incomes of Americans in the top 1 percent -- families like President Trump's or Senator Bob Corker's -- tripled.

That is less surprising when one realizes that for all the stories about harried workers in the Midwest shouldering an unbearable tax burden, tax relief since Reagan's fateful State of the Union speech has mostly been aimed at benefiting the well-to-do: The average tax rate for Americans in the bottom half of the income pile was higher in 2014 than it was in 1980. The rate at the top declined.

Comments

The new tax policies do not take effect until next year. This is a long term trend and stupid headline.

#1 | Posted by bayviking at 2017-12-27 06:50 AM

What's a better headline?

#2 | Posted by BruceBanner at 2017-12-27 11:40 AM

"The bottom half of Americans fared better under President Bill Clinton, who actually raised taxes. On average, their incomes rose by a fifth over his two terms, after taxes and transfers, a gain of over 2 percent per year, after accounting for inflation. Their lot also improved during President Barack Obama's administration, census data shows"

and how did the top 1% make out during Clinton's years? Same with Obamas?

Did they do as well as they did under GWB, for example?

The focus seems to be on how the top 1% do under GOP administrations only and how the bottom half do under dem and GOP administrations.

What about how the wealthiest do when a dem is in the WH? Don't see that compared much....

Snoofy keeps posting the same link over and over illustrating the disparity trend in wealth and gone in the same direction since 1975.

Since 1975 at least 3 dems have occupied the WH and enjoyed majorities in congress.

my point is that maybe we place too much emphasis on tax policy for the direction in income/wealth disparity. It's a factor, but I question how much of a factor it is....

#3 | Posted by eberly at 2017-12-27 11:54 AM

my point is that maybe we place too much emphasis on tax policy for the direction in income/wealth disparity. It's a factor, but I question how much of a factor it is....

#3 | POSTED BY EBERLY

What you're missing is that not all billionaires are douchebags.

Some are indeed patriotic Americans who understand that them doing well under Dem-oriented policies, which most importantly includes paying their fair share of taxes, is important for all Americans ...

The problem is many billionaires are buying the entire political process to change all the laws to solely benefit them -- and that includes lowering their taxes -- and just the estate tax involves trillions of dollars ... so it is a big deal.

#4 | Posted by PinchALoaf at 2017-12-27 12:10 PM

#3 that's a good question.

But Obama was a Republican president.

You have to acknowledge that first.

#5 | Posted by BruceBanner at 2017-12-27 12:18 PM

4

You don't know any billionaires so that is a moot point.

And the estate tax is not that big of a deal..never has been. It's a tax of choice for billionaires. It's avoidable no matter what the rates, for all intents and purposes. It's a wedge issue more than anything.

and one can push for higher taxes (in general) but avoid them using any and all loopholes at their disposal up to and including being sued by the IRS (See Warren Buffett). They can also push for progressive policy but store their cash offshore (see Apple Computer).

You see, it makes you feel good to think you have a handle on whether or not billionaires are douchebags or not as though in a million years you could possibly know that.

#6 | Posted by eberly at 2017-12-27 12:25 PM

It's a Bernie Bros class warfare thing. Just like Trump's class war, but more open about it.

#7 | Posted by BruceBanner at 2017-12-27 12:26 PM

5

I'm with you....can you clarify what you mean though?

#8 | Posted by eberly at 2017-12-27 12:26 PM

You don't know any billionaires so that is a moot point.

And the estate tax is not that big of a deal..never has been. It's a tax of choice for billionaires. It's avoidable no matter what the rates, for all intents and purposes. It's a wedge issue more than anything.

and one can push for higher taxes (in general) but avoid them using any and all loopholes at their disposal up to and including being sued by the IRS (See Warren Buffett). They can also push for progressive policy but store their cash offshore (see Apple Computer).

You see, it makes you feel good to think you have a handle on whether or not billionaires are douchebags or not as though in a million years you could possibly know that.

#6 | POSTED BY EBERLY

I could give a rat's ass if you know all of American's billionaires ... it's not hard to understand that GOP donor billionaires are behind

- retrograde tax policies (inludes the estate tax and hiding profits offshore)

- retrograde business policies (hello Walmart, goodbye mom & pop stores)

- retrograde environmental policies (we have plenty of oil, so let's trample ANWR)

- retrograde Wall Street regulation (2008 Wall Street bailout was GOP led, but only Hillary benefits from hedgefund d-bags? GTFOOH)

So by all means, tell your like minded billionaire buddies that Big Daddy PinchALoaf says they're douchebags of the highest order.

#9 | Posted by PinchALoaf at 2017-12-27 12:59 PM

"it's not hard to understand that GOP donor billionaires are behind.......whomever is in power." ft

Billionaires are billionaires first.

#10 | Posted by eberly at 2017-12-27 01:06 PM

Billionaires are billionaires first.

#10 | POSTED BY EBERLY

I agree

So now go back and re-read post #4 -- I am distinguishing between billionaires aren't d-bags and those who are wrecking the country (per post #9).

#11 | Posted by PinchALoaf at 2017-12-27 01:21 PM

I'm with you....can you clarify what you mean though?

#8 | POSTED BY EBERLY AT 2017-12-27 12:26 PM | REPLY | FLAG:

If we want to measure policy effect then we have to consider Obama's policies were of trickle-down. Obama and Bush gave money directly to companies in the stimulus.

Trump is doing more of the same but doing it through a regressive tax cut.

Obamacare is also a regressive tax. People pay upward for relatively small return.

#12 | Posted by BruceBanner at 2017-12-27 01:26 PM

So now go back and re-read post #4 -- I am distinguishing between billionaires aren't d-bags and those who are wrecking the country (per post #9).
#11 | POSTED BY PINCHALOAF AT 2017-12-27 01:21 PM | REPLY | FLAG:

Yeah right. Sure. Good one.

#13 | Posted by BruceBanner at 2017-12-27 01:27 PM

"I am distinguishing between billionaires aren't d-bags and those who are wrecking the country (per post #9)."

No, you are just imagining that you are making that distinction. You're singling out a few billionaires that you know to be wrecking the country.

Kochs, Adelson, etc....not sure your list is much longer than that....but whatever.

#14 | Posted by eberly at 2017-12-27 01:33 PM

I think the Koch Bros are trying to do what they think is right. They're not cartoon characters.

#15 | Posted by BruceBanner at 2017-12-27 01:47 PM

Bruce, aka Tiny Tim, is drunk again.

#16 | Posted by PinchALoaf at 2017-12-27 02:02 PM

drunk? because he pointed out the Kochs are not cartoon characters?

they're not, you know....

#17 | Posted by eberly at 2017-12-27 02:06 PM

The zero percentage interest rate from the fed is also being included in the Obama = Republican in policy

#18 | Posted by BruceBanner at 2017-12-27 02:14 PM

#16 I wish!

#19 | Posted by BruceBanner at 2017-12-27 02:15 PM

Interview with a Koch.

Worth listening to.

freakonomics.com

#20 | Posted by BruceBanner at 2017-12-27 02:16 PM

I've pointed out here, repeatedly, that these US companies are eating the world's lunch. Amazon apple Google Facebook et all are dominating world markets. They are to be celebrated not denigrated

#21 | Posted by DavetheWave at 2017-12-27 02:51 PM

So tell us Bruce how many koch industries workers are union members? Compare the to Google Microsoft apple Amazon and Facebook employees (combined!!)

What those companies don't have any union employees? How does that jibe with your line of bs??

#22 | Posted by DavetheWave at 2017-12-27 02:55 PM

"Amazon apple Google Facebook et all are dominating world markets"

Including labor markets. Which makes uneducated white Americans feel like they are being passed over for higher skilled foreigners, which is true.

That made them mad, so they voted for Trump. But Trump isn't going to help them get those jobs or those skills. He will make their health care worse though.

#23 | Posted by snoofy at 2017-12-27 02:56 PM

But you can celebrate that Warren Buffett owns Wells Fargo and ran the biggest banking scandal in 10 years, while he and Obama bashed fat cat banksters, rolling out the buffet rule!!

#24 | Posted by DavetheWave at 2017-12-27 02:57 PM

23 the tax that were rolled out by Obamacare were passed without a single R vote. And many here laughed.

You can pretend aca improved health care, go ahead.

#25 | Posted by DavetheWave at 2017-12-27 03:00 PM

How does that jibe with your line of bs??

#22 | POSTED BY DAVETHEWAVE AT 2017-12-27 02:55 PM | REPLY | FLAG:

What's your contention with my "line of bs"? What bs would that be?

#26 | Posted by BruceBanner at 2017-12-27 03:01 PM

#20

That's a great interview, Bruce, thanks for posting that.

I have tried to post facts about the Koch Brothers over the years that run counter to the MediaHuffThinkDailyTalkingMattersPoProgressPointsMemo narrative only to be shouted down by the usual suspects, hopefully your posting of this will cause them to emerge from their cocoon for a few seconds to consider the points raised in that interview.

#27 | Posted by Rightocenter at 2017-12-27 03:03 PM

The Koch brothers own Georgia Pacific. It is an American consumer goods company that makes everyday products like facial tissue, napkins, paper towels, paper cups and the like. Their plants are great examples of American advanced manufacturing. Incidentally, GP makes most of its products here in America. The company's workforce is highly unionized. In fact, 80 percent of its mills are under contract with one or more labor union. It is not inaccurate to say that these are among the best-paid manufacturing jobs in America.

This presents a dilemma and a paradox. While the Koch brothers are credited with advocating an agenda and groups that are clearly hostile to labor and labor's agenda, the brothers' company in practice and in general has positive and productive collective bargaining relationships with its unions.

-politico


What's your point Dave Thewave?

#28 | Posted by BruceBanner at 2017-12-27 03:04 PM

Glad you enjoyed it RoC! Liberals need to figure out who and what their real issues are. People will make a few dollars off of this tax thing. Saying money is evil is not the right message.

#29 | Posted by BruceBanner at 2017-12-27 03:07 PM

@ Eberly
@ Right-O-Center
@ BruceTinyTimBanner
@ DaveTheWave

You guys are Quislings for the 1%.

Shameful

#30 | Posted by PinchALoaf at 2017-12-27 03:32 PM

Bears repeating:

"While the Koch brothers are credited with advocating an agenda and groups that are clearly hostile to labor and labor's agenda, the brothers' company in practice and in general has positive and productive collective bargaining relationships with its unions."

I posted something similar to this last year and was angrily shouted down by almost the entire DR Left, most notably Tony, Corky and Danni.

#31 | Posted by Rightocenter at 2017-12-27 03:33 PM

#30

Obviously, anything that Pinch is exposed to that is outside of his cozy cocoon that threatens his narrative frightens and angers him, but we forgive his confusion nonetheless.

#32 | Posted by Rightocenter at 2017-12-27 03:36 PM

Saying money is evil is not the right message.

#29 | POSTED BY BRUCEBANNER

The evidence shows decades of tax cuts and our overall tax policies have not benefited workers and the middle-class, but have instead benefitted those at the top.

Evidence > Koch Propaganda = flat wages & record corporate profits

#33 | Posted by PinchALoaf at 2017-12-27 03:38 PM

Obviously, anything that Pinch is exposed to that is outside of his cozy cocoon that threatens his narrative frightens and angers him, but we forgive his confusion nonetheless.

#32 | POSTED BY RIGHTOCENTER

Obviously you're as blind as a bat.

Tax cut after tax cut since the 1980s, and wages have stayed as flat as a pancake.

Only you and the rest of the Quislings can't see this.

#34 | Posted by PinchALoaf at 2017-12-27 03:42 PM

You're fighting the wind brother.

#35 | Posted by BruceBanner at 2017-12-27 03:45 PM

Tax cut after tax cut since the 1980s, and wages have stayed as flat as a pancake.

Hey, we planted acres of orange trees and our apple production has stayed flat as a pancake.

#36 | Posted by Rightocenter at 2017-12-27 03:53 PM

30

you're a fool. when Obama talks about a cocoon...he means you.

my only point in #3 was questioning how truly impactful tax policy has on wealth and income disparity (which I agree is a real problem).

I'm not advocating for lower taxes on the wealthy...I just think you are so simple minded and lost to believe this comes down to the personalities of billionaires.

#37 | Posted by eberly at 2017-12-27 03:57 PM

Here's a hint, Pinch...wage growth and tax cuts aren't linked, wage growth and productivity, international trade and automation are:

It took many factors -- some the result of deliberate policy choices, some the outcome of broad economic processes -- to produce decades of wage stagnation for the typical worker. Similarly, it will take many incremental reforms and new policies to reestablish the conditions that support robust, broadly shared wage growth. There is no single wage growth panacea, but many policies would help, including: raising the minimum wage; increasing worker bargaining power (including by reducing noncompete contracts or collusion among firms); ensuring adequate labor demand through looser fiscal or monetary policy; increasing dynamism through pro-mobility or entrepreneurship policies; and making broad improvements to education or productivity policies. Given the longstanding trends and limited improvements in living standards for many workers, taking action to increase wage growth is one of the most important policy imperatives we face.
Harvard Business Review: Why Wages are not Growing in America

#38 | Posted by Rightocenter at 2017-12-27 03:58 PM

#38 you realize that Republicans do the opposite of most of those suggestions, right?

Actually they may be doing the opposite of all of those policies right now.

#39 | Posted by BruceBanner at 2017-12-27 04:11 PM

you realize that Republicans do the opposite of most of those suggestions, right?

That's a pretty broad brush, since implementation of those "suggestions" depends on how you define pretty much everything except "raising the minimum wage", but still a fair statement from a general standpoint.

#40 | Posted by Rightocenter at 2017-12-27 04:38 PM

I can see how a JEFFJ would argue the education one.

#41 | Posted by BruceBanner at 2017-12-27 04:46 PM

Education, monetary policy, worker bargaining power, entrepreneurship and mobility policies, productivity and retraining, these all can be argued by both sides of the aisle.

#42 | Posted by Rightocenter at 2017-12-27 04:54 PM

The tax bill is a quantifiable harming of most of these things. The push against worker bargaining power is well documented. Weakening unions is a clear example of that.

#43 | Posted by BruceBanner at 2017-12-27 05:25 PM

Tax cut after tax cut since the 1980s, and wages have stayed as flat as a pancake. - Pinch

No, it was the 70s, when immigration began to soar.

#44 | Posted by AndreaMackris at 2017-12-27 05:29 PM

The push against worker bargaining power is well documented. Weakening unions is a clear example of that.

Only if you are focusing on the 10% of the labor force that is unionized, increasing bargaining power for the other 90% requires low unemployment, job growth and non-automation productivity gains that are starting to drive wages up.

#45 | Posted by Rightocenter at 2017-12-27 05:34 PM

#45 with current low unemployment high corporate profits, and 6 million job vacancies, why aren't we seeing it?

#46 | Posted by BruceBanner at 2017-12-27 05:51 PM

46 because the new mega US corps are doing more with less. IBM has 380,000 employees, Facebook has less then 20,000 and Its 4X larger in market cap.

And they don't have 1 union employee.

#47 | Posted by DavetheWave at 2017-12-27 07:27 PM

#47 maybe a tax cut will change that? That's the current GOP magic wand?

#48 | Posted by BruceBanner at 2017-12-27 07:28 PM

You can pretend aca improved health care, go ahead.

#25 | POSTED BY DAVETHEWAVE

Obamacare is indeed improving healthcare ...

www.drudge.com

Without Obamacare there were no patient quality and safety standards, and by virtue of identifying all those crappy hospitals, it's working just as it was designed to do.

#49 | Posted by PinchALoaf at 2017-12-27 07:33 PM

BTW, we need to add Andrea Mackris to the list of Quislings for the 1%.

#50 | Posted by PinchALoaf at 2017-12-27 07:37 PM

Quisling.....cute.

#51 | Posted by eberly at 2017-12-27 07:50 PM

why aren't we seeing it?

That is a super complicated macro-economics question that deals with productivity gains, inflation and the rise of health benefits in lieu of wage increases all factor into it:

One of the economy's biggest mysteries is this: The labor market is the strongest it has been in a decade, yet wages are rising barely faster than inflation.

For some reason, the booming job market and ultralow unemployment rate, which fell to 4.4 percent in April, haven't led employers to raise pay in a meaningful way. That flies in the face of a basic assumption of how the economy works: A tight labor market is expected to lead to pay increases that in turn fuel broader inflation.

But the mystery of the missing pay raises may have a surprisingly simple solution, and one that sheds light on the larger economic challenges of our age.

Consider a simple model for how much the average worker's pay ought to be rising: You could simply add together the productivity growth rate -- how rapidly the output generated by each hour of labor is increasing -- and the inflation rate, which tells us how quickly prices are rising.

Over the last 24 months through March, inflation has come in at 1.4 percent a year, and productivity growth at 0.6 percent. Those are very low numbers. And in our supersimple model, you may expect average worker wages to have risen only 2 percent.

In fact, the average hourly earnings for nonmanagerial private sector workers rose 2.4 percent a year in that period. You may not feel like cheering about that, but it's more than we might have expected, with inflation and productivity so weak.

If anything, the numbers show that workers are capturing more than their share of the spoils from a growing economy. And that, as it happens, is the reverse of a decades-long trend.

Why? Minimum wage increases in several states probably contributed. Obama administration efforts to shift the playing field toward workers may have helped, too. But we don't know whether this is a temporary blip or the beginning of a trend, in which employee paychecks will swell with a greater share of the fruits of economic growth.

Surely, the low unemployment rate is an important factor. Economic theory tells us that when workers are scarce, employers have to raise wages.

Indeed, economists at Goldman Sachs recently studied which factors drive wage trends in 10 major economies, and identified low productivity growth as the main culprit behind the recent weakness in wage numbers around the world.

Everything in macroeconomics is linked, though not in ways that are fully understood. The relationship between joblessness and inflation is known as the Phillips curve, for example, and it points downward: The lower the unemployment rate, the higher the inflation rate should be.

In reality, though, the relationship between unemployment and inflation is not straightforward and seems to be always moving.

Even less is known about the ties between wages and productivity. This is particularly important if, as our analysis of wage trends suggests, low productivity growth is the culprit behind Americans' small inflation-adjusted pay increases during the last few years.

Unfortunately, the picture isn't entirely clear. The process by which businesses and their workers become more productive is something of a black box, deeply important yet not really understood. But perhaps we can at least ask better questions: The real mystery isn't why wage growth is so low, but why productivity is so low. And solving it could leave both workers and their bosses better off.

NYT:The Question Isn't Why Wage Growth Is So Low. It's Why It's So High.

#52 | Posted by Rightocenter at 2017-12-27 07:50 PM

"47 maybe a tax cut will change that? That's the current GOP magic wand?"

It's not a magic wand. It sells.

#53 | Posted by eberly at 2017-12-27 07:51 PM

Here's a hint, Pinch...wage growth and tax cuts aren't linked, wage growth and productivity, international trade and automation are:

#38 | POSTED BY RIGHTOCENTER

So what you're saying is that wage growth is linked to productivity.

Except that American corporations are as productive as ever and profits are at record levels -- so where's the pay raises for American workers?

How now, brown cow ~

#54 | Posted by PinchALoaf at 2017-12-27 07:52 PM

52

So, productivity is not very good?

#55 | Posted by eberly at 2017-12-27 07:56 PM

qz.com

#56 | Posted by eberly at 2017-12-27 07:58 PM

Where did Pinch go?

#57 | Posted by eberly at 2017-12-27 10:41 PM

#56 interesting. The tax bill is not good for productivity then.

#58 | Posted by BruceBanner at 2017-12-27 10:45 PM

Agreed. It's not really good for much.

Tax rates and productivity are mutually exclusive items.

#59 | Posted by eberly at 2017-12-27 10:49 PM

But I was unaware productivity had declined in recent years.

#60 | Posted by eberly at 2017-12-27 10:50 PM

Except that American corporations are as productive as ever

Wrong. Productivity was mostly negative over 2016 and was pretty low or negative (except for 2010) during the Obama administration, but has risen every quarter in 17 so far. That may be due to increased training of workers these past two years or from improved ways to measure productivity in a service economy, but an increase in productivity has been shown to be linked to wage growth.

Tax rates and productivity are mutually exclusive items.

It's probably more accurate to say they are mutually distinct than exclusive.

#61 | Posted by Rightocenter at 2017-12-27 11:02 PM

#30 | Posted by PinchALoaf at 2017-12-27 0

Bruce is a conservative which is the reason he hates Bernie Sanders and keeps crying about Bernie, he is afraid Bernie will once again turn the Dems into a liberal party instead of the neo-liberal crap that it is today.
Bruce is a neo-liberal conservative and whats the Dems to turn even further to the right

#62 | Posted by PunchyPossum at 2017-12-27 11:53 PM

Punchy and Pinch! Stop 69ing each other while thinking about me.

#63 | Posted by BruceBanner at 2017-12-28 01:19 PM

Bernie will never lead any party ever. He tried and lost. He can take up knitting in 2018.

#64 | Posted by BruceBanner at 2017-12-28 01:20 PM

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