197 Comments

I understand the frustration with Manchin’s refusal to provide his specific priorities within a $1.5T bill. Yet I get the impression he doesn’t have strong preferences for one program versus another. Further I don’t think he wants to get the political flack for picking and choosing which programs make the cut.

And I think that is reasonable. Those hard decisions should ultimately reside with party leadership; chiefly, Schumer, Pelosi, and Biden. That is the job of being in a leadership role; making the hard calls that can build a voting block to pass legislation and receiving political flack for their decisions.

I personally blame these three leaders for eschewing their responsibilities. Yet I can understand their concerns about having to anger some political blocks, journalists, and twitterati “thought leaders” by explicitly endorsing certain priorities over others. E.g., stating they want to drop the CTC in favor of addressing climate change and deficit reducation. No matter what they choose they will anger someone and receive a fair amount of loud condemnation.

It’s even possible that these three leaders don’t see the possibility of reconciling these priorities into a package that can garner sufficient votes among congressional Democrats. Any proposed package may be vetoed by Dems that don’t see their hobby horse included. E.g., the SALT assholes. In which case our Democrat leadership finds themselves in the sisyphean task of going through the motions of developing and championing a cornucopia of Dem priorities while knowing no such bill will ever pass.

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If we do another round of democrats SALT discourse I will spontaneously combust. Everyone is so disingenuous in that debate. At least Josh Gottheimer basically wants to line the pockets of his constituents, Katie Porter saying it’s progressive to have more SALT is nails on a chalkboard to me.

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The problem, in my view, is that the leadership are acting like we are a parliamentary system where the leaders write legislation and the party membership dutifully vote for it. That's not how our system is supposed to work. What's needed is a return to regular order in the House and Senate.

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I think the last part is likely correct. Presumably there's a bloc on the other side that won't vote for a smaller bill without their priorities in it. And has expressed as much to the leadership. Leadership's actions make a lot more sense if that is the case.

Maybe that means there is still hope for a "something is better than nothing" bill in the (presumably) lame duck sessions after the election?

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It does seem like Manchin's policy preferences are vague and weakly held, but I would say that's the problem. It's fine for a dentist to be indifferent to public policy. But Manchin asked to be a U.S. senator. And whatever his motivations are, his strategy doesn't seem optimized for either deferring to leadership or avoiding flak.

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Go find someone else with clear policy preferences who can win as a democrat in WV. In the interim, Manchin is the only reason the democrats have gotten _anything_, including administrative appointments.

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Oh, for sure. None of that is inconsistent with anything I said.

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Apr 26, 2022·edited Apr 26, 2022

Yes! Yes! Yes! This should be a no-brainer. That the Democrats are not doing this, that in fact, despite the Trifecta we’re close to the midterms and they *still* haven’t corrected the horrible (an hugely unpopular) GOP tax cuts, show the party has a radical problem. How could they be so incompetent or clueless??

I have two main suspicions: 1. Weak leadership from the WH leaving a vacuum that makes it very difficult to get things done 2. Structural changes in the voter base mean that the Dems are no longer truly incentivized to pursue a classic left-wing economic agenda, not even a very moderate one.

As evidence for no. 2 I’ll point out that until quite recently the left-wing of the party used to be progressive in the original sense: Warren was all about anti-trust, regulation, taxation. Sanders basically the same just in a more populist and less-wonky style. But since Trump took power the Dems lost their North Star. Warren and even Sanders paying homage to woke agenda that they truly ignored (or that simply didn’t exist) until 2016 or later. Heck, Sanders used to be an immigration skeptic - a proud tradition in a labor left - but in the 2020 came out publicly for decriminalizing illegal border crossing !

And Warren nowadays still does some good work, but it seems her no. 1 issue now is student loan debt. What happened to them? I suppose they (naturally enough) fell inlove with their own new found popularity, and then got carried away by a hyper-educated and pretty wealthy base, that is not truly interested in economic-left policies beyond the occasional virtue-signal. Culture wars are far easier on the old pocket.

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Great post. I used to really like a lot of what Warren brought to the table in terms of pocketbook issues but ever since 2020 it feels like she has fallen more under the sway of the activist class.

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"Structural changes in the voter base mean that the Dems are no longer truly incentivized to pursue a classic left-wing economic agenda, not even a very moderate one"

Wasn't 75% of the primary spent arguing about Medicare-for-All, a left-wing economic agenda?

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There was plenty of noise around M4A. But, and this is where THPacis' point is well-taken, what happened to any of it once Dems retook the White House and Senate? One suspects that their meekness at getting any left-wing economic agenda-ey things passed is a rational response to where their actual voters' interests lie. It makes Dems feel cool when they drape themselves in a working class mantle, but really they're composed of middle-to-upper-middle class people.

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"what happened to any of it once Dems retook the White House and Senate"

They, um... Passed the CARES act, about the economy. Then they passed an infrastructure bill, also about the economy. Then they tried to pass BBB, but it ran aground due to Manchin/Sinema. That was about the economy too!

I do think this highlights the real problem, which is that the moderates don't tend to push more actively for center-left economic policy. This makes the conversation end up being about social issues, like banning library books or immigration.

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"I do think this highlights the real problem, which is that the moderates don't tend to push more actively for center-left economic policy" curious about this.

I'm curious about your thoughts on this: Do the moderates (I'm thinking Manchin and Mark Kelly) want to push for center-left economic policy? It seems to me that they seek what are more traditionally understood as center-right, blue dog-esque policy goals...

I definitely agree with you that the unwillingness to either tout policy wins or justify policy losses creates space for social issues to take up all the oxygen.

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I think... They're conflicted. They have center-left preferences, but don't seem to push them as much as it sounds like they could. Part of that is probably just party leaders having so much power.

The irony of the post is that they aren't even do Blue Dog goals right now! We aren't seeing the Joe Manchin Deficit Reduction act, or a proposal to cut down wasteful spending. They don't seem to be doing much of anything!

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You're right, congressional Dems should be credited with those achievements. But insofar as many on the left are disappointed in this congress' inability to make major movement towards a more social-democratic future, my interpretation of THPacis' point was that they rightly identify the class profile of the Democratic base as too bourgeois for Dems in congress to feel confident going full FDR.

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Please explain how they could have gotten any of your preferred programs passed, given the breakdown in the senate.

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Practically everyone supports taxing the rich and practically everyone defines "rich" as making roughly 2x what they themselves make.

How do you all define rich? I think HH income above $400K (98th percentile) is clearly rich. I'm sure other would define rich as the top 10%, which equates roughly to HH income above $200K (which, as someone about at this level, doesn't *feel* that rich but I bet few rich people actually feel rich).

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https://dqydj.com/household-income-percentile-calculator/

I would start with top 10%. Note that raising the marginal tax rate on HH income > 200k would barely affect people right at the 10% line, since so little of their income would be above that line.

However once you get to top 5%, now you're taxing about 25% of their income at this higher rate - so you're starting to get what feels like a real increase (Although increasing the marginal rate by even a whopping 10% would only increase their taxes by about 2.5%)

It's tricky - if you wanted more out of that top 10% you'd have to add the marginal tax hike _earlier_ possibly 150k (which seems to be around top 14%) - so that the top 10% actually generate some revenue.

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founding

The standard difficulty with doing anything to the top 10% is that this group is probably more like 20% of voters, and 40% of small dollar donors.

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Found a chart:

https://econofact.org/voting-and-income

Looks like of the top 20%, 80% voted.

Of the top 50% (67k household) 65% voted

About 55% voted in the 20%-50% range, and then maybe 40% below that.

If we normalize to 50%=1 vote, then the top 20% cast 1.6 votes each (weighted by percent = .32)

The next 30% cast about 1.18 votes each (weighted by percent = .35)

The next 30% were about 1.1 votes (.33)

And the bottom 20% were about .16

Adding up you get 1.16, with the top 20% casting 27% of the vote. So, lopsided, but not 10% = 20%.

And if you want to reverse the college/non-college partisan divide, I don't see a way around it other than giving up on some 10%-ers to try to appeal more to working class.

I don't want my taxes going up, but I know I can afford it to an extent, and I'd much rather have fights about the proper rate of taxation than the culture wars.

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Apr 26, 2022·edited Apr 26, 2022

Great post, I appreciate you bringing real data and doing the work to make those calculations. I learned something! It's not as lop-sided as I would have guessed. The bottom 20% are about 14%, which is underweight for sure, but not vastly so, and the middle 60% are within a percent or two of 60%.

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A lot of progressive donors fall in that income bracket and generally give money to candidates that want to increase their taxes by a lot. So I think it would be OK on that front

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Stocks and flows. You’re describing high income. Some high income people are also asset rich, some aren’t. Some asset rich people were never high income.

When deciding if someone is asset rich, it matters a lot how you value assets like primary residences and pensions and also how old they are. When deciding if someone is high income, it matters how you think about expenses that are purely frivolous (wine, travel) vs. contingent to the income (credentialing, HCOL rents) vs. exogenous (illness, divorce).

My central case for a rich person is someone whose necessary expenses and labor market activity are both totally dwarfed by his assets.

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I'm a postdoc making 44k/year. I do not consider a family making 88k/year rich, for the record :)

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I'd probably start with the same, though I think it can be hard to picture what different amounts "mean" so when I've heard discussions of this, wealthy becomes 'anyone who can stop working tomorrow (or doesn't work due to inheritance) and be fine the rest of their life' and rich is just 'some 6-figure number.' HH income over time matters too, though for income tax of course a year is our current time frame. As a stereotypical Californian I'll throw in that location probably plays a role—I'll probably solve the problem of not being able to buy a house by moving to a lower-cost area and will then also drop to a lower income percentile.

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Apr 26, 2022·edited Apr 26, 2022

Unfortunately, Matt’s facts are a little wrong here. Trump increased standard deductions and reduced tax rates for the poor and middle class. Yes, this also reduced rates for top earners and created lots of pass through deductions for his real estate buddies, but the median American saw a significant tax reduction.

If the Democrats really wanted to stop inflation, they’d do a Clinton-style broad-based tax increase where everyone felt some of the pain. Frankly, raising taxes on the top 1% won’t do anything for inflation. And with the right PR, they could talk about civic duty and bringing the country together vs our enemies.

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You are calling Matt wrong, but then making a different claim. His claim was that the tax code got less progressive, not that taxes didn’t go down for the poor and middle class.

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Why is making everyone feel the pain better than making only the rich feel the pain? That seems like poor electoral strategy as well as poor policymaking. The whole point of Matt's piece is that all voters are feeling the pain of inflation, but only a minority of voters would feel the pain from upper-income tax increases to reduce inflation. That's the reason to do it.

"Upper income" doesn't just mean the top 1%. For example, 6% of American workers earn more than the Social Security tax ceiling. Joe Manchin has endorsed getting rid of the ceiling and since it's all about getting his vote, that's certainly one thing that should be done. But raising the marginal rates for the upper brackets (28% and above) would also affect only a small percentage of voters:

https://taxfoundation.org/how-many-taxpayers-fall-each-income-tax-bracket/

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Soak the rich!

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"Frankly, raising taxes on the top 1% won’t do anything for inflation."

Many on the left often overestimate how much funding they can get to pay for their favorite programs just by taxing the 1%, so it wouldn't surprise me if there's similar overrating on how much inflation reduction they can get by the same.

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He’s practicing what he preaches and calling it a plan to ‘tax the rich’ and not giving many potential details. Seems fine it’s not like there’s a real deal on the table. Broad contours are kind of given by example in the student loan discussion; that would imply ‘the rich’ are top 1/3. Seems reasonable to me that reducing top 1/3 income and some deficit reduction should have some small positive effect on NGDP and inflation / RGDP divide.

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The poor and middle class tax cuts expire. The tax cuts for the rich are permanent. Details matter.

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founding
Apr 26, 2022·edited Apr 26, 2022

I'd agree that the 1% / 99% framing gets it wrong.

But you could very easily achieve substantive inflation reduction with something that raises taxes significantly on the top quintile, and a bit on the next quintile, while leaving everyone below the 60th percentile alone. (This is only true because of how unequal our income and wealth distributions already are. If the income distribution compressed over time, by raising real wages at the low end, you'd probably also have to push the tax burden down the scale somewhat, perhaps with a national VAT.) I don't know whether you consider that "broad based". But that's basically what it would mean to do what Matt was talking about the other day, where we say as a society that we're going to reduce the amount that affluent people spend on things like restaurant meals, which means less people will be employed as waiters, and some of those people can go get retrained to do stuff like childcare or eldercare instead.

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OK, then leave the stuff for poor people alone and raise the marginal rates toward the top. Simple.

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Deemphasized debt on primary residences and encouraged multifamily development.

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Don’t really see how that would be relevant. Would you explain?

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I love Joe Biden and I think he has been unfairly maligned in many situations (e.g., the withdrawal from Afghanistan) but the one thing I would never have predicted of him or his administration is that his major legislative priority would have failed (so far) because of his inability to negotiate a deal with critical senators.

It seemed like his entire career was heading to the successful passage of BBB or some version of it. And then . . . ?

If there are intense and potentially successful negotiations going on behind the scenes smartly being kept from the prying eyes of the media, then great. But I get the feeling that nothing is happening. WTF?

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secret congress!

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I’d be curious to know who you define as rich.

Also, which taxes would you propose increasing? I could see a case for a measured increase in the capital gains tax rate given how much the stock market has appreciated.

Still, as an admittedly center right guy, it feels like we got ourselves here through a combination of dovish monetary policy and handouts. Reversing both seems fair to me.

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+1. Look at the Median family. Around $70k with a $25k tax deduction if they’re married. Then they pay 10-12% on that. That’s around $4.6k, or 7%.

Contrast with Clinton’s America in the 90s. $60k median, $7k deduction, 15% to 42k, 28% beyond that. They paid about $9.4K, or 16%.

I know it’s populist and fashionable for everyone to say that the middle class are getting screwed, but they’re really not and we should be honest about that.

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also rhetoric about how "the middle class is shrinking" seems to ignore the fact that this is often because people are leaving the middle class and becoming upper class (or upper middle class). The percentage of Americans making a six figure-style income (even when controlling for inflation) has increased substantially in recent decades.

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I assume this is combined with others leaving the middle class in the other direction and becoming poor?

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Feels true and would love to see data on this migration to upper incomes.

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In terms of numbers I agree with you, the middle class is not being overtaxed. But when people are talking about the middle class being screwed, I don't think they are primarily talking about tax burden, but rather the ability to afford a middle class lifestyle. Some hallmarks of the middle class would be homeownership, ability to afford childcare for young children, ability to pay for kids' college (and pay own student loans), ability to save a nestegg for retirement. I feel like I can safely say that the prospects for affording these hallmarks of middle class life are increasingly remote for a family earning median income, and definitely more remote than they were in Clinton's America. And this list of hallmarks of middle class that I wrote increasingly feels like a rich person's list, not a middle class list.

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I don't disagree, but there are sooo many holes for the lower-tier rich, and the rich are just outright engaging in fraud and assuming the IRS will be too strapped to do more than settle for a part of what's owed.

My household is well up into the professional classes; a hair shy of 3X that median figure, let's just say. My federal tax bill last year was under $10k. Call it 2X the figure you cited.

Now, a one-off EV purchase helped, lol, but even so I'd have paid right around 3X what the median family did under a supposedly "progressive" income tax scheme.

Let's let the Fed take care of inflation as it's on track to do (more than do, I suspect), raise taxes on those making more than $200k because we *should*, jack the hell out of enforcement, and then claim that the tax increases helped halt inflation in '24 even though they probably didn't have much impact.

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That’s easy, anyone who makes more than me!

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Yeah, I was about to say that thing about who is rich. For example, I've spent some time with a successful young professional with an income above $200k and no student loans, as her parents paid for her education. She's a Bernie primary voter and wants to raise taxes on the rich to lower the taxes on the "working class", so (among other things) she can afford to move from Brooklyn to Manhattan. Since I come from a much poorer place than New York, I couldn't believe that this person is real, but she is. Should she be taxed more or not?

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Yes, she should be taxed more at 200k.

The person at 500k more, and at 5m even more.

Manhattan and Beverly Hills and Palo Alto and many other desirable urban neighborhoods and suburbs are **super** expensive to buy into. Being not **super** rich does not make you not rich.

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Tell her to stuff it and move to Philly if she can't afford to play in Manhattan, lol.

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For all the people who fantasize about moving a lot of favorable voters to Wyoming to fix the perceived Senate problem, it seems to me that the more realistic immediate goal would be to Make Philadelphia Great Again so at least they can prevent Pennsylvania from sliding into the R side again.

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It's getting there, the rest of the state is just emptying the hell out and the SE is increasing. PA is one of the only "established" states that may drift toward the Democrats alongside the "booming" ones like CO, VA, GA, AZ...

But a lot depends on whether the Democrats piss off rural voters faster than urban/suburban ones increase their numbers, at least under the current paradigm.

Really though, this current party coalition strikes me as transitory; it's only been the last two electoral cycles, yet people talk of it as if it's a permanent feature already.

It will change, because it always does.

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So should we non-PA Democrats be cheering for Fetterman or Lamb?

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My money is on Fetterman as the better candidate, but also as a needed experiment. Call it the "Rustbelt populist model," which would pave the way for a new breed of rural populist Democrat *if it proves to work*.

Victory would be great, but even a narrow loss with substantial gains in the western and northern part of the state should be taken as evidence that we can and must fight for rural voters.

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The demographic change is very real but it's just not fast enough for the Ds to pin much hope on; that's partly because the older / younger split in party preference in PA is much smaller than in those boom states. Swing voters and defections have been a bigger driver of change than demographics in the previous few elections.

Point taken on the transitory nature of coalitions - but do you see the rural / urban split changing any time soon? Seems like it's just growing every campaign. It could only reverse, imho, if a Fetterman-type experiment really takes off, or far more likely, if the urban, majority non-white working class starts shifting more noticeably towards R.

But yeah, if they could turn Philadelphia into a real boomtown it would certainly increase the chance that SE PA's preferred candidate wins.

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A problem with this attitude is that when she moves to Philly her total economic contribution collapses. Both top line income and tax paid. It’s not clear how that helps anyone, unless we count your schadenfreude.

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Lol.

I make within a few percent of what she does, pay my taxes, and live a vastly better quality of life with my money, while likely saving and investing more.

So please, be more of an elitist, it’s definitely to all of our benefits!

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It’s possible you’ve made a rational calculation that the satisfaction of harming “elitists” is worth the lost tax revenue. But expensive cities make the same work more productive; that’s their whole thing. That’s why they’re expensive. That’s why the US as a whole could be so much more prosperous if they did zoning reform. Policies that make people leave them are bad, whether they operate from the supply side or demand side.

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We’re literally talking about an upper-class professional who subjectively “feels working class” and wants a tax cut to be able to afford to comfortably live in Manhattan.

I know what a network effect is, but I’m reasonably confident that such a person will be perfectly productive in a first -tier metro of 6 million, an hour from NYC’s 18 million and DC’s 5 million, and will feel better off because she can afford to live in the thick of it as she wants.

If you choose to be oblivious to context and couch elitism in fluff, this is not my problem.

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It’s fairly easy to say that someone “should pay more” - it just sort of rounds up to saying they’re a bad person and you don’t like them.

What do you think she actually pays, and what do you think she should pay? Those are the more interesting questions.

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I disagree that there's an individual moral judgement in saying "should pay more". I wasn't commenting on the kind of person they were at all--instead, it's an economic and sociopolitical argument.

I am very fortunate to be familiar with taxes at and around her income level--this is my personal position and that of many around me. I do not consider myself bad, nor most of my friends and family. I only ask and expect people to pay what they technically owe, so especially post TCJA, she, and myself, and many others, should face higher tax rates.

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My comment is under a post whose thesis is that the rich should pay more. So, I'm asking who does this post refer to. I have seen quite a few people belonging to households that earn 3x or more than the national median (which is between $60k and $70k, if I'm not mistaken) asking for tax relief, which I find it weird based on the standards of my home country.

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Very well said on your first sentence. I'm willing to accept that the broad concept of "tax the rich" is popular, but I would like to see its popularism tested on differing levels of income, and then see if its popularity still holds up.

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Joe Biden said it was $400k and he was the Democratic Party. Pretty sure we’ll find out that it’s less than $400k.

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I think if you raised the top rate to 40% you’d raise a decent amount of revenue without causing anyone undue hardship. Close some loopholes on pass through income, maybe look at st cap gains rate and you have enough money to make a real impact.

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Isn’t the top rate already almost 40% and over 50% when you include state income taxes in California or New York?

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That looks correct. Just googled it and:

Looks like 37% and California adds 13.3% putting it over 50%

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This website is pretty anti-SALT, meaning for federal tax purposes it should not be considered relevant what state taxes someone paid.

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deletedApr 26, 2022·edited Apr 26, 2022
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We've had low inflation for so long I never thought of inflation as affecting the real capital gains tax.

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I agree that higher taxes on the rich will help us tame inflation, but I believe it operates through a relatively slow mechanism similar to increasing interest rates. The rich already spend a disproportionately small portion of their income on consumption; the majority of their income is saved and invested. Increasing taxes may have some impact on their marginal consumption, but they could also just slightly decrease their savings rate. And if we continue to define rich as income in excess of $400k then we are only addressing a vanishingly small amount of consumption.

Decreasing the savings and investment rate of the rich will aid in slowly decreasing inflation. With less investment in the economy fewer new businesses will be created and thereby fewer new jobs. Similarly, existing businesses will be less able to raise capital to expand operations. Distressed businesses will find themselves unable to restructure their debt with new financing and will instead need to minimize their operations or possibly go out of business. All of this will slow the growth of the economy and loosen up the labor market. Note these mechanisms are the same ones impacted by raising interest rates and increasing the cost of capital.

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1. This piece barely mentions, let alone attempts to address, the real political problem with raising taxes on the rich: Kyrsten Sinema, whose twin political goals are 1) getting rich and 2) making sure the rich pay less taxes.

2. I get thinking Schumer erred by keeping his deal with Manchin secret. But Manchin kept that number secret, too. He watched everyone set the table, light the candles, and sit down to eat, THEN he announced the menu was not to his liking and flipped the table over.

This also ignores that Manchin signed onto a parallel-track process for BBB and infrastructure, which progressives insisted upon to prevent Manchin getting what he wanted (just infrastructure) and leaving the rest of the Party with blueballs. Then House moderates convinced Pelosi to vote on infrastructure separately anyway, and after it passed, Manchin starts "negotiating" on BBB, by which I mean making ridiculous counteroffers and suggesting the child tax credit should be cut back because the lazy poors will just spend it on drugs. Manchin didn't draw a line in the sand, publicly, until mid-December. So, yes, he negotiated in bad faith for 6 weeks, wasting everyone's time. He could have gone public with that number at any time; the secrecy is his fault, too, not just Schumer's.

3. The political reform bill Dems were voting on was the compromised political reform bill your folk hero Joe Manchin negotiated. So if it "left most of the threats to American democracy unaddressed", that's who to blame.

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What is Democratic leadership even doing right now? What are their priorities? What do they want to achieve?

Where is this party's *ambition*? This is the problem we are having in this country broadly. Contented, satisfied people should not be politicians. If someone was hungry to leave a legacy, they would get stymied on their first attempt at legislation, and instead of throwing up their hands and saying "welp, too bad", they would actually attempt to govern the country in whatever way they could rather than trying to orchestrate a method to ensure that their favored social clique doesn't blame them for political failure and instead blames someone else. Schumer and Pelosi, it appears, have basically two priorities. 1) Deliver hobby-horse issues to their social clique and their staffers' social clique, 2) If 1) is not immediately achievable, be sure that whatever fallout occurs falls on someone else's shoulders.

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Tough to deliver on ambition when you have the barest Senate majority possible, and multiple senators near the median want to temper that ambition.

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"Ambition" in this case doesn't mean "I want to reshape the entire country". It means "I want to impact the world, have an actual real effect, leave a legacy". Besides that, Schumer at least has very little of the former anyway. He has been playing the game to maximize his own ability to cover his ass, not his ability to achieve the world. Partly a gerontocracy problem I'd guess but also partly just a cultural problem with the class of people who become politicians.

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Are you familiar with the Iron Law of Institutions?

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Fair!

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Ambition shouldn't mean "deliver a broad, sweeping agenda". It means setting some goals, even if they are somewhat modest. Then aiming for them, and explaining why you're aiming for them. I don't think the Dems are doing any of that.

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That's fair if that's how ambition is being defined here.

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Apr 26, 2022·edited Apr 26, 2022

I should have worded my comment better, because as I reread it I sound like I'm personally trying to define political ambition, which wasn't really my intent. I should have been more clear that I was trying to restate the way Kade U was using the word. Although I agree a lot with Kade's opinion, ambition probably wasn't the right word because it usually has other meanings

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I think it’s natural for WH to feel frustrated and to get focused on foreign policy right now. Important things are happening and they have a freer hand.

I think the blame here falls on Schumer, Manchin, Sinema, maybe a few other influential senators. A done deal could possibly get through the house but it’s probably not a good place to start. Some important senator or group has to put in hours and effort.

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Democrats need to get it together but not by taxing the rich. They came up with some of the worst targeted stimulus bills in history that barely addressed COVID, didn’t tackle any other long term priorities, sent money to everyone but the rich, and created the first massive inflation in 40 years.

Democrats are going to get slaughtered in the mid-terms because they’ve done exactly the meme of their policies: spend recklessly on short-sighted ideas that actually make their constituents’ lives worse.

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The untargeted stimulus you describe started with Trump and was furthered under Biden...

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I'm one of that tiny minority of people that thinks perennial high deficits are a problem. Like climate change, it's not a problem now, but eventually it's going to blow up. So I've long favored tax hike generally combined with government reform to get more value out of the dollars we do spend. So I'm on board with your argument in general here.

But, a couple things annoy me. First, anyone who claims we should "tax the rich" should be required to define who is "rich." Secondly, I think there needs to be an argument that taxing whoever you think is "rich" will actually reduce demand and therefore inflation. Reduced income by the rich will likely lead to reduced demand for luxury goods, but it's not clear it will do much for meat, gas and used car prices.

In short, any tax proposal depends on the details and advocates need to show their work.

Secondly, I think this is a political fantasy. No politician is going to vote to raise taxes in an election year, particularly politicians that are vulnerable (ie. Democrats).

Here in Colorado, thanks to TABOR, Colorado taxpayers will get a $400 refund ($800 for joint filers) thanks to record receipts. Now, Democrats normally hate TABOR and wish and have tried to get around it many times over the years. But this year, they are moving the payment of this refund forward to before the mid-term elections. Normally people would get this TABOR refund in early 2023, but the Democratically -control legislature and Gov. Polis are moving that up to this September and the ant-TABOR talk is mostly gone except from the most left-wing Democrats who represent the deepest blue areas here.

So while I agree that tax increases should be on the table, our politics is what it is and no politician who is remotely vulnerable is going to commit political seppuku by supporting tax increases this year.

And one other thing to consider is interest payments. You are one of those who previously argued that borrowing is cheap/free, so the federal government should do more of it. While it's great that your position has changed with circumstances, the problem is that our previous borrowing is only cheap and free only as long as interest rates remain low. And they aren't going to remain low.

One thing that I think hasn't been sufficiently addressed is how the inevitable increase in interest payments is going to affect the federal budget once interest payments on the debt start ballooning.

Finally, this:

"Where I fault Manchin — and moderate politicians from both parties more broadly — is that he’s been very passive despite being the pivotal player in American politics. "

misses the fundamental problem which is the lack of regular order in Congress. Leadership has given up on regular order and is trying to run the Congress and Senate like we are in a parliamentary system where the bills are crafted in secret by leaders who present them for a vote without going through the regular order committee process. Plus, Manchin was not passive - he gave a detailed description of what he would support, as you noted, back in June.

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It’s frustrating to me that:

1) I pay roughly half my income in taxes

2) Trumps tax cuts actually increased my taxes (by repealing SALT)

3) A Biden tax increase would likely increase them again

I guess this is probably all fine, but it would be nice if increases were targeted at people paying like 20% (capital gains and inheritances, I guess?)

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"1) I pay roughly half my income in taxes"

That sounds highly unlikely - care to share the numbers?

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I guess the important context is I make 7 figures of W-2 income and live in NYC. That gets you a tax rate around 50% (for example: https://smartasset.com/taxes/new-york-tax-calculator#D0JL2LRBj0)

Possibly one should count the employer side of payroll tax as well, although I didn’t. Possibly there are other taxes I should count as well (sales tax? idk)

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Your link doesn’t support your claim.

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https://smartasset.com/taxes/new-york-tax-calculator#bBJsAAGfLm

I’m not sure if the parameters are saved by the link. Trying filling in household income $3,000,000 and zip code 10020 (not my actual numbers but illustrative).

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I think that Democrats harvesting most of the campaign contributions from rich people might have something to do with this.

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Get rid of 199A

Raise every tax bracket 3%

5% surcharge above $1M AGI

Corp Tax Rate 25% and make 100% bonus depreciation permanent

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But what about the SALT deduction?

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SALT is back baby

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Apr 26, 2022·edited Apr 26, 2022

I get the politics on this, and I'm pretty much always on team deficit reduction, but I'm real foggy on the economics. Isn't the problem with taxing the rich that it is more likely to constrain supply than spending? The argument for stimulus is that giving money to low income people is giving money to people that are going to spend that money in ways that generate demand while the richer brackets are more likely to invest. Isn't investment what we want right now? And from an opportunity cost perspective is this really a coherent way to target inflation? Using the tax code seems like a real bank shot to me.

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So are we in fact talking about designing a tax that targets inflation specifically? i.e. a tax that suppresses affluent consumption while shifting investment out of financial hedges and into productive investment.

Is that even plausible? What's the design?

Or are we talking about, "A move to tax the rich is plausibly consistent with the economic/political moment, so just do it and don't worry about if it meaningfully impacting the issue that makes it passable."?

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Apr 26, 2022·edited Apr 26, 2022

I guess what I want to hear is that this represents a true opportunity to do something about inflation, but it seems half baked if that's what we're looking for. If this, as presented, is the best we can plausibly do about inflation that's depressing. If it's something people want to do that can plausibly be done because of inflation I don't find that compelling.

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This is a fairly stupid post to be honest. I read through it twice to see if there was a concrete proposal about how to raise taxes on the rich and did not find one. Matt and his readers would do well to read TR Reid's fine book, "A FINE MESS: A Global Quest for a Simpler, Fairer, and More Efficient Tax System." I'm as liberal as anyone reading 'Slow Boring' and have been around this issue for a great many years. I've come down on the side of eliminating all tax preferences including the sacrosanct mortgage interest deduction. Put into place a self-executing VAT and clean up the damn tax code. the more complicated the tax code, the more opportunity for abuse (carried interest not being taxed as income, IRAs being used to shield what should be taxable income, etc. etc.).

A simplified tax code will lead to lower rates which any politician can easily explain.

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I don't think Matt is calling for a root-and-branch reform like the one in 1986, which in any case is too much of a lift in the time available. The current problem is inflation and it doesn't require changing the basic structure of the code, just raising marginal rates for the upper brackets and leaving the lower ones unchanged.

I don't always agree with Matt's takes but if I were to judge one of them as "stupid" my instinct would be to assume that I was misunderstanding it.

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I don't think it was MY's intent to write a specific or concrete proposal. He was saying that the Democrats should pass SOME bill that targets inflation by raising taxes in a progressive manner. He says that this bill should include the tax-credits for zero-carbon energy from BBB, it should probably include some deficit reduction, and it should be something that Democrats, including Manchin and Sinema, can agree on. Otherwise, there is room for some different proposals.

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Would a VAT need a constitutional amendment? I agree that a VAT is much simpler than an income tax, and taxing consumption is preferable to taxing production.

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Why would a VAT be unconstitutional?

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Possibly because of Article I, Section 9: "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken." Sales tax probably doesn't fall under this, especially if it is equal for all good and services, but an amendment clarifying Congress' taxing power on goods would definitely help with court challenges.

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We've had excise taxes since the Washington administration and I don't see why a VAT would be constitutionally different.

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That would be ridiculously wild if SCOTUS ruled that a VAT was a direct tax, and that the 16th Amendment doesn't apply. I could also see this SCOTUS doing just that.

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I'd be supportive of a VAT, but think there is a pretty obvious constitutional barrier. Is there a legal rationale for the 16th amendment applying to a sales tax?

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I don't think the 16th Amendment would apply, but I could see a far left analysis trying to argue that it meant to entirely repeal the Capitation Clause. But on the direct tax topic, a VAT seems like one of the most indirect taxes out there.

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