Matt_W
2048
It is not marginal tax rates. It’s total tax rates. The chart comes from this NYT column:
It’s based on data collected and presented in this book by Saez and Zucman:
They have a website that discusses methodology and activism around this issue further:
https://taxjusticenow.org/
They describe their methodology in summary here and in several papers linked from that summary.
See, when someone who is 39 years old has a birthday, then they turn 40, which takes them out of the “35-39” group and puts them into the “40-45” group. And if people’s incomes tend to go up over time, then you have the higher-earning 45-year-olds leaving the group above the median, while the lower-earning 39-year-olds enter the group below the median. So it’s entirely possible for the median to stay the same, while the income of individuals goes up.
I don’t know anything about the individuals below the median, because (as I keep saying) you can’t draw conclusions about individuals based on statistics about income groups.
Although I can say this, since it’s just a fact of life: All of the 40-year-olds below the median were recently 39-year-olds.
The “tiny percentage” answer comes from studies that follow individuals over time, not from the data about income groups that was quoted.
This process as you describe it is inconsistent with the median wage data reported. If departing 45-yr-olds entered the next age group at a higher wage, the median wage of that age group would not be the same as the lower age group. It would be higher, since every person entering would enter it with a higher wage than the average of the lower group, and they would be joining a cohort with a higher average wage than the lower group. Yet it is basically the same median at both age groups, so that explanation doesn’t work.
Having decades of the same median wage is inconsistent with the claim that people move up the income scale over time, unless you also agree that people also move down the income scale over time.
Also, this is the first I’ve heard of the automatic wage increases on birthdays every five years, and I’m pissed that I’ve missed a bunch of them.
Which studies followed people over their entire working life? Or did you extrapolate the result from shorter periods of time?
You’re confusing “mean” with “median”. The median is more resistant to outliers, so it’s entirely possible to have extreme values while the median stays the same (as the graph shows). The point about not drawing conclusions about individuals from data about income groups still stands.
You first: I’m still waiting on your studies showing that a “very large percentage of people…never escape the bottom 20%.”
Where is your study that follows people over their entire working life? Because you keep asking me for my data, but somehow you avoid providing your own.
I’m not, and that’s a bullshit response. Please respond to this:
If the higher-paid members of a cohort leave the cohort and are replaced by lower-paid people, the median wage of the cohort will drop. If the higher paid members join another cohort which is only joined by higher-paid members, that cohort will have a higher median wage.
Another bullshit response. You’re making claims about how people’s incomes change over their entire life, when you can’t point to any studies that track people’s income changes over their entire life. What you’re doing is looking at short-term studies and extrapolating the short-term result to their entire lives, and then assuming that result for everyone. Which is to say, you’re making it up.
I said that people’s incomes “tend to go up over time”, which does not preclude the fact that some people’s incomes go down over time.
Not if the other people’s wages go up.
And you’re doing the exact same thing by claiming that a “very large percentage of people…never escape the bottom 20%.” This whole discussion started because you made that claim, and I’m still waiting for you to back it up. You don’t get to make a claim with no evidence, and then ask me for evidence when I call you on it.
If a broad-based study of multiple individuals (and multiple sets of individuals) of different ages and income groups show that people tend to move to higher income groups over time, then that is strong evidence that the same trend holds for other individuals over longer periods of time. That’s how studies work: You can’t study every single person over their lives, so you get a large sample group and make general conclusions based on that information.
Now you seem to be claiming that no, people’s incomes are generally stagnant over their lives. If you believe that’s true, then I would love to see the studies of individuals over longer periods of time that support that claim. But honestly, I think it’s just an article of faith with you, and you don’t have any such studies about individuals. But hey, go ahead and prove me wrong!
No economist has ever extolled the virtue of trickle-down economics. It’s not an economic policy; it’s used solely as a political attack.
Thanks for the link. As they explain in their FAQ, they make up their own definitions.
For instance.
Pre-tax income is income before government intervention but after the operation of the pension system. This measure of income is comprehensive in that it adds up to 100% of national income: it includes forms of income that contribute to US national income, including income that is untaxed.
So for example, if your house or your IRA goes from $500k to $1 million, in 5 years, you have an additional $100K in annual income.
Now, the IRS definition of income run hundreds of pages, now I can’t claim to have read them all, but I’m quite confident none of them include this crap.
I’m sorry, but their website is so profoundly and fundamentally misleading that I refuse to discuss it.
As usual, a dog-ignorant statement from Andy. Many economists have extolled the virtues of trickle-down economics, aka supply-side economics. They’ve been referenced in this very thread even.
Supply-side economics focuses on lowering taxes and decreasing regulation in order to promote economic growth; trickle-down economics is the idea of lowering taxes specifically on the wealthy, and that the benefits will supposedly “trickle down” to everyone else. There is nothing in supply-side economics that specifies targeting the rich.
Oh, and supply-side economics was developed in the late 1970s, while the idea of trickle-down economics was first mentioned as early as 1896.
Edit: Here’s what Investopedia says about trickle-down economics:
So no, they are not the same thing.
Matt_W
2062
Their work is, in large part, a collaboration with Thomas Piketty. Saez and Piketty are two of the most renowned economists in the world. Piketty has written perhaps the most discussed book in economics in the last decade. And Gabriel Zucman is a rising star. I’m not making an argument from credential here, but their ideas are certainly worth more than a casual dismissal. Their treatment of income is rigorous and transparent. Obviously you can refuse to discuss it, but it’s a little like refusing to discuss Watson and Crick E.O. Wilson or Steven Jay Gould (better analogies) in a discussion of evolutionary biology.
That doesn’t seem to square with
But then I’m not wealthy, and therefore probaly not smart.
ShivaX
2064
They’re literally the same thing and have been since 1980. No matter what some random ass website says.
Trickle-down economics was first mentioned (by critics) in 1890; supply-side economic theory was created (by economists) in 1980. But yeah, I’m sure the most popular website about financial information doesn’t know what they’re talking about.
ShivaX
2066
And yet, supply-side is trickle down anyway.
It’s kind of hard to sell ‘trickle down,’ so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.
-David Stockman Ronald Reagan’s Budget Director
But some website no one knows about says it isn’t so what does he know?
CF_Kane
2067
I know I’m wasting my time, but this is disingenuous at best. Supply-side economics focuses on reducing taxes and regulation in order to shift the supply curve, as opposed to focusing on tax cuts and spending that shift aggregate demand.
For the theory to work, any tax cuts have to be focused on the investor class, because the purported benefits of the supply side theory come from additional investment in productive capacity, rather than additional consumption. Given that poorer/lower income folks have a higher propensity to consume and wealthier/higher income folks have a higher propensity to invest, only tax cuts that benefit the wealthy/higher income class are likely to result in more productive capacity and push the supply curve.
The supply side theory is that additional investment will push the supply curve right, and thus produce a higher quantity of goods (loosely defined) at a lower price. That is the basis for the description of supply side economics as trickle down. Also what @ShivaX says above.
Also, the evidence suggests that the policies most commonly pushed by supporters of supply side economics do not create the results the theory presupposes.
Keynesianism, focused on manipulating aggregate demand through spending or tax cuts that increase consumption, still seems to work pretty well though.
