I disagree with the premise that a dollar is worth more to someone who has less of them and a dollar is worth less to someone who has more of them.

Guy, then you disagree with the concept of diminishing marginal utility. That will get you a failing grade in all micro economics courses.

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A flat income tax is flat, neither regressive or progressive.

Gary, I disagree, when the flat tax is levied on the marginal income person and the go over the edge that is a very regressive effect as all economists I know would agree with.

Any modification such as a floor or ceiling no longer makes it flat and it is either progressive or regressive.

That is conceptually correct.

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And in Texas, yes, it's true, we do *not* have a state income tax. We have a state sales tax of 6.25%. If you buy something in Texas, you pay 6.25% to the state of Texas in taxes. Your city gets to tack on additional sales tax and confiscate that if the voters are fooled into doing that

I'll remind you that Deleware has an income tax rate of around 4%. Seems odd that Texas Parade around a premise that income tax is bad sales tax is good.

Please note that the 4% is the starting point for the Deleware income tax make more pay a little more etc. The wonderfully sneaky fact is that tax paid is deductable straight off the top of your federal income. So in essense you aren't getting taxed on the tax.

You can itemize your sales tax and if it hits critical mass you can send in a 1040. Good luck getting the average person to keep every receipt through the year in an attempt to deduct it. Again, simplicity and ease of use go hand in hand with the Income tax. Frankly, I get tired of Ignorant Texans bragging that they don't pay income tax. I also get tired of explaining how 4% is much lower than 6.25 or even 8.25%

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In a rich man's house there is no place to spit but his face.
Diogenes Of Sinope

A flat income tax is flat, neither regressive or progressive.

Gary, I disagree, when the flat tax is levied on the marginal income person and the go over the edge that is a very regressive effect as all economists I know would agree with.

Any modification such as a floor or ceiling no longer makes it flat and it is either progressive or regressive.

That is conceptually correct.

http://legal-dictionary.thefreedictionary.com/Regressive+Tax wrote:

The proportionate tax rate, also referred to as a flat tax rate, remains constant as income rises. Under a proportionate tax system, higher-income individuals pay a greater amount of taxes than lower-income individuals pay, but the ratio is identical.

I agree it isn't desirable, but it is not regressive. Those who say it is operate in a different universe, one where meanings of words are flexible to suit them. Unfortunately this makes negotiation and consensus impossible, which frequently is their real desire -- my way or the highway!

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And in Texas, yes, it's true, we do *not* have a state income tax. We have a state sales tax of 6.25%. If you buy something in Texas, you pay 6.25% to the state of Texas in taxes. Your city gets to tack on additional sales tax and confiscate that if the voters are fooled into doing that

I'll remind you that Deleware has an income tax rate of around 4%. Seems odd that Texas Parade around a premise that income tax is bad sales tax is good.

Please note that the 4% is the starting point for the Deleware income tax make more pay a little more etc. The wonderfully sneaky fact is that tax paid is deductable straight off the top of your federal income. So in essense you aren't getting taxed on the tax.

You can itemize your sales tax and if it hits critical mass you can send in a 1040. Good luck getting the average person to keep every receipt through the year in an attempt to deduct it. Again, simplicity and ease of use go hand in hand with the Income tax. Frankly, I get tired of Ignorant Texans bragging that they don't pay income tax. I also get tired of explaining how 4% is much lower than 6.25 or even 8.25%

Ah, Delaware, home of corporations ...

California sales taxes top out at 10%, and the income tax tops out at 10.3%. And they are barely able to pay the bills. This is what happens with a democrat super majority in both houses and a democrat executive branch.

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In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

An old economics text book of mine describes it this way.

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Since a person in a low income bracket spends all they make those on the margin are then pushed over the edge and are now below the margin.

Adjective: progressive
3. (of taxes) adjusted so that the rate increases as the amount of income increases

Adjective: regressive
1. (of taxes) adjusted so that the rate decreases as the amount of income increases.

By this, flat can not be regressive, nor can it be progressive.

I do know that the above definition from the dictionary is not what is generally meant when talking about a change in tax policy, which is why I asked for the meaning to be ascribed before we start with the invectives.

incorrect. A regressive tax is one that affects a persons wealth less as they earn more. The easy example is the carpenter that makes $1000 and pays $90.90 for a hammer that has a 10% sales tax. he pays $100 of his money. he pays 1% of his wages in taxes a guy making $10,000 will pay about 0.1% of his wages. You can see that the guy making less money pays a higher percentage of his wages in tax.

The state of Texas has this form of taxation(no Income Tax) 8.25% in most areas and it is quite backward and if the economy tanks so does the tax revenue.
The state of Deleware has no sales tax but has a mild income tax (usually less than 4% on average)that quite easily pays for everything the state needs.

The flat tax I am referring to is income tax, not sales tax.

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The flat tax I am referring to is income tax, not sales tax.

Michael, since it is acknowledged that a flat tax will push the person on the margin over the edge, do you think that is a good idea?

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The flat tax I am referring to is income tax, not sales tax.

Michael, since it is acknowledged that a flat tax will push the person on the margin over the edge, do you think that is a good idea?

I'm not convinced that it will push anyone over the edge.

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I'm not convinced that it will push anyone over the edge.

Michael, this is a matter of definitions, if a person is on the margin then they are on the edge. Do you deny that a margin exists?

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I'm not convinced that it will push anyone over the edge.

Michael, this is a matter of definitions, if a person is on the margin then they are on the edge. Do you deny that a margin exists?

I'm going to play semantics with you, I'm not convinced that it will push anyone over the edge.

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I'm not convinced that it will push anyone over the edge.

Michael, you did not address my question.

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In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

An old economics text book of mine describes it this way.

No surprise. Frequently claptrap is taught in economics classes. Reminds me of when the prof told us it would horrible to repay the debt of the USA. If that is the case, why all the theatrics over the debt ceiling?

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Time to start the education ... a few cherished "liberal" ideas are debunked and a scattered few confirmed.

This is a long post ... and there will be a test conducted at a polling place.

Found that data going back a long time frame.
(Note the .pdf contains some oddball non-printing characters, which I tried to remove)
http://elsa.berkeley.edu/~saez/pikettyqje.pdf

According to Kuznets’ influential hypothesis, income inequality
should follow an inverse-U shape along the development process,
ÂŽfirst rising with industrialization and then declining, as
more and more workers join the high-productivity sectors of the
economy [Kuznets 1955].
...
One could indeed
argue that what has been happening since the 1970s is just a
remake of the previous inverse-U curve: a new industrial revolution
has taken place, thereby leading to increasing inequality,
and inequality will decline again at some point, as more and more
workers beneÂŽt from the innovations.
...
Top wage shares have started to recover from the World War
II shock in the late 1960s, and they are now higher than before
World War II. Thus, the increase in top income shares in the last
three decades is the direct consequence of the surge in top wages.
As a result, the composition of income in the top income groups
has shifted dramatically over the century: the working rich have
now replaced the coupon-clipping rentiers.
...
One additional motivation for constructing long series is to be
able to separate the trends in inequality that are the consequence
of real economic change from those that are due to fiscal manipulation.
The issue of fiscal manipulation has recently received
much attention. Studies analyzing the effects of the Tax Reform
Act of 1986 (TRA86) have emphasized that a large part of the
response observable in tax returns was due to income shifting
between the corporate sector and the individual sector [Slemrod
1996; Gordon and Slemrod 2000]. We do not deny that fiscal
manipulation can have substantial short-run effects, but we argue
that most long-run inequality trends are the consequence of
real economic change, and that a short-run perspective might
lead to attribute improperly some of these trends to fiscal
manipulation.
...
Tax units within the top decile form a very heterogeneous
group, from the high middle class families deriving most of their
income from wages to the super-rich living off large fortunes.
More precisely, we will see that the composition of income varies
substantially by income level within the top decile. Therefore, it is
critical to divide the top decile into smaller fractiles.
...
We use a gross income definition including all income items
reported on tax returns and before all deductions: salaries and
wages, small business and farm income, partnership and ÂŽfiduciary
income, dividends, interest, rents, royalties, and other small
items reported as other income.
...
Therefore, the evidence suggests that the
twentieth century decline in inequality took place in a very specific
and brief time interval. Such an abrupt decline cannot easily
be reconciled with a Kuznets-type process. The smooth increase
in inequality in the last three decades is more consistent with
slow underlying changes in the demand and supply of factors,
even though it should be noted that a signiÂŽcant part of the gain
is concentrated in 1987 and 1988 just after the Tax Reform Act of
1986 which sharply cut the top marginal income tax rates (we will
return to this issue).
...
This highly specific timing for the
pattern of top incomes, composed primarily of capital income (see
below), strongly suggests that shocks to capital owners between
1914 and 1945 (depression and wars) played a key role.
...
The negative effect of the wars on top incomes is due in part
to the large tax increases enacted to ÂŽfinance them. During both
wars, the corporate income tax (as well as the individual income
tax) was drastically increased and this mechanically reduced the
distributions to stockholders.17 National Income Accounts show
that during World War II, corporate profits surged, but dividend
distributions stagnated mostly because of the increase in the
corporate tax (that increased from less than 20 percent to over 50
percent) but also because retained earnings increased sharply.18
...
As depicted in Figure III, the income share of the top
0.01 percent underwent huge fluctuations during the century. In
1915 the top 0.01 percent earned 400 times more than the average;
in 1970 the average top 0.01 percent income was “only” 50 times the
average; in 1998 they earned about 250 times the average income.
Our long-term series place the TRA86 episode in a longer
term perspective. Feenberg and Poterba [1993, 2000], looking at
the top 0.5 percent income shares series ending in 1992 (respectively,
1995), argued that the surge after TRA86 appeared permanent.
However, completing the series up to 1998 shows that
the significant increase in the top marginal tax rate, from 31 to
39.6 percent, enacted in 1993 on did not prevent top shares from
increasing sharply.19 From that perspective, looking at Figures II
and III, the average increase in top shares from 1985 to 1994 is
not significant higher than the increase from 1994 to 1998 or
from 1978 to 1984. As a result, it is possible to argue that TRA86
produced no permanent surge in top income shares, but only a
transitory blip. The analysis of top wage shares in Section IV will
reinforce this interpretation. In any case, the pattern of top income
shares cannot be explained fully by the pattern of top
income tax rates.
...
The decline of the capital income share is a very long-term
phenomenon and is not limited to a few years and a few thousand
tax units. Figure V shows a gradual secular decline of the
share of capital income (again excluding capital gains realizations)
and dividends in the top 0.5 percent fractile from the 1920s
to the 1990s: capital income was about 55 percent of total income
in the 1920s, 35 percent in the 1950s–1960s, and 15 percent in the
1990s. Sharp declines occurred during World War I, the Great
Depression, and World War II. Capital income recovered only
partially from these shocks in the late 1940s and started a steady
decline in the mid-1960s. This secular decline is entirely due to
dividends: the share of interest, rent, and royalties has been
roughly at while the dividend share has dropped from about 40
percent in the 1920s, to about 25 percent in the 1950s and 1960s,
to less than 10 percent in the 1990s.21
...
It should be noted, however, that the ratio of total dividends
reported on individual tax returns to personal dividends in National
Accounts has declined continuously over the period 1927 to
1995, starting from a level close to 90 percent in 1927, declining
slowly to 60 percent in 1988, and dropping precipitously to less
than 40 percent in 1995. This decline is due mostly to the growth
of funded pension plans and retirement saving accounts through
which individuals receive dividends that are never reported as
dividends on income tax returns. For the highest income earners,
this additional source of dividends is likely to be very small
relative to dividends directly reported on tax returns.
...
Strikingly, the real value of the top estates
in 1916 is about the same as in 1997, namely around $80 million,
even though the GDP per capita grew by a factor of 3.5 during this
period. Therefore, the biggest fortunes have in fact substantially
declined in relative terms.25
...
In contrast to progressive labor income taxation,
which simply produces a level effect on earnings through labor
supply responses, progressive taxation of capital income has cumulative
or dynamic effects because it reduces the net return on
wealth which generates tomorrow’s wealth.
...
Top wage shares show a striking stability from 1927 to 1940.
This is especially true for the top percentile. In contrast to capital
income, the Great Depression did not produce a reduction in top
wage shares. On the contrary, the high middle class fractiles
benefited in relative terms from the Great Depression.
...
In all of our wage shares series, there is a sharp drop during
World War I from 1941 to 1945.32 The higher the fractile, the
greater is the decrease. The share of P90 –95 declines by 16
percent between 1940 and 1945, but the share of the top 1 percent
declines by more than 30 percent, and the top 0.1 percent by
almost 35 percent during the same period (Table IV). This sharp
compression of high wages can fairly easily be explained by the
wage controls of the war economy. The National War Labor Board,
established in January 1942 and dissolved in 1945, was
responsible for approving all wage changes and made any wage
increase illegal without its approval. Exceptions to controls were
more frequently granted to employees receiving low wages.33
Lewellen [1968] has studied the evolution of executive compensation
from 1940 to 1963, and his results show strikingly that
executive salaries were frozen in nominal terms from 1941 to 1945
consistent with the sharp drop in top wage shares that we ÂŽfind.
The surprising fact, however, is that top wage shares did not
recover after the war. ... Moreover, after a short period of
stability in the late 1940s, a second phase of compression takes place
in the top percentile. This compression phase is longer and most pronounced
the higher the fractile. While the fractiles P90 –95 and
P95–99 hardly suffer from a second compression phase and start recovering
just after the war, the top group’s shares experience a
substantial loss from 1950 to the mid-1960s. The top 0.1 percent
share for example declines from 1.6 percent in 1950 to 1.1 percent
in 1964 (Table IV).
...
While everybody acknowledges that tax reforms can
have large short-term effects on reported incomes due to re-timing,
there is a controversial debate on whether changing tax rates
can have permanent effects on the level of reported incomes.
Looking at long-time series up to 1998 casts doubts on the supply-side
interpretation that tax cuts can have lasting effects on reported
wages.
...
Consistent with the evolution of top wage shares, average
CEO compensation has increased much faster than average
wage since the early 1970s. Therefore, the increase in pay gap
between top executives and the average worker cannot be attributed
solely to the tax episodes of the 1980s.
...
The pattern of top shares over the century is striking: most of
the decline from 1927 to 1960 took place during the four years of
World War II. The extent of that decline is large, especially for
very high wages. More surprisingly, there is no recovery after the
war.
...
The compression of wages during the war can be explained by
the wage controls of the war economy, but how can we explain the
fact that high wage earners did not recover after the wage controls
were removed? This evidence cannot be immediately reconciled with
explanations of the reduction of inequality based solely
on technical change as in the famous Kuznets process. We think
that this pattern of evolution of inequality is additional indirect
evidence that nonmarket mechanisms such as labor market institutions
and social norms regarding inequality may play a role
in the setting of compensation at the top. The Great Depression
and World War II have without doubt had a profound effect on
labor market institutions and more generally on social norms
regarding inequality.
...
The marginal product of top executives in large corporations
is notoriously difÂŽcult to estimate, and executive pay is
probably determined to a significant extent by herd behavior.
Changing social norms regarding inequality and the acceptability
of very high wages might partly explain the rise in U. S. top wage
shares observed since the 1970s.
...
The large shocks that capital owners experienced during the Great
Depression and World War II seem to have had a permanent
effect: top capital incomes are still lower in the late 1990s than
before World War I.
...
In the United States, due to the
very large rise of top wages since the 1970s, the coupon-clipping
rentiers have been overtaken by the working rich. Such a pattern
might not last for very long because our proposed interpretation
also suggests that the decline of progressive taxation observed
since the early 1980s in the United States could very well spur a
revival of high wealth concentration and top capital incomes
during the next few decades.

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Gary, a good read with some dismal conclusions.

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In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

An old economics text book of mine describes it this way.

No surprise. Frequently claptrap is taught in economics classes. Reminds me of when the prof told us it would horrible to repay the debt of the USA. If that is the case, why all the theatrics over the debt ceiling?

Maybe, but the statement I quoted is not claptrap.

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In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

An old economics text book of mine describes it this way.

No surprise. Frequently claptrap is taught in economics classes. Reminds me of when the prof told us it would horrible to repay the debt of the USA. If that is the case, why all the theatrics over the debt ceiling?

Gary, most acknowledge that the debt can be a source of inflation logic follows that paying off the debt would have the opposite effect, deflation. Maybe your econ prof was right.

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In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

An old economics text book of mine describes it this way.

No surprise. Frequently claptrap is taught in economics classes. Reminds me of when the prof told us it would horrible to repay the debt of the USA. If that is the case, why all the theatrics over the debt ceiling?

Gary, most acknowledge that the debt can be a source of inflation logic follows that paying off the debt would have the opposite effect, deflation. Maybe your econ prof was right.

There is a problem in how it is stated and in understanding what the debt is. The debt is issued by the Bureau of the Public Debt. It is a promise to repay on a given date. Failure to do so would bring down the economy to levels akin to the bottom of the Great Depression. So it is vital to repay the debt.

What was really being advocated was to continue to run deficit spending, in effect cause inflation. I note, absent external events (war), that the only time that wealth inequality got less was when we had deflation or near zero inflation. When we had a bout of bad inflation, wealth inequality exploded. (Instead of saying don't repay the debt which was PC they found it impossible to say run deficits which isn't PC.)

Are you so sure the econ prof was right?

The country is not unlike a big business. When it is overextended it can not react quickly to change and many inefficiencies must be accepted as it costs to much to retool. When there is cash in the bank, it can fix stuff before it breaks and react quickly to changes. I note that state governments and local governments which can not print money must have emergency funds because of this. Why not federally?

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