A Stitch in Haste

Harvard economist Greg Mankiw pens a piece tying together two recent blogposts of mine.

First, I gave you this chart from the Tax Foundation:


(Click to enlarge.)
Now he presents this chart, with essentially the same numbers, from the Congressional Budget Office:


So much for the nonsense that taxes aren't progressive. They're obscenely progressive.

Second, Mankiw revisits Warren Buffet's claim (to a partisan audience) that he pays only a 17.7% marginal tax rate:

Another piece of the puzzle is that Mr. Buffett's tax burden is larger than it first appears, because he is a major shareholder in Berkshire Hathaway.

When the C.B.O. studies the tax burden, it includes all federal taxes, including individual income taxes, payroll taxes and corporate income taxes. In its analysis, payroll taxes are borne by workers, and corporate taxes by the owners of capital. For the richest 1 percent of the population, 9.3 percentage points of their 31.1 percent tax rate comes from the taxes that corporations have paid on their behalf. The corporate tax would undoubtedly loom large if the C.B.O. were to calculate Mr. Buffett's effective tax rate.

Buffett of course understands this. So when he plays the class warfare card, he is wilfully and maliciously lying.

Remember: Republicans may be the party of millionaires, but Democrats are the party of billionaires.

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A comment left at Mankiw's blog:

Let's say I'm born to rich parents. They put me in a fancy high school (like the one you went to), pay for my preparation for entrance exams, get me into a fancy college (like the one you went to) and pay for that college expense.

And then I come out and have this huge network of rich friends from college, my high school, and my family. And through one of these connections, I get my start at a job paying twice as much as a blue collar worker will ever make. And this is the beginning of a successful career in law/medicine/financial services/government.

Fast forward twenty years. If I decide to have children, no doubt they will get the same preparation for a middle-to-upper-class life that I had.

Consider: How many multi-generational capitalist dynasties have there been in American history? I would be hard-pressed to name five; ten would be utterly impossible. Even the largest fortune — or insider ownership of a firm — dissipates rapidly when divided among children, grandchildren and great-grandchildren. Meanwhile, how many multi-generational political dynasties have there been? I can name quite a few, on both sides of the aisle.

So someone who professes to care about the dangers of intergenerational power accruing ad infinitum to "the elite" should worry less about mansions and more about statehouses — and White Houses.