Presented by Terence J. Hoyt

1. A Brief History of Wealth Distribution in the United States • There are three highly influential philosophers in the direction of current policy. Since 1981, there has been a significant decline in tax rates on upper incomes at the same time there has been a tremendous increase in their wealth. • - In addition to looking at these two trends, I ask: Where does tax revenue come from when compared to various income levels? What has been the trend of income within various wealth levels in the United States? • - Presented by Terence J. Hoyt

2. Plato: “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.” Ca. 450 BC. • Lesson: A moral tax system is a progressive one. A progressive system raises rates as marginal income gets higher. • Three recent philosophers developed arguments that the state does not have a right to tax citizens with the goal of distributing benefit to individuals. In contrast to the left, which claims that values are not based on reason, these thinkers all hold that moral arguments can and must be based on reason.

3. The three (dead) thinkers having the most influence on American politics today are: • Ayn Rand Capitalism: The Unknown Ideal (1966) non-fiction5 million copies sold.Atlas Shrugged (1957) fiction • 6 million copies soldThe Virtue of Selfishness (1964) non-fiction1.25 million copies sold as of 2008. • Ludwig von MisesThe Anti-Capitalist Mentality (1956), Bureaucracy (1944) • Friedrich von HayekThe Road to Serfdom (1944)All three came from Eastern Europe and were responding to both the Nazi and Communist dictatorships of the 20th century. Is it reasonable to apply the assumptions about “big brother” made concerning Europe to American culture?

4. Ludwig von Mises, 1881-1973. libertarian view of government social programs: they are always immoral and unjust • There is no such thing as a just and fair method of exercising the tremendous power that interventionism puts into the hands of the legislature and the executive. The advocates of interventionism pretend to substitute for the --as they assert, "socially detrimental” --effects of private property and vested interests -- the unlimited discretion of the perfectly wise and disinterested legislator and his conscientious and indefatigable servants, the bureaucrats. In their eyes the common man is a helpless infant, badly in need of a paternal guardian to protect him against the sly tricks of a band of rogues.

5. Friedrich von Hayek, 1899-1992 • “I have arrived at the conviction that the neglect by economists to discuss seriously what is really the crucial problem of our time is due to a certain timidity about soiling their hands by going from purely scientific questions into value questions.” Interpretation: Social sciences believe they cannot and ought not make moral value judgments. My response: Moral claims must and can be made based on reason or the merely loud win. • “Even the striving for equality by means of a directed economy can result only in an officially enforced inequality - an authoritarian determination of the status of each individual in the new hierarchical order. “ • “We must face the fact that the preservation of individual freedom is incompatible with a full satisfaction of our views of distributive justice. “

6. The most influential thinker today: Ayn Rand, 1905 – 1982 Rand is against all regulation. • “When I say 'capitalism,' I mean a pure, uncontrolled, unregulated laissez-faire capitalism – with a separation of economics, in the same way and for the same reasons as a separation of state and church.” Rand was most influenced by Nietzsche, and with him, holds that Christianity is a “slave morality” which denies us our potential greatness. Neither she nor Neitzsche really understood Christianity. • Rand: “Altruism declares that any action taken for the benefit of others is good, and any action taken for one's own benefit is evil. Thus the beneficiary of an action is the only criterion of moral value – and so long as that beneficiary is anybody than oneself, anything goes.” • My response: WHAT? • Note the intense moral passion.

7. Ayn Rand, from Atlas Shrugged, 1957 • “If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater his effort the heavier the world bore down upon his shoulders - What would you tell him?" “I…don't know. What…could he do? What would you tell him?" “To shrug.“ • Implications of “shrugging” for social policy formation: The better off are morally justified and should tell the rest of society to shove it. • Note: Congressman Paul Ryan (MI) requires his staff to read Atlas Shrugged. He just proposed privatizing Medicare, applied to all who are now under 55.

8. Note: Christianity is not individualistic in the way most Americans conceive individualism. Some of the effects on policy of a radically individualist, explicitly anti-Christian philosophy.

9. Changes in Tax Policy over 50 Years • The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s.Principle of Progressivity: higher rates on higher marginal income.In 2003, total federal revenues as a share of the Gross Domestic Product dropped to 16.6 percent.  The last time that total revenues as a share of the economy fell below 17 percent was in 1959 • CBO Presentation of Effects of Bush Tax CutsNote: first three graphs

10. The Great Divergence By Timothy Noah

11. Federal Individual Income Tax Brackets From 1975 - 2010 The individual income tax code has flattened out considerably in the last few decades. After the Reagan tax reforms ended in the late 1980s, President George H. W. Bush and President Clinton raised taxes in the Omnibus bills of 1991 and 1993 to fight back a possible deficit crisis. Twenty years later, we still have the lowest tax rates in modern history for middle and upper-middle class families making between $50,000 and $200,000.

12. Who Pays Income Taxes and How Much?Created by: National Taxpayer Union, an anti-tax group. Their argument: That the highest earners pay the most in Federal taxes.AGI = Adjusted Gross Income

13. Current Marginal Tax Rates

14. Changes in Tax Rate on Highest Marginal Income Since 1910 There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group’s over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly — which hardly seems a great rationale for a further tax cut. So why are those radio and television talk show hosts spending so much time arguing that today’s wealthy are unfairly burdened…. My suggested explanation: Bad philosophy combined with their own desire to “get more. “

15. Effects of lower rates on source of revenues. • The decline in income tax receipts also led to a shift in the composition of federal revenues. • The share of federal revenues consisting of income taxes is at the lowest level since 1941. • The share of federal revenues consisting of payroll taxes rose to the highest level in the nation’s history. (= Social Security)

16. Tax revenue vs. portion of GNP • In 2007, the top 5% of income earners paid over half of the Federal income tax revenue.[42] However, as of 2004, the top 5% hold 59.2% of wealth. The top 1% of income earners paid 25% of the total income tax revenue.[43] Again however, the top 1% hold 23.5% of wealth. • Some argue that the upper incomes pay too much. This doesn’t seem intellectually or morally honest, given that they are also getting a much larger percentage of total GNP than in the past.

17. Estate Taxes Moral Justification: The estate tax is the most progressive of any of the federal taxes. According to the latest data from the Internal Revenue Service, out of the approximately 2.3 million deaths per year, only 1.9 % of estates pay estate tax. Three moral rationales for estate tax: - Prevention of the accumulation of unearned wealth and power in the hands of a few. - To the extent that inherited wealth is seen as windfall to the recipient, such a tax source may be seen by some as fairer than taxing earnings that are the result of work and effort. - Families that accrue large gains through the appreciation of their wealth in assets can, in the absence of an estate tax, largely escape any taxes on these gains by passing on the assets to their heirs.

18. The Republican Party’s platform calls for full repeal of the Estate Tax. How much money would repeal of the estate tax cost? • The Joint Committee on Taxation estimates that extending the repeal of the estate tax beyond its scheduled expiration at the end of calendar 2010 would reduce revenues by $290 billion between fiscal years 2006 and 2015. • My remark: No one could create economic value of more than a few hundred thousand dollars if they were on an island. Society has a moral right to tax great wealth at higher rates, whose standard can be based on reason.

19. Growing Inequality of Wealth in America • Article in Foreign Affairs this year titled “Why the Rich Are Getting Richer: American Politics and the Second Gilded Age” • Article in Atlantic Monthly of this year: “Why Should We Care About Economic Inequality?”

20. How much does the Federal Government spend on various programs? Compare to cost of estate tax reduction. • Student loans. • National Park Service. • Amtrak • My argument: Each of these programs justify taxation, both morally and practically. The existence of inefficiency is not a moral reason not to promote such programs.