From Neil W: “My wife and I are 50 and didn’t really begin to achieve financial success until our mid-forties. Thus we missed out on the Reagan Era low tax rates and we are scrambling to make up for lots of lost time in saving for retirement. We have been fortunate to benefit from stock options, but that was mainly one grant ending this year and taxes are hitting us hard. By the end of this year, the Clinton tax increase will have cost us about $100,000 in additional taxes. This will force us to retire about three years later (at 60 as opposed to 57). Which leads me to my question: Don’t you find it paradoxical that so much of your ‘job’ work is dedicated to helping people accumulate wealth while your political work aims at electing people who want to take as much wealth away from us as they can get away with? (Full Disclosure: I detest the Right for attempting to control our bodies, but I also detest the Left for attempting to control just about everything else. I am a Libertarian.)”
Well, first I guess I should point out that during the Fifties, when you and I were growing up, the top federal tax rate was 90%. In the Sixties and Seventies, it was 70%. During the Reagan years, the top rate dropped as low as 28% (today, all in, the top rate works out to about 43%), at the same time as the federal tax burden on the average working stiff went up because Social Security taxes went up so much. So the overall federal tax take plummeted if you were making a million bucks a year, but rose significantly if you were making $18,000. The Clinton tax plan reversed some of that. The “earned income credit” for the working poor was increased, and paid for — you’re right — by folks near or at the top of the income pyramid.
It cost me even more than it cost you, but I thought it was fair. I mean, I type my little fingers to the bone. But even though I pay a lot in taxes, I’m not sure the guy who buses my table at the restaurant or the doorman who gets me a cab in the rain or the nurse who changes my sheets (I’m fine, this is just an example) or the teacher who earns $27,000 — all of whom pay far less tax than I do — is really the one with the cushy deal.
But apart from issues of fairness . . . have you calculated how much you’ve saved from lower mortgage rates, etc., brought on by the balanced budget produced in part by the higher taxes? And the rise in stock and bond prices that resulted? Tax rates were lower during the Reagan and Bush years, but the Dow was around 2,500 much of that time.
I appreciate your frustration, but there are other sides to this. Most middle class or wealthy people can hardly say they are poorer as a result of the last several years.
And philosophically, I do believe that the future, in this complex world of ours, “won’t just take care of itself” if everyone were a libertarian and fended for himself. I think there are areas where we serve our own long-term self interest by acting in concert, as a community. Public education, clean drinking water, health insurance for the poor and elderly, Social Security, safety standards, some government sponsored basic research and so forth.
Everyone agrees there’s a lot of bloat in government (if corporate raiders are to be believed, there’s some in private industry, too). Fighting it is a never-ending battle. But one of the achievements the current administration can be proudest of, I think, is all the “reinventing government” that has gone on. When you get into the nuts of bolts of it, you find that much of it is real.