Tax Rates and Incentives - Rich and Poor

November 2, 2013 
Posted by Jay Livingston

Taxes on the rich were a big issue in Obama’s first term. The Bush tax cuts that had lowered the top rates were set to expire, and Republican lawmakers and media voices were fighting hard on behalf of the wealthy (a category most of them belonged to). 

Under the Obama proposal, the Bush tax-cut* rate of 35% for those at the top would have returned to 39.6%.  That was on paper. In fact, the superwealthy actually paid nowhere near those rates. In the Times today (here), James B. Stewart  reports on the plight of the 400 wealthiest American in 2009.  They saw their adjusted gross income decline, on average, from $320 million to $200 million. And the percentage they paid in come taxes did go up. But not to 35%. 

(Click on an image for a larger view.)

The rate the very rich paid rose from about 16% to 20%.  The slightly less wealthy – the top .01%, average income $1.4 million – paid a rate of 24%, higher than the top 400 but still well under the official rate. That 24% rate was also the average for the poorest of the rich, the 1% with incomes of at least $344,000. 

Economists like Greg Mankiw have risen to defend the wealthy, arguing that if rich people’s taxes rise – i.e., revert back to the levels of the 1990s – the rich will become lazy. With the government taking another 4 cents out of each dollar, rich will not work so hard, and then where would we be?   (As I pointed out [here], Mankiw himself was anecdotal evidence to the contrary. He was writing articles claiming that marginal tax rates were key incentives for the rich; Mankiw is a rich economist, but he was getting paid peanuts or nothing at all for his work in writing them. That is, even with an incentive of $0, we was writing op-eds rather than playing with his kids.)

Those “high” taxes of the 90s – back before the Bush tax cuts – didn’t seem to keep the rich (or anyone else) from working. Unemployment was low, and the economy was doing just fine thank you. I find it hard to believe that if the top rate returns to pre-Bush levels, Dustin Pedroia will start heading for the dressing room after the seventh inning or that Tom Hanks will confine himself to minor parts that involve only a few days on the set or that traders at Goldman will start taking Fridays off. 

But what about the effects of increased marginal rates on people who struggle to make ends meet? 

The Congressional Budget Office has released figures showing what happens when poor and middle-income people increase their income. 

For the poor, increased income brings the loss of government benefits – Medicaid, SNAP (food stamps), and the like – and an increase in the various taxes paid.  According to a 2012 CBO report , at about $27,000 the amount paid in taxes exceeds the value of government benefits, and disposable income rises more slowly than actual earnings. 

The CBO also calculated the marginal* tax rates on people from the 10th percentile to the 90th. 

The X-axis is calculated as a percentage of the official poverty line – about $11,500 for a single person, $19,500 for a family of three.  So 300% of those figures would be about $34,500 and $58,500 respectively.  It is those earners just above the poverty line who pay the highest marginal rates.

The more recent October, 2013 update breaks down the increased costs of these higher earnings, separating the higher federal taxes from the other costs – the higher state and local taxes, federal payroll tax, and the loss of SNAP benefits.

The graph shows the marginal tax rates for people earning less than 450% of the poverty line (i.e., less than $51,700 for an individual, less than $88,000 for a family of three).  As the report concludes:

 In 2013, 37 percent of low- and moderate-income taxpayers who have earnings face total marginal tax rates—including federal and state individual income taxes, federal payroll taxes, and the phasing out of benefits from the Supplemental Nutrition Assistance Program—between 30 percent and 39 percent, and over 20 percent of that group face marginal rates of 40 percent or more.

The issue of tax rates and means-tested programs is complicated (see Nancy Folbre’s columns at the Times Ecomomix web page, for example). But it is curious that those who were prominent in their concern over the disincentive effect of an increase in marginal rates on the rich are silent or even enthusiastic when it comes to increased marginal rates on the poor.

Is That a Thing?

October 30, 2013
Posted by Jay Livingston

On Sunday, both New York tabloids put the same story on page one – the stabbing death of a woman and four children in their apartment in Sunset Park, Brooklyn.

Early word from the police was that “it’s looking a domestic violence case.” Apparently the killer knew the victims and may have been a relative. 

What caught my attention was the “related” story that the Daily News linked to on its website version of the story. What kind of story might be related? A story about the family? about difficulties faced by Chinese immigrants or conflicts within an immigrant community? about mental illness and violence? about ethnic and demographic changes in Sunset Park?  No. None of the above.

(Click on an image for a larger view.)

The story the Daily News chose as “related” concerns the “Green Gang goon who was caught on video slugging a female New England Patriots fan in the face after the Jets’ upset victory” a week earlier. It turns out that in a fight twenty years ago, when he was 17, he fatally stabbed another kid.  He served three years. 

How are these two stories related? There is no connection between the two killers or their victims. The incidents are separated by two decades.  The motives and circumstances are entirely different.  If the Jets fan had not been caught on camera punching the female Patriots fan, no journalist following the Sunday killing would have dug up information on this crime of twenty years ago in an attempt to elaborate on the Sunset Park killings.  Knowing about that “related” crime gives us no better understanding of Sunday’s stabbing. 

Instead, the two stories are related by a common theme – they are both about killing where the weapon is a knife.  The Daily News seems to be taking a page from Amazon’s marketing strategy. “Readers who liked this story also liked . . .”  or Netflix recommendations. (I wonder what the stabbing-death-story demographic is.)  Television news often groups stories thematically. A story about a commercial arson in one part of town will be followed by a story about an accidental fire in a house in a distant neighborhood. The circumstances, location, and causes of the two fires are completely different, and if the big fire had not occurred, that house fire might not have been newsworthy.  But that night, it fit with the fire theme.

Mark Fishman wrote about this thematic organization of TV news in his 1978 article “Crime Waves as Ideology.”  We’re so used to it that when we watch the local news at eleven, we barely notice it.  Now, thanks to hyperlinks, online news can do the same thematic grouping.  A possible consequence that Fishman pointed out is that the news directors can unwittingly create media crime waves – sudden increases in the number of stories while the the actual number of crimes remains unchanged.  Once the theme is established, it’s just a matter of combing the city or the entire country for incidents that fit.

Here is another screen from the Daily News website.

A stabbing at the University of Indiana. The related stories are a stabbing death of a teacher in Long Beach, California and of a teacher in a Texas high school.

So, students stabbing people at schools – is that a thing? Probably not, but it is a news theme.

Careers Night

October 28, 2013
Posted by Jay Livingston

We had our annual careers night. Or it might be or bi-annual careers night, or even tri-annual. Some years we have it, and some we don’t, and this year we did.  It’s our attempt to answer the age-old question, “What can I do with a degree in Sociology?”

We know what some sociology graduates have done – become head coach of the Steeles or First Lady of the United States.  But since those jobs are currently taken, we were lucky to have three of our recent graduates on hand to tell us what they were doing. 

We had a pretty good turnout – at least fifty students.

And here are our speakers: Emman Hamdan,  Jessica McCabe, and Kristine Nemec.

Emman is in her first year of an MSW program at Rutgers. 

She’s taking courses and “shadowing” a social worker in the field. She said that her Sociology at Montclair had prepared her so well that the instructor in one of her courses had asked her not to speak up in class so that the other student could wrestle with the questions. 

Kristine got her degree in May, but she is already a consulting company.

Back in the spring semester, when Kristine was in Chris Donoghue’s section of Senior Research Project, Chris got an inquiry from a medical board. They needed a survey.  Kristine was on it immediately. She singlehandedly designed the survey and is now analyzing the data. She plans to do further consultant/contract work. 

Jessica is working for two non-profits. At the Masakhane Center in Newark she is a sex educator, where, she says, the insights of sociology have helped her tailor her approach for the needs of an inner-city population.

She also works at the National Council of Jewish Women, a different p;opulation (Short Hills ain’t Newark). After looking at some of the surveys Council had done, she said to herself, “Prof. Ruane would not have liked the construction of this survey.” She told them so, tactfully, and offered to do it right. So now she is their unofficial in-house survey maven.

The speakers were great, and the students were very interested to know what might lie on the other side of a sociology degree.  We really should do this more often.

The Revenge Fantasy - Django Unchained and 12 Years a Slave

October 23, 2013
Posted by Jay Livingston

Many critics are praising 12 Years a Slave for its uncompromising honesty about slavery. It offers not one breath of romanticism about the ante-bellum South.  No Southern gentlemen getting all noble about honor and no Southern belles and their mammies affectionately reminiscing or any of that other Gone With the Wind crap, just an inhuman system. 12 Years depicts the sadism not only as personal (though the film does have its individual sadists) but as inherent in the system – essential, inescapable, and constant.

Now, Noah Berlatsky at The Atlantic  points out something else about 12 Years as a movie, something most critics missed – its refusal to follow the usual feel-good cliche plot convention of American film:

If we were working with the logic of Glory or Django, Northup would have to regain his manhood by standing up to his attackers and besting them in combat.

Django Unchained is a revenge fantasy. In the typical version, our peaceful hero is just minding his own business when the bad guy or guys deliberately commit some terrible insult or offense, which then justifies the hero unleashing violence – often at cataclysmic levels – upon the baddies. One glance at the poster for Django, and you can pretty much guess most of the story.

It’s the comic-book adolescent fantasy – the nebbish that the other kids insult when they’re not just ignoring him but who then ducks into a phone booth or says his magic word and transforms himself into the avenging superhero to put the bad guys in their place.  The classic example is the Charles Atlas ad that used to grace the back page of those comic books.

(Click on an image for a larger view.)

For the sake of brevity and clarity, here is the Reader’s Digest version in three frames – one before the magic transformation, two after.

As I’m sure others have pointed out, this scenario sometimes seems to be the basis of US foreign policy. An insult or slight, real or imaginary, becomes the justification for “retaliation” in the form of destroying a government or an entire country along with tens of thousands or hundreds of thousands of its people. It seems pretty easy to sell that idea to us Americans – maybe because the revenge-fantasy scenario is woven deeply into American culture –  and it’s only in retrospect that we wonder how Iraq or Vietnam ever happened.

Django Unchained and the rest are a special example of a more general story line much cherished in American movies: the notion that all problems – psychological, interpersonal, political, moral – can be resolved by a final competition, whether it’s a quick-draw shootout or a dance contest.  (I’ve sung this song before in this blog, most recently here after I saw Silver Linings Playbook.)

Berlatsky’s piece on 12 Years points out something else I hadn’t noticed but that the Charles Atlas ad makes obvious: it’s all about masculinity. Revenge is a dish served almost exclusively at the Y-chromosome table.  The women in the story play a peripheral role as observers of the main event – an audience the hero is aware of – or as prizes to be won or, infrequently, as the hero’s chief source of encouragement, though that role usually goes to a male buddy or coach. 

But when a story jettisons the manly revenge theme, women can enter more freely and fully. 

12 Years a Slave though, doesn't present masculinity as a solution to slavery, and as a result it’s able to think about and care about women as people rather than as accessories or MacGuffins.

Scrapping the revenge theme can also broaden the story’s perspective from the personal to the political (i.e., the sociological):

 12 Years a Slave doesn’t see slavery as a trial that men must overcome on their way to being men, but as a systemic evil that leaves those in its grasp with no good choices.

From that perspective, the solution lies not merely in avenging evil acts and people but in changing the system and the assumptions underlying it, a much lengthier and more difficult task. After all, revenge is just as much an aspect of that system as are the insults and injustices it is meant to punish. When men start talking about their manhood or their honor, there’s going to be blood, death, and destruction – sometimes a little, more likely lots of it. 

One other difference between the revenge fantasy and political reality: in real life, the results of revenge are often short-lived. Killing off an evildoer or two doesn’t do much to end the evil. In the movies, we don’t have to worry about that. After the climactic revenge scene and peaceful coda, the credits roll, and the house lights come up. The End. In real life though, we rarely see a such clear endings, and we should know better than to believe a sign that declares “Mission Accomplished.”