Out of curiosity, what are your thoughts on estate taxes? If the surgeon or myself is smart enough to put money away and leave it for his/her children, should they have to pay taxes on it? After all, it's not impossible for a $400k earner to reap the benefits of compounding interest and have $1M+ at retirement or death.

BTW, if you know of a bank offering 5% on a savings or CD account, please let me know

Also, it's not completely accurate to rank people solely by income. The surgeon who earns $400k a year in income is nowhere near as wealthy as the guy with 8 million in the bank earning 5% interest, though they'd both show up in the same percentile. The surgeon, who had to go through many years of expensive med school, followed by a few brutal years of residency, and is now providing an immensely valuable service to society, is paying 40% in taxes and the trust-fund guy who inherited his money is paying 15%.

It's clearly a broken system.

I suppose it's never going to be even. Just as the top 1% don't pay enough (by these standards), the bottom 1% contribute nothing–possibly even negatively. Maybe these edge cases shouldn't even be considered.

Also, to make the top 1% of earners, you only need to make $389K per year. I wouldn't exactly call that “ultra-rich” and its definitely not just people living off their investments.

The top 10% look to get about 70% of both the tax burden and the GDP, which is arguably fair. But percentile 1 gets 47% while only paying 39% That means percentile 2-10 are getting raped, forced to make up the extra 8. They're making 23% of GDP but paying 31% of the taxes.

That is exactly what Krugman talks about. The working wealthy are being short changed in favor of the ultra-wealthy who live off of their investments.

Here's one such summary: http://www.ntu.org/main/page.php?PageID=6

The last available year is 2006, in which:
- The top 1% of earners paid 39% of income tax revenue
- The top 5% of earners paid 60%
- The top 10% of earners paid 70%

How can you dismiss this as any less relevant than the statistics that Krugman quotes? I'm trying to keep an open mind with regards to all these stats and theories–I would hope you are too.

As best I can tell from this graph on income/GDP ratio, the bottom 90% of earners represent 31% of the GDP … so that puts the top 10% at 69%. Is it still wrong? (btw, that includes capital gains income)
http://www.visualizingeconomics.com/2006/10/17/…

And the Bush tax cuts don't benefit much of the productive wealthy, they benefit the ones who merely live off of their investments. Their value to society, as a whole, is much less than those who are paying the top personal tax rate.

Hauser's law has a number of well-known flaws. Here's the best:

http://time-blog.com/curious_capitalist/2008/05…

Hauser's chart looks more impressive than it is due to being zoomed out so much, and when you zoom in you see that while 70% tax rates are absurd, reasonable (i.e. Clinton years) raises in income tax do increase revenues.

I don't really have a problem with that. Estates are post-tax money, however. How do you rationalize double-taxing those?

The top 10% of earners contribute over 70% of the tax revenue–you might want to mention that in your analysis of wealthy people's value to society.

Also, what do you think about Hauser's law? (That tax revenue as a % of GDP remains constant.) Maybe the key is not raising taxes–but working to increase economic growth and reduce spending.