Almost Classical

The marginal and effective U.S. income tax rates mentioned in my 2011 post The 90 Percent Tax Myth  have been supported by research conducted by Thomas Piketty (Paris School of Economics), Emmanuel Saez (UC Berkeley and NBER), and Gabriel Zucman (UC Berkeley and NBER). These economic researchers are well-respected by progressives. Data are data, though we differ on interpretations. "Income" vs. "Wealth" presents much of the challenge, as wealth accumulates but is not taxed in the United States. Distributional National Accounts:  Methods and Estimates for the United States published July 6, 2017, includes the following table: As the table shows, the effective tax rate for the top 1 percent peaked at 45 percent of income in 1944-45. Unfortunately, the overall revenue intake of the United States kept growing and the burden has been falling most on the bottom 50 percent. Tax increases on the middle and lower classes reduce potential economic growth s...

I recommend: http://www.economist.com/blogs/democracyinamerica/2011/03/middle-class_stagnation While the above is primarily a short summary of other columns and blogs, it makes a great point: Western nations with a widely unionized workforce are still experiencing increases in wage disparity between the top 20 and bottom 20 percent (upper and lower classes). The middle class (usually defined as the middle 40-60 percent) is stagnating, as well. I've written on this blog about the "Superstar Effect" and income. See: http://www.nytimes.com/2010/12/26/business/26excerpt.html Also: http://almostclassical.blogspot.com/2011/01/skills-and-value-concentration.html The reality is that the marketplace is constantly changing. Technology has, for centuries, eliminated jobs and reduced the "value" of the lowest-level, least-specialized workers. Unions are not going to be able to offset the loss in value within some jobs. Quite bluntly, if there is any chance your job can be a...

Many of my colleagues and peers complain about "wealth concentration" and the "superstar effect" without realizing these are natural trends in any group, regardless of size. As a community expands, the effect I am going to explain is magnified. The end result approximates a "natural monopoly." Seldom is there a nefarious plot to control products or knowledge -- it just happens to be more efficient to concentrate skills and products. I'm going to use a large-scale, modern example to explain how skills concentration (specialization) leads to wealth concentration and the superstar effect. Afterwards, I'll offer other examples to help clarify the concept further. For nearly 40 years, from the 1960s through the mid-1990s, when a company wanted to use computers to automate and improve a task's accuracy the firm would hire a team of programmers. As a result, companies of every size and type had customized software. This was great for programmers, but ...