The Rich and the Very, Very Rich

James Surowiecki has a New Yorker article out that makes a very reasonable point -- namely, that there's a big difference between being a doctor or a lawyer or an entrepreneur or, say, a prominent journalist at the New Yorker, and being a millionaire.

Our tax code should reflect that distinction. It doesn't.* Let's make it.

This is smart, I think. I'll add the obvious disclaimer that I'm not an authority on the economics of tax policy -- we cool, Dylan? -- and then proceed to say that, nevertheless, at some point, all talk of tax policy has to lead to questions of a larger scale: What sort of society do I want to live in? Whom am I prepared to work for? Does the immiseration of the poor matter, and how much? Deep questions like that. Tough questions. The economics flows from those answers.

Now, there is a big difference between the rich and the very richest. For one, in economic terms, the very richest have done much better for themselves in recent years. Economist Emmanuel Saez has generated some data that indicate that the very, very richest -- those in the top 0.1 percentile who make about 2m+ a year -- have seen seen their incomes grow 95% from 2002 to 2007, while the other richest -- call them the "lower-upper class," the nine percent of Americans making 110k to 400k -- saw their incomes grow only 13%. Indeed, a full two thirds of all income growth from 2002 to 2007 was contained in the top 1%; that top 1% saw their incomes grow more than ten times as fast as the bottom 90%. America is becoming a staggeringly unequal country; this inequality, unsurprisingly, benefits the very, very richest among us most substantially.

Unpack these numbers and I suspect we find some fairly profound cultural difference too -- between the doctors and lawyer and journalists in the "lower-upper class" and the very, very rich. The Populists of the 1890s drew a distinction between "producers" and "parasites": the "people," they said, the true heirs to the American creed, were "producers -- they made. The "elites" were "parasites" -- they depended on the wealth of others.** Today, the social contribution of the very, very rich has been called into question by folks like Umair Haque using populist 2.0 terms like "thin value," "bean counting,""income not outcomes," and so on. Go to his blog and you hear William Jennings Bryant singing:

Jennings: "Burn down your cities and leave our farms and your cities will spring up again as if by magic; but destroy our farms and the grass will grow in the streets of every city in the country." - Cross of Gold

Haque: "every generation has a challenge, and this, I think, is ours: to foot the bill for yesterday's profligacy — and to create, instead, an authentically, sustainably shared prosperity." - Generation M Manifesto

In short, the rich versus the very rich: this distinction matters. It explains a lot -- about the nature of class in America, and about the nature of our economy. We ought to develop a vocabulary -- and then a tax code -- that reflects it.

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* And yes, marginal tax rate is very different from effective tax rate. As my buddy Jon Levine explains, this line is grossly inaccurate: "This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James’s dentist: same difference."
**It's interesting to note that these categories were used by the People's Party of the 1890s in explicit contrast to the language of the Marxists. Populism was a sort of uniquely American theory of class relations.