For those who weren't aware: Top federal income tax rate now 45 percent, top capital gains tax up 10 percentage points

From Politico:

. . . Democrats have pushed through several new taxes on the well-to-do — many coming online this year — making the top tax bite steeper than advertised. By how much is a matter of opinion, but some experts say the true top rate is about 45 percent — 5 percentage points higher than the usual sticker price or higher still depending on what’s included in the mix. . . . 

Taxes on capital gains, for example, top out at 25 percent, once various surcharges are included, a sharp increase from 2012. . . . 

Thanks to quirks in the law, some may be subject to the tax but not paying it while others who are exempt may nevertheless be paying it, said David Kautter, managing director of the Kogod Tax Center at American University. . . . 

The health care law also imposes a new 3.8 percent “net investment” tax on capital gains, dividend, interest and other investments, in addition to the regular 20 percent capital gains tax. That’s expected to generate $123 billion over a decade. . . .  

That will cut the after-tax income of the top 1 percent, who earn at least $506,000, by about $50,000 or about 4.5 percent, according to the Tax Policy Center. The bite is much bigger for the very rich. Those who earn at least $2.6 million, enough to put them in the top one-tenth of 1 percent, will lose about $322,000 or about 6.2 percent of their income. . . . .

A note for me to remember some dumb economics: Stiglitz on inequality

This claim is based on the crazy argument that people don't spend all of their money.  It is almost as if wealthy people are digging a hole in their back yard and burying the money there.  But wealthy people's money doesn't just disappear.  If they put it in the bank, it is loaned out to others.

“What sustains the American economy is consumption, and the people at the top spend on consumption a smaller fraction than those at the bottom. In fact, those at the bottom have to — to get by — spend about basically 100 percent. So when you move money from the bottom and the middle to the top, overall spending gets constrained, and that weakens the economy,” economist Joseph Stiglitz said on MSNBC's "Up with Chris Hayes" . . .

Socialists who own Rolex watches

There is no increase in inequality among 99 percent of the population

So much for concerns about the poor getting poorer than everyone else.

In a recent paper weaving together several strands of new research, Mr Gordon reports that improved use of income datasets "shows that there was no increase of inequality after 1993 in the bottom 99 percent of the population, and can be entirely explained by the behavior of income in the top 1 percent." So we are left needing an explanation for the rise of "the stinking rich", as Mr Noah calls them. But when it comes to rising inequality, that's all there is to explain. Maybe the subject doesn't merit a ten-part series after all.

Mr Gordon's surprising conclusion is based upon recent studies showing that measured income inequality has been overstated due to inadequacies in traditional methods for constructing price indices and estimating real income. In the latest version of a much-discussed paper Christian Broda and John Romalis find that

the relative prices of low-quality products that are consumed disproportionately by low-income consumers have been falling over this period. This fact implies that measured against the prices of products that poorer consumers actually buy, their “real” incomes have been rising steadily. As a consequence, we find that around half of the increase in conventional inequality measures during 1994–2005 is the result of using the same price index for non-durable goods across different income groups.

. . .

Using an updated price index, Christian Broda, Ephraim Leibtag, and David Weinstein find that

the real wages at the 10th percentile increased by 30 percent from 1979 to 2005. In other words, the real wages of low earners have not remained stagnant, as suggested by conventional measures, but actually have been rising on average by around 1 percent per year.

From the Broda et al. article:

Past research suffered from the problem of being unable to match data on prices paid with the households that actually make the purchases. As a result, prior work focused on inferring the linkages between prices paid and household characteristics—for example, by using approaches based on neighborhood effects and unit costs. Here, we first describe household-level data that allows us to look at the linkages between prices paid and household characteristic. We then use that data to reconsider the commonly held notion that the poor pay higher prices than those with high incomes and that this behavior is driven by the larger share in expenditure of the poor in high-priced convenience stores.