My Patrilineal Roots

My patrilineal ancestors who was the first of my patrilineal ancestors to emigrate to the United States was born in  Rimbeck, landkreis Halberstadt, in Saxony-Anhalt (formerly known as Sachsen, Prussia), shown here:

The birth record from the local church which was built between 1742 and 1760 is:

It says:

Karl Andreas Christoph Willike, born 17 Feb 1823 in Rimbeck, Province of Sachsen, Deutschland, died 2 Oct 1898 and was buried 5 Oct. Age 75 y, 7 mos, 15 days.

He emigrated to the U.S. from the country then known as Prussia, in order to avoid the draft in advance of what came to be known as the Revolutions of 1848. As explained at the link:

The revolutions of 1848, known in some countries as the springtime of the peoples or the springtime of nations, were a series of revolutions throughout Europe over the course of more than one year, from 1848 to 1849. It remains the most widespread revolutionary wave in European history to date.

The revolutions were essentially democratic and liberal in nature, with the aim of removing the old monarchical structures and creating independent nation-states, as envisioned by romantic nationalism. The revolutions spread across Europe after an initial revolution began in Italy in January 1848. Over 50 countries were affected, but with no significant coordination or cooperation among their respective revolutionaries. Some of the major contributing factors were widespread dissatisfaction with political leadership, demands for more participation in government and democracy, demands for freedom of the press, other demands made by the working class for economic rights, the upsurge of nationalism, and the European potato failure, which triggered mass starvation, migration, and civil unrest.

The uprisings were led by temporary coalitions of reformers, the middle classes, the upper classes (the bourgeoisie) and workers; however, the coalitions did not hold together for long. Many of the revolutions were quickly suppressed, as tens of thousands of people were killed, and even more were forced into exile. Significant lasting reforms included the abolition of serfdom in Austria and Hungary, the end of absolute monarchy in Denmark, and the introduction of representative democracy in the Netherlands. 

The revolutions were most important in France, the Netherlands, Italy, the Austrian Empire, and the states of the German Confederation that would make up the German Empire in the late 19th and early 20th centuries. The wave of uprisings ended in October 1849.

As noted here: 

Growing discontent with the political and social order imposed by the Congress of Vienna led to the outbreak, in 1848, of the March Revolution in the German states. In May the German National Assembly (the Frankfurt Parliament) met in Frankfurt to draw up a national German constitution.

But the 1848 revolution turned out to be unsuccessful: King Frederick William IV of Prussia refused the imperial crown, the Frankfurt parliament was dissolved, the ruling princes repressed the risings by military force, and the German Confederation was re-established by 1850. Many leaders went into exile, including a number who went to the United States and became a political force there.

Thus, the Prussian part of this wave of revolutions was a failure and a step backward for democracy.

Karl's brother also emigrated at that time, but rather than settling in the fairly newly formed free state of Ohio, he migrated to one of the slave states of the South. Both brothers were alive during the U.S. Civil War and were in states on opposite sides of that conflict. My side of the family has basically lost touch with the descendants of Karl's brother.

A generation after the Revolutions of 1848, a federal German Empire, with the former Kingdom of Prussia at its core, was formed in 1871. After losing World War I, the Weimar Republic replaced the German Empire's monarchy in 1919. This initially promising democratic experiment eventually failed, however, in part, as a result of the harsh circumstances forced upon it by the Treaty of Versailles, giving rise to the Third Reich of Nazi Germany whose expansionist efforts caused World War II. 

A lasting democratic regime was finally put into place after World War II, in which Nazi Germany was ultimately defeated, in West Germany, while East Germany became a Soviet style one party state until the Soviet Union fell in 1989. Germany reunified on the model of West Germany in 1990.

When World War II ended, my German relatives were on the East German side of the division between West Germany and East Germany. As a practical matter, they were impossible to get back in contact with until my father did so, not long after Germany reunified. Some of them opened up a bar and pig roasting restaurant after reunification.

My wife's family is similarly situated. But the separation in her case has not been resolved. The ancestral homeland of both sides of her family was in North Korea. Some made it to the south around the time of the Korean War, and some didn't. No one has heard any word from those who didn't since then. Her parents, and some of their siblings and children, in turn emigrated to the United States. Korea has genealogical records that go back about five centuries, but the records for her family are currently out of reach.

The Economic Impact Of Slavery On 19th Century Land Use

Free men were reluctant to farm in slave states, even though there was plenty of arable land available.

To engage with the large literature on the economic effects of slavery, we use antebellum census data to test for statistical differences at the 1860 free-slave border. 

We find evidence of lower population density, less intensive land use, and lower farm values on the slave side. Half of the border region was half underutilized. This does not support the view that abolition was a costly constraint for landowners. 

Indeed, the lower demand for similar, yet cheaper, land presents a different puzzle: why wouldn’t the yeomen farmers cross the border to fill up empty land in slave states, as was happening in the free states of the Old Northwest? 

On this point, we find evidence of higher wages on the slave side, indicating an aversion of free labor to working in a slave society. This evidence of systemically lower economic performance in slavery-legal areas suggests that the earlier literature on the profitability of plantations was misplaced, or at least incomplete.

From a new NBER working paper by Hoyt Bleakley and Paul Rhode.

U.S. Taxes And Trends In Wealth Inequality In The U.S.

Wealth Inequality In the U.S. Over Time

This chart, based on the same household net worth data from the Federal Reserve, shows the top 0.1% separately (but is harder to eyeball):

In the 34 years from 1990 to 2024:

*  the share U.S. national net worth owned by the top 1% (currently net worths of more than about $5.8 million, with the current net worth of the top 0.1% consisting of net worths more than $30 million) increased by about 33% (the top 0.1% increased from an 8.6% share to a 13.5% share which is a 57% increase, while the rest of the top 1% increased from a 14.2% to a 16.8% share which is an 18% increase), 

* the share of the next 9% (currently net worths of more than about $1.94 million up to $5.8 million) fell by about 3% from a 37.8% share to a 36.6% share, 

* the share of the next 40% (currently net worths of more than about $193,000 to about $1.94 million) fell by about 15% from a 36.0% share to a 30.5% share, and 

* the bottom 50% (currently net worths of about $193,000 or less including negative net worths since debts exceed assets) fell by about 29% from a 3.5% share to a 2.5% share.

The bottom 50% peaked around 1992 at 4% of total net worth and hit bottom around 2011 at 0.4%  of total net worth in the wake of the financial crisis, and has recovered about half of its losses since it peak since then.

Of course, this is not a zero sum game (although the nominal dollar figures below exaggerate the extent to which everyone has improved their lot):

Adjusting for inflation (234%) and population growth (about 33%) from 1990 to 2024, the per capita net worth in each percentile group has changed in absolute terms as follows in that 34 year time period:

* Top 0.1% up 74%

* Next 0.9% up 67%

* Next 9% up 66%

* Next 40% up 38%

* Bottom 50% up 13%

Changing tax laws were a major driver of these trends

A significant factor in the increased share of wealth held by the top 1% over the last 30 years has been increasingly smaller tax burdens on them.

The strong preference for unearned income and gifts and inheritances over earned income in the tax code makes the effective tax rates of the wealthiest, especially the 1% lower in most cases, than the effective tax rates of the upper middle class and middle class.

The charts below break it down the tax rates on different kinds of incomes, and on gifts and inheritances, over time.

The chart above neglects several additional key tax preferences for certain kinds of income, mostly unearned: 

(1) the unlimited exclusion of income from municipal bonds, 

(2) the exclusion of income from increased cash value in whole life insurance policies, 

(3) the tax free status of accrued but not realized capital gains in assets owned at death, 

(4) tax deferral of capital gains from the sale of investment real estate that are rolled over into new investment real estate investments, 

(5) an exclusion of $250,000 of capital gain on the sale of a principal residence held for at least two years for a single person and $500,000 for married couple, 

(6) deferred or tax free income from various retirement and education investments (most Social Security benefits, defined benefit pensions, 401(k)s, IRAs, Roth IRAs, 529 plans, etc.), 

(7) preferential income tax treatment for stock options and certain other kinds of equity based compensation, and 

(8) the 20% of pass through entity income deduction (I.R.C. § 199A) in tax years 2018-2025.

Tax breaks from international taxation, too complex to review in this post, have also materially help people on the top 0.1% of net worth.

In addition to the federal income tax, wage and salary income is subject to a 7.65% employee and 7.65% employer FICA tax, for a combined 15.3% (and earned self-employment income is subject to a parallel self-employment tax) up to $168,600 in 2024 (the cap is indexed). Above this wage base, there is a Medicare tax of 1.45% employee and 1.45% employer for a combined 2.9% with a parallel self-employment tax.

There is also a federal 3.8% net investment income tax on investments, including the sale of stocks and bonds, for those who earn more than $200,000 if single or $250,000 for married couples (as of 2021), to finance the Affordable Care Act.

Income from marijuana dispensaries is taxed at a punitively high rate due to Internal Revenue Code Section 280E.

Gift and estate tax exclusions and rates over time:

1987-1996	$600,000	37%	55%	$10,000
1997	$600,000	37%	60%[1]	$10,000
1998	$625,000	37%	60%[1]	$10,000
1999	$650,000	37%	60%[1]	$10,000
2000-2001	$675,000	37%	60%[1]	$10,000
2002	$1,000,000	41%	50%	$11,000
2003	$1,000,000	41%	49%	$11,000
2004	$1,500,000	45%	48%	$11,000
2005	$1,500,000	45%	47%	$11,000
2006	$2,000,000	46%	46%	$12,000
2007-2008	$2,000,000	45%	45%	$12,000
2009	$3,500,000	45%	45%	$13,000
2010[2]-2011	$5,000,000	35%	35%	$13,000
2012	$5,120,000	35%	35%	$13,000
2013	$5,250,000	40%	40%	$14,000
2014	$5,340,000	40%	40%	$14,000
2015	$5,430,000	40%	40%	$14,000
2016	$5,450,000	40%	40%	$14,000
2017	$5,490,000	40%	40%	$14,000
2018	$11,180,000 [3]	40%	40%	$15,000
2019	$11,400,000	40%	40%	$15,000
2020	$11,580,000	40%	40%	$15,000
2021	$11,700,000	40%	40%	$15,000
2022	$12,060,000	40%	40%	$16,000
2023	$12,920,000 [4]	40%	40%	$17,000 [4]
2024	$13,610,000	40%	40%	$18,000

Notes to table:

[1] The 60% maximum tax rate actually represents an additional 5% that was added to estates of more than $10,000,000 from the years 1997 to 2001 in order to eliminate the benefit of the progressive tax table. The additional 5% ended at a taxable estate of $17,184,000, which is when the average tax rate reached 55%. So the top marginal tax rate during those years was 60%, but the top average tax rate was 55%.

[2] The federal estate tax in 2010 was actually optional, and estates could elect to pay no estate tax and instead accept a limit on the increase in the income tax basis on assets included in the estate.

[3] The basic exclusion amount was doubled in 2018, but that doubling ends after 2025.

[4] Official figure published in Rev. Proc. Rev. Proc. 2022-38.

Unused gift and estate tax exclusion became inheritable by a surviving spouse starting with decedents dying in the year 2010.

Working Class and Middle Class Taxpayers

The working class and the middle class pay no meaningful federal income tax (and sometimes even receives a net credit) and no gift and estate tax. The poor and the working class pay little federal income tax mostly due to the standard deduction (and previously a per person exclusion from income), the per child tax credit, the earned income tax credit, the exclusion of health insurance from income, the Affordable Care Act subsidy for certain non-employer health insurance policies, higher education tax benefits, graduated tax rates that tax low incomes more lightly, and the lifetime exclusion from gift and estate taxes. Deductions for student loan interest, self-employment health insurance, mortgage interest and state and local taxes also reduce the tax burden for many middle class families.

They do pay FICA or self-employment taxes, however, which greatly offsets the benefit of paying little or no federal income taxes (although they do receive Social Security benefits based in part on the FICA taxes they paid, and received Medicare health care benefits at age sixty-five, in exchange). 

They also pay the "poor man's estate tax", in the form of the estate recovery system for Medicaid nursing home benefits which requires means tested Medicaid nursing home benefits to be repaid with a beneficiary's probate estate.

Federal Excise Taxes And Revenue Sources

In addition to the federal taxes shown above, there are a variety of federal excise and duties taxes on gasoline and other vehicle fuels, on commercial air travel, on alcohol, on tobacco products, on firearms and ammunition, on phone service, and on good imported from less favored nations. Collectively, these taxes have a mostly regressive impact, meaning that the take a larger share of low income people's money than they do higher income people.

The federal government also earns modest amounts of money from miscellaneous sources such as making coins and currency, entering into grazing leases on federal lands, leasing federal mineral rights, and imposing fines and penalties.

International Comparisons

In many developed countries, value added taxes (VAT) and wealth taxes are important, and are largely absent in the U.S. (apart from real property and car taxes) and in many small countries especially islands, customs duties are a major source of government revenue, while they are largely insignificant in the big picture in the U.S. 

The U.S. also does not follow the "no taxation and no representation" model of oil rich monarchies where government services are financed with oil wealth owned personally by the monarch or the royal family, and likewise, has not nationalized oil and gas extraction to the extent of many, mostly developing, countries.

Overall, total tax collections in the U.S. as a share of GDP are low compared to other developed countries, which is one of several important reasons that the U.S. has more wealth inequality than many other developed countries.

Winners and Losers In Federal Taxes And Spending

Generally speaking, "blue states" (i.e. those that vote for Democrats in Presidential elections) pay more in taxes than they receive in federal spending, while "red states" (i.e. those that vote for Republicans in Presidential elections) are subsidized by blue states and pay less in taxes than they receive in federal spending, although this isn't a strict relationship.

This is mostly because "red states" tend to have lower incomes and GDPs than "blue states". 

At the county level, Biden voting counties had 71% of the national GDP while Trump voting counties had 29% of the national GDP, despite having roughly similar populations. It isn't clear how much of this relationship is because income drives political preferences, and how much of this relationship is because partisan differences in policy drive income differences.

State and Local Taxes

In addition to the federal government, various taxes are collected by state and local governments. The most significant are income taxes (often, but not always based on federal income taxes), business income taxes, taxes on retail sales of certain goods and some select services, property taxes on the assessed values of real property, gas taxes, alcohol taxes, tobacco taxes, and motor vehicle registration fees. Some state and local governments tax the value of real estate transfers. There are also a variety of user's fees. Taxes on mineral extraction and gambling and marijuana are significant revenue sources for some state and local governments.

Alaska pays a fixed some of money to every resident annually, currently $1,580 per resident, from its "permanent fund" of oil and gas tax revenues.

The relative importance of different kinds of state and local taxes varies greatly from state to state.

On balance, most state and local tax systems are regressive, meaning that lower income people are taxed at a higher percentage of their incomes than higher income people. 

Generally speaking, "blue states" have higher overall tax rates and more progressive tax systems, while "red states" have lower overall tax rates and more regressive tax systems, although the correlation isn't perfect.

The combined average state and local tax burden from all state and local taxes combined (from here) is shown below (the U.S. average combined state and local tax burden is 10.56%):

State Level Income Inequality

This only partially drives income inequalities between states, however (states with strong economic contributions very high income industries like technology, finance, and insurance also tend to have great income inequality):