INGRAHAM: No, no -- do you -- do you not agree that when you tax the rich you ultimately end up over time reducing much of the revenues that would come in for their spending that they make, their hiring and companies where they hire. I mean, a lot of this also is small business owners.
STEIN: No, I don't agree with that. I -- I don't agree with you, with all due respect.
INGRAHAM: Well -- that they spend less?
STEIN: You are a woman of -- well you're a woman of extraordinary intelligence but the data is very clear that we had higher rates of economic growth in the 40s, 50s, 60s and 70s when we had higher taxes. The era of very low Bush 43 taxes has correlated with a low period in productivity growth and a low period of economic growth. You cannot correlate low taxes with high productivity. It just can't be done.
You can oppose tax hikes if you like. What you can't say though is that there is good evidence that either the Reagan tax cuts or Bush tax cuts generated additional tax revenue. Take a look at this table of tax receipts by year. Tax receipts clearly fell off immediately after the Bush tax cuts, and the bounce back was small. Growth in tax revenues was small under Bush. Reagan is a similar story, though not quite as bad as Bush. Tax revenue increases were much higher under Carter and Clinton. This is not to say that tax cuts can't increase revenue. And it's also not to say that the Bush tax cuts were the cause of the reduction in revenue. My point is the data don't show that tax reductions resulted in an increase in tax revenue.
41 comments:
In a simplified model (and using numbers I pulled out of the air) -
Say GDP is 100 and effective tax rate is 35%.
Say in this scenario, that the economy grows at 2% a year.
So a year from now GDP is 102 for a total receipt of 35.7
Say we cut effective rate to 30%. For tax revenue to be recovered in the first year it will require a growth rate of 19%. I suspect that one one would argue this as likely. And admittedly this is not the argument. The argument is over long term.
So say 10 years from now - in the first scenario the economy will be 121.9 with a tax revenue of 42.67
For tax revenue to match at the lower effective rate in 10 years the economy needs to be at 142.22
This requires a growth of roughly 3.56%/yr
In this idealized scenario, that I think is not realistic in its assumptions, there can be a compelling case for lowering tax rates.
So the onus falls on the one making the positive claim that something similar to what I have described is likely. That is; that the growth of the economy is going to be (in relative terms) significantly higher and that the changes are directly and primarily a function of the lower tax rates.
Historical data should provide empirical evidence. At least by allowing us to look at tax rates vs growth. There is still a question of determining how much of the growth is directly attributed to it.
HP - maybe you can help me out here.
Yes, I think I agree with your point, Paul. Tax cuts could lead to additional tax revenue long term in theory. The tax cuts supposedly spur economic growth that would exceed the growth generated by the higher rates. But why does the right claim that this is in fact what happened due to Bush and Reagan? Presumably for Bush the improvements are yet to be realized. At best they could say it's too early to tell. They can't say revenues went up.
Paul,
I actually agree with Jon here. And really it's more complicated then your example. You have to also include the natural growth rate of tax revenue because of population growth and other factors. IOW, even if tax revenue went up after you lowered taxes - was that due to population growth (which would have lead to higher revenue anyway) or the lower taxes themselves? Paul Krugman discusses that here.
So when conservatives talk about the Reagan growth in tax revenue, they fail to correct for population growth, inflation, etc. Actual revenue did in fact increase after Reagans tax-cuts - the question is did it increase because of the tax-cuts or in spite of them (population growth, inflation, etc). And the consensus - from real economists, is that it was in spite, not because.
Three other points here real quick. The better argument that conservatives make on this is not that tax-cuts increase tax revenue (what respectable conservative would actually want that???), it's that the real problem here is not a revenue problem, but a spending problem. Second, Europe tends to have higher taxes then we do and they also have lower economic growth. The conservative would argue that this is because of the tax rates (among other things). The liberal would argue...well, they really don't argue otherwise. They are just left scratching their head and disagree with the conservatives (as the liberal David Leonhardt is forced to do in that link). These are the stronger arguments in favor of current tax rates (among others).
Lastly, every party has their irrational side. The conservatives arguing that we are on the right side of the laffer curve is our irrational side. The liberals arguing that more unions would improve the labor market is their irrational side. You don't necessarily have to agree with everything - but you tend to take the good with the bad.
It seems I was not clear - the intent of my original comment was not to make a positive case.
I was trying to make; albeit a very simplified, case that if I use what is being said and do the implied math behind what it would take for the claims to be true.
HP - on the following
The better argument that conservatives make on this is not that tax-cuts increase tax revenue (what respectable conservative would actually want that???), it's that the real problem here is not a revenue problem, but a spending problem.
I agree with you that would be the better argument. Conservatives and I would disagree on what to spend money on of course but at least the argument would have logic value to it.
btw- I clicked on the first link you provided. I am unimpressed. This is the same site a while back you linked to - I don't quite remember the context - where he attempted to make a case relating to migration. That one was pretty bad too.
W/ regards to second link -
The conservative would argue that this is because of the tax rates (among other things).
I do not doubt that conservative would argue this. Do you have a meaningful resource that shows the correlation beyond asserting it?
I don't know this for sure but I am under the impression that in many of the western european countries population growth is quite anemic. If true, why should this aspect (one of many things to be considered) be dismissed?
My economic friend understood that dialog and simplified it for me some - I still felt like there is a huge 'grey area' balance and that all the numbers could dramatically change in both directions if the economy slips, the population spikes or a half dozen other factors happen.
Backing up for one quick second, I really really want to ask Jon a simple question - How Much? How much does he want to take from the rich? Hannity openly (and correctly I might add) breaks down his tax burden - income tax, property tax, county and state tax as being $.40 on the dollar. Here in Ohio that number for my family is roughly supposed to be $.31/$.34 on the dollar. Before the Lefties out there respond, please keep in mind that I have only outlined 4 forms of taxation that claims 30%+ of my money amd over 40% of Hannity's cash. From that available money we pay sales tax, gas tax, energy taxes, phone taxes, internet taxes, capital gains taxes on profits made from money already earned (double taxation) and I am probably missing about 30 additional taxes here - point being that all of the taxes added up suggests that over 40% of my wages are taken from me in one form of tax or another. The rich, the top 1% out there have more toys, more propeties, bigger homes and so on so if I am at 40% minimum as a so called top 10% earner - is it fair to think they are paying over 50%? So again - simple question here - how much do you want to take - what is fair to you Jon?
What I find troubling is that this is the only answer from the Left - HP has a very valid point, we have a Spending Problem and they feel that it is their right and within their charter to simply go out and take more from those who have more and fundementally that can not sit well with any human being - not even a Progressive. So all I want to know is how much do you want to take from the Rich then?
Paul,
The population issue certainly plays a role. But taxes do as well. I dont have anything directly addressing that - to make the point I would probably use the economic freedom index and show a correlation.
But there is a general view that the higher the taxes, the more deadweight loss. Which indirectly translates to loss in economic efficiency.
See here.
A good question Chad. Is enough ever enough or does the left just want endless tax hikes?
The first point that needs to be made in my view is that we must start by putting real facts on the table. I don't care for this very murky discussion about what Sean Hannity pays. That's very misleading. When you're drawing judgments based on stuff like that you're drawing judgments on things you don't really understand.
I say go with real data, like from the CBO. I've done the work. We know what the rich pay. We know what the rich own.
The top 1% owns half of all stocks, bonds, and mutual fund assets. So if the top 1% were to pay proportional to that ownership at the federal level they'd pay half the taxes. Do they? No. They pay 28% of the taxes. They also earn 23% of the income.
It's even more lopsided for the upper one tenth of 1%. So take Warren Buffet. As a proportion of his income he pays a lot less than his secretary, who makes an upper middle class income.
I've also talked about state taxes. The group that pays the highest proportion of their income in state taxes is the poor. The rich pay the least.
So Sean Hannity is going to do what right wing talk show hosts do. That is offer a little info here and a little there that paints a very misleading picture about how tough life is for him. That's of course a story that the corporate owners and advertisers at Fox News want told because it serves their interest. It's kind of like homeopathy. "I know a guy that took this secret extract and it cured his cancer. I know a guy that is rich and really suffers under this burdensome tax structure." We have the data. Why would we go with such murky sources? Because the data don't reveal the picture preferred by wealth.
So I'll tell you what I think the rich should pay and I'd ask you to do the same. Should they pay less than the poor as a proportion of their stock ownership and as a proportion of state taxes?
In my view we should look to history. What has worked best for America in the past? What has worked best for other countries? It's not like we should look to some arbitrary demarcation and say "More than such and such % is immoral." I think O'Reilly said something like that. "Taking more than 70% is immoral." Why? Just seems bad. That's not a reasonable criterion. The criterion in my view should be this. What produces the healthiest and happiest society for all parties? I don't think anybody would be happy with a situation where people that work hard aren't rewarded more than people that work little. But what if taxing O'Reilly at 70% in fact made for a better world, even for O'Reilly? What if that meant that yes, there was short term pain (not that he felt it with his multiple millions). But long term the economy grew more quickly and what he gave up was compensated for in the gains the economy experienced?
There can be no denying that our economy did much better for both the rich and the poor when our top marginal rates were closer to 50 or 60%. HP can argue that the cause was elsewhere, and I wouldn't suggest this single factor is determinative. But what I would say is that whatever the rate is, it should be evaluated based on testing. What works well and what doesn't? Economics is not like science where tests are repeatable, but I think you imitate the scientific methods as best you can.
I say sticking to these principles of "You can't take what I earned" rather than looking to actual data to see what has worked is precisely what had produced the failure that is Africa. Africa has been basically run by the World Band and IMF for the last 30 years. You know what they prescribe? Free markets. Low tariffs. Low regulation. Non-existent minimum wage. Balanced budgets. And by the way they have tons of natural resources. Tons of oil, diamonds, gold. Just awesome in terms of their natural wealth. And this is the worst place in the world to be after all the tea party recommended policies. People genuinely believed this would work and was for the best for Africans. But we have to look to real world experience. Africa is a failure and needs a new course. The African model is not a good idea for the US. It's not what made us rich and it won't make us rich in the future.
Ahh - so this is fair to you?
http://www.heritage.org/budgetchartbook/top10-percent-income-earners
The bottom 50% pay less than 3% into the kitty - in terms of actual dollars and that is fair? Another angle for you - 165,000 million people pay 10 times less than what 300,000 people pay into the pot.
You can turn and twist things however you want to sir, but when the top 50% is responsible for 97% of the total income tax dollars in the pot - things are not right - not even close.
Chad, I've rebutted your errors regarding what the rich pay in taxes at length multiple times. It is obvious to me that your right wing views are like Islamic fundamentalism. They are articles of faith impervious to facts.
Do you think if you repeat the claim that the bottom 50% only pay 3% often enough it will become true? You are misreading Heritage. That's not an accident. They frame it in a misleading way so that misinformation continues. Stop allowing them to keep you ignorant.
Heritage looks at one tax only. The income tax. But there are other taxes. Excise taxes, taxes on capital gains, social security taxes, and corporate income taxes. Heritage looks at only the one because it is progressive. Others are regressive. So they don't consider them.
Capital gains taxes matter. Corporate taxes matter. The sources I provide address all of them plus state taxes. When all of those factors are considered it becomes clear that the over burdensome taxation on the rich is pure fantasy. It's a little progressive, but nothing like what you and Heritage portray.
You think you don't need to read the other side because you already know all about it. You don't.
http://www.heritage.org/research/reports/2009/05/the-rich-pay-more-taxes-top-20-percent-pay-record-share-of-income-taxes
http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes
http://www.taxfoundation.org/blog/show/26361.html
http://www.americanthinker.com/2010/03/lying_about_bushs_tax_cuts.html
http://www.politifact.com/rhode-island/statements/2011/feb/25/sheldon-whitehouse/whitehouse-says-richest-400-taxpayers-taxed-lower-/
http://www.politifact.com/truth-o-meter/statements/2010/jul/09/trent-franks/trent-franks-says-top-1-percent-pays-over-half-ent/
So how much do the rich pay in sales taxes, how about property taxes then? We have to include everything right?
Jon writes, There can be no denying that our economy did much better for both the rich and the poor when our top marginal rates were closer to 50 or 60%. HP can argue that the cause was elsewhere, and I wouldn't suggest this single factor is determinative. But what I would say is that whatever the rate is, it should be evaluated based on testing. What works well and what doesn't? Economics is not like science where tests are repeatable, but I think you imitate the scientific methods as best you can.
I'm curious Jon - instead of looking back decades and trying to extrapolate from a different era, why can't I look at say Europe vs the USA? Europe has higher tax rates and slower growth.
That would seem like the more apt comparison and yet it points to exactly the opposite conclusion: higher taxes leads to lower growth.
Your thoughts?
Also, let's not forget that while the payroll tax is certainly regressive, social-security benefits are progressive. So on net, payroll taxes become PROGRESSIVE (taking into account tax and benefits).
This is a serious readjustment that Jon absolutely needs to take into account as the payroll tax alone, without taking benefits into account, is the most regressive part of Jon's argument, thus making his argument artificially stronger - yet in reality, the sign seems to point in the opposite direction.
Great links Chad - keep it up!
Thanks HP. I guess what is hard to swallow is that Jon wants to add those other taxes into the mix to show some balance, but then he doesn't want to recognize the property taxes, sales taxes from purchases and other taxes paid by all of course, but due to their success the rich contribute a much higher by dollar portion for those types of taxes.
Jon is so focused on percentages and not actual dollars that I think he is misleading himself a bit then he is not factoring in the additional taxes like I mentioned above.
Then - how about all of the freebies out there? I don't have a bunch of time to study this, but what about the dollars to provide food stamps, free childcare, free energy, free gas and so on? Yes there are payroll and medicare taxes taken out of the low skilled work forces checks, but when they get all their freebies what do those dollars look like and when factoring in where does the tax rate stand then?
He simply dismisses what Hannity pays in taxes because he is Right Wing - really - the guy has proven over and over that he has 40% of his wages confiscated before he even touches any of his money - regardless if he is rich or poor that is not a good thing.
Chad, what are your thoughts on the links you provided? The two politifact links are right on point and correct errors you typically make. So that's great. Another of your links says households making more than $212K make about 30% of all the income and pay 40% of the federal taxes. Sounds about right and confirms what I said. Our federal tax code is mildly progressive. Our state tax code is regressive.
Then you have other links that repeat the same misleading claim you always offer. The rich pay a disproportionate amount of federal INCOME taxes. That leads to the kind of error corrected in your second politifact link made by Trent Franks.
So are you offering links intended to confirm my point? And if so why include links that also make the same misleading claim you based your prior erroneous claim on?
And finally why is HP excited about these links? I'm confused here.
HP, I'm not committed to high taxes. I'm committed to higher growth, especially when that higher growth is egalitarian. If lower taxes produces that outcome I'm for it. As far as I can see it doesn't.
But if you want to put some facts on the table that suggest that it does work, go for it. I think comparing the US to EU would be worth knowing. What are there effective rates? But you must keep in mind that the US has a lot of advantages that mean our growth should be expected to be higher in any case. World reserve currency, preferential treatment by dictators throughout the world (since we install them) etc. What I'd suggest is check economic performance in a particular EU country under one tax code and again under another. Did Thatcher cut taxes and did Britain improve as a result? That sort of thing.
It's not that I oppose tax cuts. I think we should craft policy based on what works, not on some principle that says tax reductions are always good and tax increases always bad, or a claim that a certain % is too high. If lower taxes work that's what I would support.
And as far as a re-adjustment you say I need to take into account because SS benefits are regressive relative to the revenue extracted via taxes, I just don't know what you mean. I'm calling for honesty in the descriptions of who pays the taxes. That requires an accurate description of who the money is collected from. If all of it went into the pockets of the poor this wouldn't change what I'm saying. We need to be truthful when we talk about who pays what. We should also be truthful about where the money goes. If I say it all goes to the rich please correct me. Chad says it's all collected from the rich, with the bottom 50% only putting 3% into the pot. Absolutely false and I'm within my rights to call him out on it. There's no adjustment needed on my part. I'm being truthful. Chad needs the adjustment.
You write, I'm calling for honesty in the descriptions of who pays the taxes. That requires an accurate description of who the money is collected from. If all of it went into the pockets of the poor this wouldn't change what I'm saying.
Oh, I think I understand you now. Thanks for the clarification. Well if this is your criteria, then I agree - overall taxes tend to be much flatter than what many people realize.
But this is a meaningless measure. What people usually have in mind is the tax/benefit ratio. It's not just the tax that's important, it's the benefit that comes from the tax that also matters. And if you were to plot that ratio by income, you would see a bigger and bigger number as you go up the income distribution. That's fundamentally many right-wingers point. And Social-security payroll taxes helps make that case - sure, the payroll tax is regressive, but the benefit is highly progressive, making the overall ratio more progressive.
That's why I liked Chad's links. It's only after you take into account payroll taxes that you can paint a less progressive picture. But as I said above, this is misleading. It misses the benefits part.
But if your only concern here is taxes coming in, then lets both champion the removal of the most regressive tax: the payroll tax! I'm sure you can easily get 90% of right-wingers to jump on board with you. :-)
Ha! I have to admit that the phasing out of the payroll tax makes some sense.
Chad gave a lot of links and I'll admit I didn't read the entirety of each of them, but did they contrast the receipts and outlays? I see them talking about receipts. Some of his sites said receipts were skewed to the rich, his politifact links didn't pain that picture. But I didn't see any of them discuss how outlays are skewed to the poor.
I'd think that would be tough to quantify. Who benefits from war? Who benefits from publicly subsidized high tech? Tough to measure.
Your so wound up Jon I like it - I have never denied for a minute that most of my links refer to only income tax. Are you claiming then that these figures that the bottom 50% only contribute to 3% of the income taxes collected by dollars?
Obviously we don't see eye to eye on the subject, but what continues to concern me here Jon is your attitude which mirrors the Progressive party and that is this - You/Progressives feel that it is your right to take what you have not earned.
I say this at least once a week and I believe in it completely - all I want to do is to fairly split the US up. Progressives to have 25 States and Conservatives 25 States - Blue states can't tax Red States and we will engage in mutually benificial transactions only and lets play ball. Each State every 4 years has the ability to vote and change sides if they are not happy. I know that we (HP, I, Conservatives) are not changing your mind - you know everything so why can't we just split up teams - nicely so we can stay America - and lets put our fundemental plans in place and see what happens.
Your Freedom to be you is my Freedom to be free from you is a saying from Mr. Church that I like and it is apropriate.
HP -
Do you have a link that shows the following?
But this is a meaningless measure. What people usually have in mind is the tax/benefit ratio. It's not just the tax that's important, it's the benefit that comes from the tax that also matters. And if you were to plot that ratio by income, you would see a bigger and bigger number as you go up the income distribution. That's fundamentally many right-wingers point. And Social-security payroll taxes helps make that case - sure, the payroll tax is regressive, but the benefit is highly progressive, making the overall ratio more progressive.
I also find the last sentence interesting. Can you elaborate?
Of course I have not denied that the bottom 50% only pay 3% of the income tax. What I've denied is that this is the only tax that matters and the only one that counts when we are talking about who contributes what in total.
You are concerned that progressives think they have a right to take what they did not earn. But then you've taken what you did not earn. Where were your complaints when you were being educated, getting sports scholarships because you could practice with equipment you did not buy, and getting access to computers that lead to your development which your dollars did not create?
See, taking what you did not earn is fine. FOR YOU. Others taking what they did not earn is a real problem. And I know you're not racist, but let's be honest. We're talking about a disproportionate number of blacks, Mexicans, and other minorities. You really don't like it when they take what they did not earn, but you don't repent for the many things you've taken that you did not earn. And those things you've taken are key to your prosperity today.
And that's true of your salary as well. I don't know what you do, but I can bet a foreigner would do it cheaper. I understand that a bus driver in India makes about 1/50 of a bus driver in Sweden. Why is that? Is driving a bus in Sweden so much more difficult? In fact the opposite is the truth. The Indian bus driver has narrower roads and must dodge more bikes, rickshaws, kids, etc. Is the bus driver in Sweden paid more because he's that much better?
Nope. It's true that moving a Swede provides more value than moving an Indian because a person in Sweden is probably more productive due to a variety of factors. But one of the reasons he's paid more is because Sweden won't allow that Indian bus driver to migrate. So a bus driver's wages in Sweden are driven primarily by one thing. Government intervention. With all your talk about the free market I notice also your very aggressive anti-immigrant rhetoric. Where's the free market now? That's cast aside. Because it's free markets FOR THEM when it serves your interest. Nanny state FOR YOU so you can be prosperous.
What I would suggest regarding this 25 state split you talk about a lot is to stop indulging your fantasies and re-join the world. What you offer is a perfect test for conservatives because conservatives don't fare well when it comes to real world tests. So you propose a test that will never be realized. Then you can imagine how it would prove all your theories right.
It would kind of be like me proposing that we build an inter galactic space ship to find a world identical to earth. And liberals can go there and agree to not destroy the environment. Then we'll show you how wrong you are. Yeah, well that's not going to happen, so discussion is kind of pointless.
What I suggest is you look to history. We can see the implementation of your policies in history. It's been very aggressive over the last 30 years since Reagan came in and implemented Milton Friedmen style economics in some parts of the world. Namely Latin America and Africa. We don't have to split up America. Just go live in the Congo, a land of immense natural resources. There's Colombia, Nicaragua, Haiti, Jamaica. Look up the IMF. They introduce austerity measures for places like this. Low tariffs. Limited regulation. Balanced budgets (not like the US, Japan, and Britain). Everything that the tea party prescribes. I say learn from history rather than splitting America and ruining another country.
Paul,
I don't have a specific link showing the overall point - but I do have one by deduction. Jon has already conceded that the income tax is progressive. State and sales taxes are slightly more regressive - and really only slightly, because most essential items like food, etc, are exempt from sales taxes. The real heavy hitter as far as regressiveness is the payroll tax. That's where Jon gets most of his argument that the overall tax structure is regressive (and I am assuming that property taxes cancels out capital gains taxes).
But when you look at social-security taxes as a whole they are the opposite: (highly) progressive. For proof of that see here, and here.
Jon,
You write, but then you've taken what you did not earn. Where were your complaints when you were being educated, getting sports scholarships because you could practice with equipment you did not buy, and getting access to computers that lead to your development which your dollars did not create?
Do you really think that scholarships are a net loss for universities? No way man. Scholarships are a way for universities to BEG YOU to come to their college. Why? Because they get MORE revenue from having a really good sports team. In other words, Chad did indeed 'pay for' his college education - by being very athletic, and helping bring in MORE revenue than any tuition would do.
Seriously man, the lack of good examples of how productive members of society "leach off of" others really undermines your argument, and shows just how far fetched it actually is.
HP, I'd say you should be careful to not fall into the typical right wing error of focusing on a single element of the tax structure that highlights the suffering of the rich and ignores the contributions of the poor. When Chad talks about the money that is collected it's all about income tax. Capital gains doesn't factor in. Sales tax. And yes, the payroll tax.
Now you're talking about the distribution of benefits. What do you talk about? One set of benefits. Social Security. One that once again highlights how life is so tough on the rich. First they pay the most (only look at income taxes). Now they don't get the most back (only look at Social Security).
My point is let's look at all of it. If you don't know, that's fine. It's hard to measure. But don't just pick out one distribution that highlights how the poor are a bunch of leeches.
Here's something that's not thought about. Football tickets and company meals. You know what the company I work for does? Takes me out to dinner sometimes. Sometimes I get professional sports tickets. Rarely for me, but sometimes. The big whigs however get all they want. We're talking the suites at Comerica or The Palace. What is that? That's a way of distributing income to wealthy people that doesn't count as income for them. And the company gets to pretend it's an operating expense, so they don't pay taxes on it. In a sense that's a gift to the rich right there that you won't see tallied.
The same applies to company cars and private jets. These things aren't treated as income for the CEO. So he pays no tax on it. Poor people have to pay for their own car. Wal Mart doesn't give them one. So they must earn income, pay taxes, and take the rest to fund their car.
As far as the sprots scholarship, you've once again misread me. Not a big deal. These things happen. But it's interesting how hard you are on me if I misread.
Go check what I said. Getting sports scholarships because you could practice with equipment you did not buy. Where did Chad get the practice that allowed him to earn the scholarship to the university? No, it wasn't at the university. It was at the high school. Without the high school football team, highly subsidized by money Chad did not earn, Chad would not have developed the skills he needed to earn the scholarship. Sure, the university wants the good athlete. But Chad would not have been the same athlete without the school that provided him the means to practice.
Far fetched? You seriously think it's far fetched for me to say that you are HIGHLY dependent on the contributions of others, contributions that were compulsory, not voluntary, that lead to your present financial success? Are you going to deny the obvious? Even Chad hasn't really denied this. He seems to disappear when I bring this point up.
and I am assuming that property taxes cancels out capital gains taxes
How so?
HP - one other question. In principle do you think taxes should be progressive, flat, or something (?) else?
Jon,
Good point on the misreading. I re-read you. Very true. I did misread you. My bad (notice the difference? I fess up when I misread - like a good conservative!).
Now, let me address what you actually said: Where did Chad get the practice that allowed him to earn the scholarship to the university? No, it wasn't at the university. It was at the high school.
But he did - public high school's are paid out of property taxes, and Chad I'm sure paid property taxes either directly, by owning a home, or indirectly, by renting. I still don't see your "owe it to others" point.
Also, when you say "rich" - substitute "more productive", it won't necessarily change the facts of what you say, but it will cast it in a far more reality based light. For example, you could have written: "The [more productive] however get all they want. We're talking the suites at Comerica or The Palace. What is that? That's a way of distributing income to [more productive] people that doesn't count as income for them. And the company gets to pretend it's an operating expense, so they don't pay taxes on it. In a sense that's a gift to the [more productive] right there that you won't see tallied."
I still get your point. The rich have all these extra perks that the poor don't have that essentially allows them to pay less taxes. Very valid point. True even, I would say, mostly. But ALSO, the more productive give more back to the community in terms of entrepreneurship, inventions, start ups, jobs,company growth, etc than the less productive. If you want to see what life would be like with a primarily worker based citizenry - look at Haiti. If you want to see what life would be like with a very top heavy workforce, look at Silicon Valley. Austin, Texas. etc
Btw, I am going to tone down my criticisms of you. If you read most of what I have written towards you before, it is primarily to show ONE thing - namely, that you are far more comfortable veering off the economic consensus than I am. You kept denying this. I think I have already proven this point, ad nauseam. You may think I still haven't - which is fine - but I dont think more can be said about it. So I'll leave that alone and treat you like the heterodox that you are! :-)
You ask, You seriously think it's far fetched for me to say that you are HIGHLY dependent on the contributions of others, contributions that were compulsory, not voluntary, that lead to your present financial success?
Sorry, I didn't read this whole thread - but can you provide specific examples?
Paul,
My assumption is that capital gains taxes is probably more regressive. Poor people generally don't have stocks. And getting paid via stocks instead of income actually lowers your income tax rate - as compared to the poor. Property taxes, on the other hand, are probably more progressive. Poor people generally don't own homes, and if they do, they pay significantly less for it than the rich, and therefore pay less property taxes.
You ask, In principle do you think taxes should be progressive, flat, or something (?) else?
Actually, this is a tough question for me. I think in terms of levels. Certain things I would dismiss out of hand. For example, any economic belief that goes far, far out of the economic mainstream I simply dismiss. But if you are talking about issues within the mainstream, I am more divided. Granted, I lean right - but I am easily switched, if the data is strong enough (for example, I am probably slightly more Keynesian than my peers).
So flat tax is probably my default. Under a flat tax, the rich already pay more. 10% of a million dollars is alot more than 10% of ten thousand dollars. I haven't seen a strong argument to jump from flat tax to progressive - making the rich pay even more. Jon's "rich benefit from wars, R&D technology, etc" argument isn't strong enough, IMHO. But I also don't think the rich should pay less - they should pay equal to or more than those making less.
Basically, I know what my views are the further you go out of mainstream economics, but alot of the "debatable" points within economics, are still overall debatable in my mind as well - though I certainly lean right.
When Chad was in high school he was not paying property taxes. His Dad was. Also the retired neighbor that doesn't have any kids in school any more. Also the childless family. They all paid taxes that funded the equipment Chad used to excel in sports. Could have been football, basketball, or baseball. Chad was pretty much the star in all three. Seriously could have gotten a scholarship in any. I'm guessing baseball because he was only average height. If he was 6 inches taller he'd probably be in the NBA.
This is not about "more productive". Usually more productive people are paid more. I'm not denying that. What we're discussing is the progressivity of our tax structure, so it's worth considering that these "more productive" people are compensated in a tax free way. Meaning the tax code is less progressive than it would appear.
But I just had a whole post on you and your "economic experts" thing. :) Seriously, that's welcome news. You've made your point about consensus and you will focus more on arguments now. Glad to hear that.
Specific examples of your dependence on the contributions of others? Well, let's start with the obivous ones. You use computers every day. The development was funded by the compulsory contributions of others. Your productivity (and hence your salary) is directly affected by that in a significant way.
I know you work in high tech telecom. Where would you be without satellites and transistors? Transistors were apparently developed by Bell Labs which could tax people through high prices since they were a government sanctioned monopoly.
You like Wal-Mart? You think Wal-Mart has made the world better? Wal-Mart wouldn't exist if the government hadn't developed mass transit. All that technology was developed for the war. The inter state highway system was also developed by the government.
That's not just land based mass transit. Also water based. Or air based. Commercial aviation was entirely developed by the government. You like flying for vacations? You think allowing corporate flights makes companies more productive? Thank the government that created that through compulsory taxation. And by the way shipping container technology wasn't free either. The government did it.
Who enforces immigration laws that keep your salary up? The government. You like the stock market? You think that's a good thing? You getting rich with that? You can't believe how regulated that is. Trading only allowed under certain conditions all enforced by the government. The transparency required to have functional capitalism is mandated and enforced by the government. There is no stock exchange without the government. The very heart of the free market economy relies on the government.
America is prosperous for a number of reasons, but a main one is that we lead the world in high tech. That's because we developed the high tech, as we continue to do today, now with nano-technology, biotechnology, neuroengineering, and other areas. The majority of the R&D done in America from 1950 to the end of the century was publicly funded. And the publicly funded stuff was the stuff that really affected the economy in a fundamental way. The privately funded stuff was more short term.
All of that required taxation. Keeping our children in a country that is on the leading edge of technology will require more of the same. Chad wants to reap the rewards of his ancestors, but not give back so that future generations can enjoy what he now enjoys. I don't agree with that.
Property taxes, on the other hand, are probably more progressive. Poor people generally don't own homes, and if they do, they pay significantly less for it than the rich, and therefore pay less property taxes.
For sake of discussion I'll concede that poor don't generally own homes. May I say then that the poor typicall rent? If so, then I think it safe to say that that their rent includes, albeit indirectly, costs associated with property tax (call it an excise tax?). Note - I accept as a given that the very poor have their housing costs subsidized.
The 2nd half of the quoted statement above is misleading, IMHO. Of course if one owns a more expensive home that person will pay more in property tax. But as far as I know, typically, property tax is a *flat* rate based on the value of the house.
In California, where I think you live, it is a bit different. If I am not mistaken one's property tax remains fixed for the duration of ownership. So if a rich person has lived in a home for a very long time it is quite likely that this person could be paying less than a poor person who recently bought a house. Is this correct?
Not making a call whether this is right or wrong. But at the moment I am skeptical of the claim that capital gains is offset by property tax in terms of progressive vis a vis regressive.
on the following
So flat tax is probably my default. Under a flat tax, the rich already pay more. 10% of a million dollars is alot more than 10% of ten thousand dollars. I haven't seen a strong argument to jump from flat tax to progressive - making the rich pay even more. Jon's "rich benefit from wars, R&D technology, etc" argument isn't strong enough, IMHO. But I also don't think the rich should pay less - they should pay equal to or more than those making less.
My view is different. I look at it very roughly as follows - as a society we want government to do "these things" - whatever "these things" may be. So what is the most effective way of paying for "these things". I think a progressive structure is the most effective way.
We can individually disagree on what "these things" might be. I will go further and say that even if "these things" were *only* the things you want I currently hold that a progressive tax system would still be more beneficial to society as a whole.
Moving on - At the risk of sounding like an idiot w/ regards to the following
But ALSO, the more productive give more back to the community in terms of entrepreneurship, inventions, start ups, jobs,company growth, etc than the less productive.
What does "more productive" mean? Is the CEO of the company where I work more productive than I am? Is the CEO more productive than the migrant worker maintaining the landscape in the community I live in. Is more productive synonymous with wealth? The CEO at the company I work had nothing to do with making it the success that it currently is. The CEO through decision making can affect that going forward; of course, but does this make this person more productive?
The term "productive" seems to be used vaguely. Or at times it feels like it is being used tautologically.
What I mean is the last quote above may as well be saying -
But ALSO, the more productive are those that give more back to the community in terms of entrepreneurship, inventions, start ups, jobs,company growth, etc.
Using the above as the definition of productive: let me say that I want to encourage a whole lot more of this.
Jon,
Your examples fall into three categories:
1. Self-interest exchanges that bettered society. I don't owe anybody anything if it was from their own self interests, after all, they got compensated for the work they did. This is how the free market works, the whole invisible hand thing. Just because their own self interests also happen to make society better off is a plus. If I worked for Intel, and got compensated for what I did, that does NOT also mean you owe me for the computer on your desk. It just doesn't follow.
2. Dubious conclusions. You claim that public transportation, monopolies from the government, R&D development, regulation of stock market etc was a net plus. That's debatable. I have seen very good arguments showing that the government actually impeded growth in those areas. In other words, had the government got out of the way, growth would have been faster and more efficient. Just to give one example, had insider trading been legal, we might have found out about the financial crisis A LOT sooner! Or, R&D has been higher in Europe - but they didn't invent as many technologies. Could it have been because their government R&D lacked a partnership with private companies, like ours did? There is one area where I do agree with you though: military R&D has been a HUGE boom (where the internet, GPS, Satellite, alot of transportation, etc came from). I wouldn't mind throwing a couple extra dollars in that direction. ;-)
3. Points where I agree with you. You are right that immigration restrictions help keep my wages high (this is, btw, your only real valid example, IMHO) . But I am all for more immigration. In fact, I am almost 100% libertarian here, and support near open borders. Which is another reason why I want to restrict the taxes the government takes - I don't support their immoral behavior of artificially blocking potential immigrants.
But I do agree with you that we can't have anarchy. We need a government to do fundamental things like enforce contracts, national security, protect private property, objectively resolve disputes, etc - but again, I am not for 0% taxes. I believe in paying SOME taxes.
One point that I failed to address above is that I specifically link payroll taxes to social-security benefits precisely because they are so closely linked. No other tax is one-to-one with a benefit like payroll tax is to social-security payouts. If you reduce the income tax, for example, that does not necessarily mean that you will reduce military spending. Or R&D. Or etc...but payroll taxes are social-security taxes. So in that specific case, I believe it is fair to look at the two as a whole: and when you do that, the sign switches. A 'regressive tax' actually becomes a progressive tax. Thereby reversing the sign of total taxes.
Think about it this way: if you were a leftist that actually LOVED social-security, you would shout in horror at my suggestion to do away with payroll taxes. Because you know that payroll taxes are closely linked to social-security benefits. So as a whole they are progressive. If you thought of payroll taxes in isolation, you would jump at the chance of removing one of the most regressive taxes around.
Paul,
You are a very incisive commenter. You got me on the rent argument. Very true. Even renting could be seen as paying property taxes...it's included in the price. You also make a valid point that property taxes are essentially flat taxes, making the overall tax not progressive or regressive - but flat. And you are even right with regard to California, a rich person could indeed end up paying less than a poor person with a smaller house, after some time.
Damn. You got me. So yes, you are right, state taxes cannot cancel out capital gains taxes. Capital gains taxes makes the overall tax system more regressive, or atleast, less progressive. Good point!
Regarding your progressive tax argument, again you make a valid point. But a lot hinges on your definition of "most effective way". But let me chew on this for a few days and I'll come back to you.
Regarding productive, I mean it from a companies perspective, like: "brings value to", "increases profits", "breadth of relevant knowledge as it relates to making the company more profitable" etc. Wealth is certainly NOT synonymous with productivity (think of the idiot son of a billionaire), but income certainly is very closely related to productivity. The CEO, as one person, certainly brings more value to the company than say the gardener - and so he is paid more.
Some of Jon's comments make me think about a movie line that is one of my favorites of all time from Varsity Blues. "Your the damn dumbest smart kid I know - you have the kind of smarts that makes me wonder if you know the difference between a sneeze and a wet fart!"
You can tie government to everything in this world if you want to Jon - no one can argue that as being true, but I will argue with you all day long that their involvement - especially in public schools - is unconstitutional, not in their charter to run and is one of the most poorly ran system in the entire world next to other government programs like medicare, social security, military healthcare and well just about every program ever ran by the government.
You want a portion of my money to go to R&D for the government - sure I can live with that, but to crow about gov't spending trillions of dollars to make computers and the internet possible well that is foolish. One of my freinds who read that comment laughed and said - 'Doesn't that fool know that the Military used private minds and people to create those things?" The military simply had the unlimited funds - the brains hire to develop the technology came from the private sector Jon. A point well received - the government may have unlimited funds for R&D, but not the brain power to create these things you tie to the government - when they need something built or made they turn to the leaders in the private sector so carefull with that. The government NEVER makes Jon - it only takes - that will remain true forever. So the truth Jon is that the government stole money from people and then hired private sector brains to develop something for war that happens to be able to work for the public - lets make sure we are clear there.
Your comment about somebody doing my job for 1/50th my pay - maybe, but once again your asking the wrong question - why is that? That is because folks like you artificially drive up the cost of labor, cost of goods, cost of doing business by regulations, taxes, social programs, and so on and on.
You dismiss my opinions because they are unfounded 'dream world' thinking, but is it? We get out here and spar because for me and my friends it is entertaining to see how far left you (Jon) can be - and to see the world through his eyes which by the way is why this country is fractured and dying in our opinion. We are having our good old time - jousting about this stuff, but we are heading for a revolution in this country folks and I am just hoping that it will be a civil split.
Jon continually dismisses my desire to split the country in half and to see which side survives - tells me that is dream stuff and I should come back to the real world, but unfortunately I think my thoughts are closer to reality than Jon's. Several states are quietly positioning themselves to be self sufficient and the word - suceede - is out there. How many states are working toward making gold/silver a monetary standard? Texas is tyring to take over all of their medicaid without any gov't funding? States are suing the Gov't of the healthcare mess. States are creating their own laws, own healthcare, own standards that go against gov't wishes - they are breaking away and at some point I really see the US going through a fundemental split again.
Just heard Senator Rubio and Ayotte who actually covered your topic Jon - they are right on the money here.
http://www.theblaze.com/stories/rubio-we-dont-need-new-taxes-we-need-new-taxpayers/
The Progressive idea tax the rich to cover 10 days of deficit spending while at the same time eliminating more jobs. 9.2% unemployment and rising!
http://www.alec.org/AM/pdf/tax/11rsps/RSPS_4thEdition1.pdf
I haven't done a full on study yet, but this is a telling study. It seems to me the traditionally Conservative States are doing well and the Progressive States are drowning and dying on the vine - wow what a shocker.
HP, you write:
Self-interest exchanges that bettered society. I don't owe anybody anything if it was from their own self interests, after all, they got compensated for the work they did. This is how the free market works, the whole invisible hand thing. Just because their own self interests also happen to make society better off is a plus.
So when the central planning authority tells a group of engineers that they are going to design a car and develop some new technology to do it, and then the buyers enjoy the benefits of that technology and product, you say that this is how the free market works because the engineers were compensated? Maybe I'm misunderstanding you here.
You claim that public transportation, monopolies from the government, R&D development, regulation of stock market etc was a net plus.
No, that's not what I said. You asked me for examples of your dependence on the compulsory contributions of others and I listed them.
Was it a "net plus"? Supposing the government hadn't taken that money and the money would have gone to alternative uses. Would you have been better off in that case? That's a highly speculative argument. I think this is what the right wing is reduced to. Speculative, unfalsifiable arguments in order to salvage their theories. But in any case it's a different argument for a different day. You are today highly dependent on the compulsory contributions of others. That's a fact.
Regarding immigration, sure you think our government should be more free market. Have open borders. I suppose you'd also oppose government R&D spending, protective tariffs for infant industries, restrictions on capital movement. Basically all the things the US did. Things that I would argue led to our present prosperity. What you prefer is the policies that have been in place in Latin America, Haiti, and Africa over the last 30 years. No doubt you like free markets. It happens that you live in a country that radically violated those policies and continues to do so today with immigration restrictions.
Chad,
With regards to what you call "private minds", I think we agree. The government doesn't develop the technologies themselves. They go to private industry and compel them, sometimes through incentives and other times with threats, to do what they regard as important for society as a whole.
The incentives have often involved tax dollars. Especially in the US. Sure, private minds did it. At government direction and with funds the government acquired from the citizens. And it worked out really well. So why are you so critical of government involvement in such things?
Even with regulations and social programs an immigrant would be happy to come here and do it for 1/50th the pay, so what does that have to do with anything? My point is you right now are benefiting from government intervention. The only government intervention you object to is the intervention that helps others, not you.
If you think secession is possible, fine. But talking about how their economies would perform is purely speculative. Why not look at the historical record we have today and learn from it rather than speculating?
I didn't read your 200 page report, but as I understand it the poorest states are the red states. See here:
http://money.cnn.com/2010/09/16/news/economy/Americas_wealthiest_states/index.htm
And as I've said repeatedly, the poorest countries are the countries that strictly adhere to right wing economics. Haiti, Latin America, African countries. The richest are those that violate those same principles with heavy government direction in an economy. Somebody needs to try and prove me wrong here because this is my new bludgeon. Yours is the policy of Africa. We already know it's a failure. Why should we follow the African economic model?
I have also addressed - on multiple occasions - that using these third wolrd countries is like comparing the Yankees to the Bluestreaks just because they both play baseball.
Quote form Wiki - Recent data suggest some parts of the continent are experiencing faster growth. The World Bank reports the economy of Sub-Saharan African countries grew at rates that match global rates.[3][4] The economies of the fastest growing African nations experienced growth significantly above the global average rates. The top nations in 2007 include Mauritania with growth at 19.8%, Angola at 17.6%, Sudan at 9.6%, Mozambique at 7.9% and Malawi at 7.8%.[5] Many international agencies are gaining increasing interest in emerging modernizing African economies,[6] especially as Africa continues to maintain high economic growth despite current global economic recession.[7]
Nearly 1 Billion people and 25 out of the 54 nations are some of the poorest places in the world. Those cities/areas in Africa embracing free market capitalism are growing by leaps and bounds.
Your keyhole views are just that - taking the smallest sample possible to try and prove your side, but ain't working.
http://en.wikipedia.org/wiki/Economy_of_Africa
I like that you are finally trying to justify your claims with evidence.
So let's be clear though. You think Africa has the right economic policies. You think they are the model for economic development. You think embracing free market capitalism since 1980 has proved to be really great for them. That's what you're saying, right?
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