Tuesday, August 16, 2011

Article about taxing the rich

Togheter with Arvid Malm I write an article about taxing high income individuals in The American, the magazine of The American Enterprise Institute.

Because they are already blessed, taxing the rich is a more equitable and socially less painful way to collect revenue. The flaw in the populist welfare state is however that the rich are also few, and already taxed high, so raising their taxes taxing doesn’t bring in enormous amounts of revenue. Furthermore, in well functioning economies high income individuals also tend to be productive, so taxing them hurts output.


  1. I ran a quick spreadsheet on Buffett's numbers and, assuming absolutely no other change, an added .15 on the 1mm to 10mm group and a .2 increase in rate on the over 10mm (I assumed a top of around 50m), would net just about 200 billion. Not going to go a long way toward dealing with the problems of the US budget. I've supported this notion, mostly to get people to shut up and start paying attention to real problems. I also know it would probably never really get clear as legislation. At least I think this whole thing is "politics as usual. Enjoy your Blog! Keep it up.

  2. Though a mere comedian, Jon Stewart does a pretty good job skewering your first "false premise". Just because letting the tax break for the rich expire doesn't solve the deficit problem by itself, doesn't mean it can't be a part of the solution. In fact, if we close some additional tax loopholes that the rich often take advantage of (such as low rates on capital gains), then it's another small step towards addressing the deficit problem.

    On your second false premise, your Clinton years analysis doesn't show that the higher tax rate inhibited economic output - it just says it's not clear what led to that output. And your plea to save the "entrepreneurial" class doesn't really skewer the second premise either (which is not to say that we should ignore entrepreneurs) - it just says that taxing entrepreneurs has an impact (though no data is cited, but I won't argue).

    To say that more taxes inhibit economic output, is only half the story (otherwise, why have _any_ taxes). Federal spending can also help economic output (besides reducing risk and ensuring a more level playing field). Obviously there's a balance that needs to be struck with taxes and spending. I'm not sure what the right level is, but this article doesn't really provide an overwhelming reason why taxing the rich more is a net loss for the country.

    Moreover, it seems this whole debate between cuts and taxes is a distraction for why our deficits are and will continue to grow - rising health care costs (refer to http://www.cepr.net/documents/publications/IOUSA%20Not%20OK.pdf). This is something your conservative friends (Dems and Repubs) have conveniently ignored.

  3. Refer to last night's Daily Show (the one with Anne Hathaway) for what I'm talking about in my prior comment.

  4. Chuga:

    The problem is constantly giving the impression that taxing the rich is a central part of it.

    In the clip I refer to Stewart did not say it was a “small” step, he gave the impression through various manipulations that the problem went away.

    As a viewer, do you have any clip of Stewart explaining to his audience that Obama’s plan to tax the rich is about one fifteenth of the current deficit (and less of the future one)?

    As an educator of liberal youth, he should do that, don’t you think? He certainly talks about taxing the rich a lot. Why not explain the relative magnitude?

    You know and I know that his viwers are left with the impression that it is much more money than 0.4% of GDP.

    “your Clinton years analysis doesn't show that the higher tax rate inhibited economic output”

    You misunderstand. I wrote nothing about the Clinton years “show”ing anything. On the contrary I criticize using one period as evidence of taxes not mattering.

    You are right about public health care inflation as the biggest threat to the budget.


    Buffet talk about capital gains taxes. The CBO calculates that going back to Clinton capital gains taxes *and* divident taxes for *everyone* - rich and middle class both - would generate about $80 billion per year the next five year.


    Again, these are attempts to divert attention towards populist rounding errors, instead of discussing serious matters and hard choices.

  5. In the episode from last night that I referred to Jon does a better job of describing the relative impact of taxing the rich a bit more. Nevertheless, I think you're holding a comedian to too high of a standard. And, also not giving his audience enough credit. Daily Show watchers are not ditto-heads or Glen Beck watchers. Still, Jon is far humbler than most real news folks. I'm not saying he doesn't sometimes deserve criticism - but it's a sad indictment of real news folks that he's your target. He's a frickin' comedian.

  6. "I think you're holding a comedian to too high of a standard."

    He is not just a comedian. Millions of young liberals relying on him as their main source of news and commentary. Stewart is one of the two three most imporant liberals in the U.S. If a comedian decides to make his show mostly about politics and news, he has a responsibility to be informative.

  7. chunga,

    I have little respect for Jon Stewart, he is the Glenn Beck of the left. The Clinton years were interesting, to be honest I think just about anyone could have been president then and come out okay as far as the economy goes. However if you look back to the Clinton years as a legislative method to creating wealth and balancing the budget then you are going to come in sorely disappointed. The truth is that increasing taxes does not fix the problem, heck it barely makes a dent in the problem of the deficits so why is it SUCH A BIG DEAL on the left? The other problem that people seem to forget is just how large the Government between Federal, State and Local portions have become. It is expected that these various entities will pay close to a combined $6.2 Trillion in Government Services. This is close to $53,000 per household.

    The point I am trying to make here is do you feel you are getting $53,000 worth of service from your government each year?

    I personally have an ideological problem with progressive taxes. I believe that property is one of the rights Government should uphold as sacred, and that in the management of government when one group, whether they can afford it or not, is treated differently than another you create a divide along the lines of receiving things for themselves or having other pay more while they themselves pay less.

    The problem is this belief has little to do with a fiscal revenue side and more to do with the, I have seen the way people act' side. Stewart is a great example of this, inciting people to attempt to fix a problem through a poorly thought out campaign of 'equity' which does little if anything to create equality and more to do with create a false premise of fixing' things.

    Anyway I also get upset that you hide Stewart behind the concept of 'comedian' when you use him in order to attempt to make a 'political' point. Either he knows enough to have a conversant voice in the conversation or he is a comedian and unworthy of being listened to on fiscal and political matters. Also I feel that someone who makes a living ridiculing others rather than coming up with substantive arguments does rate more on the 'comedian' scale.

  8. With money so tight for everyone right now it would be nice if they could come up with a better way to balance the budget--actually cut spending etc. rather than put the burden on tax payers.

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