Taxes

No, Economists Don't Agree a 70 Percent Top Marginal Tax Rate Is a Good Idea

Sorry, Alexandria Ocasio-Cortez and Paul Krugman.

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|||Douliery Olivier/ABACA/Newscom
Douliery Olivier/ABACA/Newscom

Economic commentators Matt Yglesias, Paul Krugman, and Noah Smith believe Rep. Alexandria Ocasio-Cortez's (D–N.Y.) call for a 60 to 70 percent top marginal income tax rate is uncontroversial. According to all three, the New York Democrat's proposal simply reflects the consensus of mainstream economics.

Their argument rests on two historical factoids. The first is that the rich paid higher taxes in the 1950s, and the economy grew just fine. The second "fact" is that an array of economists, from Nobel Prize winner Peter Diamond, to Thomas Piketty and Emmanuel Saez, have produced peer-reviewed research showing combined marginal rates as high as 70 to 80 percent are "optimal."

But dig into these three papers, and you'll find the results reflect philosophy as much as economics. These economists think they can plan the distribution of income to maximize "social welfare." But they arrive at the decision to impose extremely high top marginal tax rates because they uniformly decide to put almost zero weight on the welfare of the rich.

That means the sole aim of this cluster of economists is to maximize revenue collected from high earners in order to transfer to others. Presuming we could design a tax system from scratch that eliminates the possibility of people avoiding taxes or hiding or reclassifying income, they estimate the single combined marginal tax rate that would generate maximum revenue to "soak the rich." Incorporating other wishful thinking about how the rich respond to taxes, these economists wind up calculating that the "optimal" top tax rate is about 70 percent, if you are also willing to imagine closing off special treatment for capital gains and the possibility of incorporation.

The astute reader can probably see some problems with extrapolating from this theoretical calculation.

First, what if one thinks the welfare of the rich is actually an important policy consideration? According to a paper by Jonathan Gruber and Emmanuel Saez, if we instead pursued a "compassionate conservative" agenda—caring about the very poor a bit more than others in society, but everyone else equally, the optimal top rate might be as low as 30 percent. If we were philosophically opposed to redistribution altogether, the optimal rate tumbles to 3 percent. What counts as optimal varies tremendously based on the philosophical assumptions the economist starts with.

Second, what if we were not able to redesign the tax code to eliminate avoidance? A 73 percent rate, the optimal rate calculated by Diamond and Saez in 2011, is a combined rate (not just a marginal federal income tax rate, as Ocasio-Cortez seems to be proposing) that assumes we eliminate all deductions and exemptions. If we presume instead that the current deductions and exemptions continue, and high earners were as responsive to tax rates today as they were in the '80s, then the supposed optimal combined tax rate falls to 54 percent. After state, local, sales, and other taxes are taken into account, this translates to a top federal income tax rate of 48 percent—much higher than today's rate of 37 percent, but nowhere near the 60 to 70 percent rate advocated by Ocasio-Cortez. (Also notable: Phil Magness and Nick Gillespie have shown, very few people actually paid the highest rates in the 1950s, precisely because deductions and exemptions existed that these economists assume we'd be able to abolish.)

Third, these sorts of analyses tend to focus on (a) the very short-term, and (b) what to do with income after it's been produced. They do not ask why we receive income in a market economy. (Answer: because we produce something someone else wants or needs, generating consumer surplus.) The idea that the value of rich people to the rest of society solely rests on their tax contributions, as Krugman implies, is bizarre. In fact, the risk that higher tax rates might deter entrepreneurial activity by reducing the future payoff to innovation should worry us greatly. The economist Charles Jones thinks that incorporating this effect into the model might lower the optimal tax rate to 28 percent, simply because innovations—think Uber, Amazon—deliver huge gains to everyone.

This all might seem technical and theoretical, but it matters. Most of the venerated papers that seem to support super high tax rates for top earners assume we share progressive preferences, that we can implement a new wholly combined tax system (or hike other taxes) to eliminate the possibility of any form of tax planning, and that these huge tax hikes won't have longer term effects on growth or human capital accumulation.

Given all this, Krugman, Yglesias, and Smith could easily have said, "There's a progressive case, grounded in economics, for major tax reform, eliminating all deductions, and having one single progressive tax with very high rates, especially on top earners." But they could instead have said, "There's a progressive case, grounded in economics, for modestly higher top tax rates within the current code." But they cannot claim simultaneously that Ocasio-Cortez's big idea merely echoes the 1950s and that her recommendation is backed up by these economists.

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  1. They just going to pretend that tax revenue didn’t go up last year with lower rates?

    1. They aren’t talking to us.

    2. It didn’t though. Even if you fail to account for population and GDP growth, It didn’t even beat inflation

      1. [citation needed]

      2. That’s the point dumbass – because of the lower taxes, 2018 GDP is going to come at something over 3%.

        1. I think we are talking Federal Revenue not GDP (which is slightly above four year Obama trend. Lower rates don’t yield more revenue, they produce less. I’d be glad to be proven wrong, but it seems like a pretty simple concept to me.

          1. Lower rates tend to yield more activity. More activity leads to hire earnings which then produces more tax revenue.

            You’ve never heard the old saying “if you want more of something, tax it less”?

          2. I think the Laffer curve thing is a pretty sound theory. If you don’t know what that is, google it.

            The only real question is WHERE is the point where it changes, AKA where is maximum revenue in terms of tax rates. Nobody really knows. Not to mention is probably changes, as tax laws change abroad, changing incentives to leave, and methods available for tax avoidance.

            But in principle there is some optimum point, and it ain’t 99.9%.

            Not to mention the morality of stealing saaay 70, 80, 90% of peoples income, even if it DID bring in more total revenue.

            1. That’s not how marginal tax rates work. Let’s assume AOC’s proposal were enacted. If you make, say, $15 million dollars in a year, only the top $5 mil is taxed at 70%. The first $10 mil would be taxed according to each lower bracket as it fills up with income. That works out to a combined functional tax rate just under 40%.

              I don’t buy Laffer’s rationale at all. If you’re heavily taxed and want to maintain a certain lifestyle or status, why wouldn’t you continue working to earn more money? I certainly don’t buy it that 35% is the sweet spot. He’s WAY undershooting that curve of his.

        2. 2018 real GDP growth over 3%?

          We will see at the end of the 1st quarter when we get the 3rd estimate of 4th quarter real GDP (assuming the shutdown doesn’t continue because the BEA is currently part of the shutdown).

          But I would bet the under on 3% growth.

      3. Hello. My name is Magnitogorsk and I’m bad at math and see my fellow Americans as tax slaves, rather than free men to use their own income as they see fit.

        1. You realize that the vast majority of Americans would pay the same rates as before, right?

    3. [citation needed]

      1. The first thing that came up on a DuckDuckGo search.
        http://www.thebalance.com/current-u-s…..ue-3305762

      2. Excellent idea, and I don’t mind if I do. Heck, I can get it wrong just like the “experts” or those pushed to publish to get tenure [having no other cause to form a sentence]. I think… the aggregate of statements coughed up by the Occasional Cortex are so woefully lacking in understanding of economics that her alma mater ought to write her an invitation: appear in front of an academic review board or her diploma gets rescinded. A determination of whether or not there was fraud on her part needs to happen for the sake of the institutions reputation.
        There. Now you have something to cite.

    4. Can we just agree on two things?

      1. AOC is a fucking idiot, and her economic ideas are batshit stupid.

      2. We all would like to see her dance around brakes in a t shirt again. Maybe a wet t shirt.

      I think many of us could bond over that.

      1. Your ideas are intriguing to me and I wish to subscribe to your newsletter.

        1. Even better ‘brakes’ should have been ‘braless’.

        2. Looks like a consensus has been reached by experts in the field. The debate is over – a moderately attractive socialist ignoramus dancing braless in a (possibly moistened) T-shirt is the only solution that serious people are discussing.

          As an aside, I now see why they use the rhetoric they do: It’s pretty fun to pretend that your opinions, no matter how asinine and/or arbitrary, are backed by everyone who matters.

        3. Careful, the pages of every issue arrive stuck together.

      2. I”m with Reason about a third of the time but they usually get their facts straight. Mr. Shitlord gives Libertarians a bad name by not enjoying braless women. Sorry I can’t agree to your to simple bigoted statements.

      3. Her eyes are quite goofy, so yes: she probably should bend over.

      4. Also, this should be the go to file photo for AOC going forward.

        https://goo.gl/images/BXkYbh

        1. She’s the second photo. It is SFW, but the bikini photo of the first girl might come off as sexist, albeit awesome.

      5. I just want to see her get gang banged by a bunch of guys dressed like Stalin, Lenin, Mao, Che, Fidel, etc. Dancing ain’t cuttin’ it!

        But yeah, her economic policies are fantasy land nonsense… Let’s just hope they don’t get put into law in 10 years when the demographics have shifted that much more.

    5. Correct. In DC, tax revenues don’t actually matter: it’s spending that gets folded into GDP numbers, and as long as treasury is able to borrow money, revenues may or may not rise to the level of a talking point. That’s why neither wing of the uniparty gives a whit about deficits, and the tax code is now a tool of pure political manipulation that is not really concerned with funding the government – just getting money to churn the right way for maximizing campaign contributions. It will stay that way until they blow up the bond market and trash the dollar. They know where they are going, which is why they forced the reporting of all foreign bank accounts some time ago on all returns filed: they need to be able to see bleeding when it occurs, spot key leverage points, and notify all their friends in high places so they can sell on top/get rich off the implosion. The lesson of the great depression is not lost on them: those with cash scooped up big assets for mere fractions of their former valuations.

  2. Didn’t work, doesn’t work, won’t work.

    1. The thing is that they know that. That is what I don’t get. They know it will kill the economy and that they will collect more money to pursue their progressive dreams with lower tax rates. But, they don’t care. They value the pleasure of exacting revenge and taking the money more than they do from spending it as crazy as that sounds.

      It is like the regulatory state. Progressives are forever pissing and moaning about how there isn’t enough money for all of the entitlements they want. If we scaled back the regulatory state and got rid of the drag it puts on the economy, there wouldn’t be enough money to satisfy them because there never is but there would be a whole hell of a lot more than there is with the regulatory state. But, they would never agree to even a little bit of regulatory reform no matter how much more tax money it gave them to spend.

      1. >>> That is what I don’t get.

        it’s where i diverge from giving a fuck because the scam-ola the Electeds run on us perpetuates regardless the program they push

      2. They value the pleasure of exacting revenge and taking the money more than they do from spending it as crazy as that sounds.

        Using the power one seizes is quite the aphrodisiac, I suppose.

      3. I don’t understand this easier. I understand lots of control-freakery, such as banning booze, porn, dancing, books. I do not understand destroying the economy to make everybody equally poor, when they know that is the outcome.

        1. It’s all about power and personal wealth for the politicians. They don’t care about the economy. They only care about winning elections so that they can wield more power, and gain more personal wealth. The more stuff they promise to the masses, the more votes they can get from those who stand to benefit.

          1. I believe Hugo Chavez wrote the latest edition on that very program. And he got that exact result.

          2. Combined with a bit of hubris, thinking that they’re smart enough to make it work, or work “enough” to lick the can down the road past their lifetime. Comrade Sanders falls in this camp.

          3. Even Stalin and Mao thought they were boosting their economies. These clowns know otherwise.

          4. this ^^^

        2. But that is the goal. Government and cronies stay rich, the slaves go poor. Cuba, Venezuela, etc. that is the goal. Poor and unarmed people are easier to control.

      4. When you think that taxes only exist as a punitive measure and that there’s no limit to deficit spending, you get this kind of insanity.

      5. The people who know it are using the rhetoric for political purposes. As long as it doesn’t actually have to be implemented, they’re OK with it.

      6. No, they don’t know that. They SHOULD, but they don’t. The are instead living in a fantasy world where causality is based on intentions. Their tax plans will work because of good intentions.

    2. Don’t be so negative. You see, it works like this: A poor person needs an additional dollar 10 times more than Joe One-Percent needs it. Therefore, taking a dollar from Joe One-Percent and giving it to a poor person creates 9 dollars in value!

      1. You think you are joking Ray but I have seen people take the marginal value of money and the diminishing returns of having it to make exactly that argument. It is terrifying.

      2. Look, Joe One-Percent is just going to put the money in his swimming pool of riches so that money isn’t going to do anything for the economy. The Poor Person will immediately spend that money adding to GDP and then that money (that went to owner Jane One Percent) will be taken from Jane One-Percent to give to Poor Person2 adding MORE to GDP and so on and so on until…Profit (social profit that is).

        Sadly, this one sided calculation is taken as serious economics.

        1. Hey now! It takes a LOT of gold coins and jewels to fill Scrooge McDuck’s vault so he can swim in it.

        2. Ironically, though, as we have seen from a commenter above, we can cancel out the effect by normalizing over the GDP…

  3. One of the many flawed assumptions these people make is that rich people will just pay the 70% and not take measures to avoid the taxes. They just assume people are going to go to work and happily pay 70% of their earnings to the government and make no effort to avoid the taxes. This is of course absurd. Rich people have means and the majority of their income is discretionary. They don’t live paycheck to paycheck. So, they have the ability to move their money to places, both geographic and financial, where it won’t be taxed or will be taxed less. They also have the ability to just not bother to make the money in the first place or leave the country entirely. So the whole debate about a “70% tax rate” is nothing but an absurdity, because there is no such thing as a 70% tax rate. You can have such a rate, but it will never be collected in any meaningful way. It will just cause people to change their behaviors.

    1. Another flawed assumption is that rich people are all born rich. Many are not; they became rich by taking risks and a lot of purposeful hard work. But who would bother doing that if the feds were just going to steal what is earned? It’s just like companies that deliberately stay below 50 employees so that various regulations, taxes, etc. don’t kick in.

    2. Every single one of these leftist shitbags that screams for higher taxes hires expensive accounting firms to make sure they don’t pay it. And I read the trades for the entertainment industry. Hollywood is always pleading poverty that they can’t afford to shoot tv and movies in CA unless they fpget big tax breaks. The kind they begrudge anyone else.

      1. John Kerry and The Kennedys didn’t. Maybe.

    3. MIT’s Peter Diamond and Berkeley’s Emmanuel Saez relaunched this debate with a landmark 2012 paper that argued for a 73 percent top income tax rate in the United States.

      This conclusion relies on two subsidiary points. One is the notion that for the very rich, the subjective value of an extra dollar is essentially $0. In other words, while a poor person’s life may get a lot better if he gets a little bit of extra money, someone like Mark Zuckerberg isn’t going to care at all.

      1. This conclusion relies on two subsidiary points. One is the notion that for the very rich, the subjective value of an extra dollar is essentially $0. In other words, while a poor person’s life may get a lot better if he gets a little bit of extra money, someone like Mark Zuckerberg isn’t going to care at all.

        How can anyone be so stupid and ignorant of human nature to believe that? No one that stupid or dishonest enough to claim they believe that should be employed as an econmist at any institution.

        1. This is why if you hire people, you should develop an anti-qualification list. For example, based on the knowledge of major fields in recent graduates from Boston U. A resume with that degree listed automatically goes to file 13.

          So a degree from Boston U. is an anti-qualification that negates any other qualifications listed.

          1. Same with Evergreen college. I would never hire anyone who graduated that hippie traitor school.

    4. Plus most of their wealth is not in incomes. Some very rich professionals, sure. But typically their wealth is in investments and stuff, which are not taxed as income.

      Which is why the 50s got away with such high tax rates. Because no one was paying them.

      1. “Rich”, “wealthy”, “high income” are related but not equivalent. It’s no different than the relationship but different measure provided by an income statement and a balance sheet.

        What I hate about news and pols that deal in class warfare like this is how they use these three concepts interchangeably. And, the stupid public eats it up.

        You don’t tax wealth via an income tax.

  4. Raising the upper tax rates increases the incentive to avoid paying taxes. That will make tax lawyers and creative accountants happy. I don’t see that as an overall economic gain.

    1. Like I say above, it is a make believe debate, since those tax rates will never actually be paid.

      1. Even if they are, the tax revenues won’t be.

  5. We Koch / Reason libertarians need to keep in mind that democratic socialists like AOC agree with us on our most important issue ? unlimited, unrestricted immigration. Until Drumpf has been removed from office, infighting over minor economic disagreements is counterproductive. The progressive / libertarian alliance needs to stay focused on its main goal. Taxes and minimum wages are far down the list of priorities with a literal white nationalist as President.

    #LibertariansForAOC
    #OpenTheBordersTHENArgueAboutTaxes

    1. This may be your best effort yet.

      1. I like it when Rev. Arty has conversations with him. Hilarious.

        1. I suppose it would be. Hard to imagine actually, that is a lot of delusion, dishonesty, stupidity and ego to light off.

          1. He really is a drooling idiot.

      2. And at that, it’s pretty damned pathetic

    2. You know you’re really hitting it when someone expresses outrage toward you.

      In the beginning, I did this myself until an amicable commentor tood me aside and explained.

    3. That’s not the most important issue.

    4. Poe’s Law.

    5. God’s work

    6. Minor economic disagreements?

      Maybe to you but……………………………..

      The elephant in the middle of the room is what the proper role of government is. And there is no common ground on that.

      Letting them use taxes as a punitive measure in their war on the upper economic classes is akin to letting the camel get his nose under the tent.

  6. She good at talking, but does she have a plan?

    Talking about what you can do is not really meaningful except to rally like minded people. Writing legislation to make it a reality is much more difficult.

    1. She had no plan. But she is a millenial. Millenials don’t do plans or things that are hard and require work and delayed gratification. She said it herself “morals are more important than facts”.

      1. My daughters are Millenials. Thankfully they are by no means stupid as is this woman, for whom morality [aka “good intentions”] overshadows any notion of fact or accuracy or even logic. I suppose anyone who disagrees is “factsplaining.”

        1. Watching this dumb bitch makes me think I should run for Congress. I think an ‘exile the progtards’ platform could sell in a whole lot of districts.

        2. Single or nah?

    2. “She’s good at dancing, but does she have a plan?”

      1. She could be conditioned. Webcam girls have a way of raising tips using a vibrator device that is strapped to them. Every time a patron tips, the device sends a burst of vibrations through her. The idea being enough tips will get her to orgasm on cam.

        The same principle can be applied here. AOC talks about economics. Whenever she advocates for lower taxes and free markets she is rewarded with a burst of pleasure. No reward for leftist rhetoric. Ayne even a painful shock collar punishing her for that.

        It’s worth a try.

  7. I should not have to repeat this:
    In a free and honest transaction between two parties, both end up with more value after the transaction. This is self-evident; I want that shirt more than I want the $20, and the seller wants the $20 more than the shirt. We are both better off. The nearly constant trading in a modern, relatively free society is the reason we’re all better off than we were sometime in the past; it’s what makes us wealthy.
    In a coerced transaction, at least one, and possibly both agents end up worse off; those transactions lower humanity’s wealth. Taxes are of this sort and while some may be necessary, more simply makes us all worse off than before.

    1. Someone had a study on how much of innovation’s rewards actually went to the entrepenuer. I don’t remember the details. It went something like figuring out how much $$$ was saved from buying a new product (say, iPhones) and how much the entrepenuer (Steve Jobs) earned. It was a remarkably low commission, so to speak, 1% or 3% I think.

      Every time I read about outrage over some CEO getting a $100M bonus, very little digging shows it well worth it to the share holders, who are the only people being “robbed” by the high pay. If a company has 100M shares outstanding and the CEO raises the price by $1, there’s the bonus. Every $ after that is gravy to the share holders.

      And if the company hired new employees, even more people benefited, such as the new workers who presumably got a pay raise compared to their previous jobs, and the current workers whose pay also presumably became more valuable because increased demand == increased price.

      1. “Every time I read about outrage over some CEO getting a $100M bonus, very little digging shows it well worth it to the share holders, who are the only people being “robbed” by the high pay. If a company has 100M shares outstanding and the CEO raises the price by $1, there’s the bonus. Every $ after that is gravy to the share holders.
        And if the company hired new employees, even more people benefited, such as the new workers who presumably got a pay raise compared to their previous jobs, and the current workers whose pay also presumably became more valuable because increased demand == increased price.”

        Mark Benioff (Sales Force) lead the push to get a new SF tax passed to attract more bums; the tax is ‘only’ on companies of a certain size, and he made the claim the companies were paying the tax.
        Liar? Incompetent?

  8. The purpose of the 70% rate is not to raise revenue, but to punish the wealthy for being wealthy.

    1. And to appeal to her base of low information voters.

    2. The actual wealthy (those with lots of assets) will avoid all of this, just like they did before.

      The idea is a tax on becoming wealthy. It limits new entrance into the ranks of the wealthy.

      1. This is the reality. It’s a barrier to entry.

        1. And they still like to say, “the rich get richer” as they help them do so by erecting such barriers.

          1. Leftists always scapegoat. And to great effect. Stalin, Hitler, Pol Pot, Mao, Obama…….

            It helps obfuscate their core incompetency.

    3. I saw something that stated that since WWII, federal tax revenues have always been around 17%. Regardless of the rate.

      1. Since WWII, income tax revenues have never been higher than 10 percent of GDP or below 6 percent of GDP, and generally hover very close to 8% regardless of the top rate.

        http://www.cato.org/blog/tax-r…..s-part-one

        1. Income taxes are only part of total federal tax revenues.

      2. The Jacket and Ms. De Rugy did a number of articles on that years and years ago (like 2009 I think).

    4. We’re toing to have to do some very unlibertarian things to fight for our freedom soon. People like AOC aren’t going away and won’t stop trying to get their way. Further, their attempts are more lawless and aggressive over time.

      The question we all need to ask ourselves is: how much is my freedom worth? More than the physical well being, or even life of the slavers trying to take it?

      The founders thought so.

      1. “”People like AOC aren’t going away and won’t stop trying to get their way.”‘

        Maybe.

        I think people thought that of the Tea Party. It was largely a thud after the initial euphoria wore off. I expect excitement about the far left will die down when it’s proven they can’t deliver on their rhetoric.

        1. But this is coming from billionaires (Smith writes for Bloomberg) who are increasingly pushing state run capitalism..the China model.

        2. Are we talking about the recent moniker or the original occurrence in Boston Harbor?

    5. The hidden downside is that it also acts as a disincentive to ordinary people to try harder. What’s the point, if the net effect is that you are going to get taxed more? This is not illusory: Years ago I turned down a “raise” because it would have moved me into a higher tax bracket, meaning that I would have less take-home pay. These games are truly punishing to anyone who has not yet worked themselves into a position where they can play hide the salami with the ordinary income they make.

  9. …they uniformly decide to put almost zero weight on the welfare of the rich.

    It’s a good thing Reason Magazine is around to shill for the likes of the Koch brothers (hat tip: OpenBordersLiberal-tarian) so they don’t risk having a bad night sleep on smaller piles of cash they made off the backs of the 99%.

    1. Good Grief! I never thought FoE would stoop to plagiarism, especially from OBL.

      1. But that is in fact exactly what he did.

      2. Jeannette Pickering Rankin (June 11, 1880 ? May 18, 1973) was an American politician and women’s rights advocate, and the first woman to hold federal office in the United States. She was elected to the U.S. House of Representatives from Montana in 1916, and again in 1940.

      3. It’s not plagiarism if you credit your source.

    2. “they made off the backs of the 99%”

      Heh.

  10. We also had segregated water fountains and no women in Congress in the 50’s.

    1. Don’t know about the 1950s (but I bet there were women in Congress then) but there certainly was at least one woman in Congress in 1941: Jeanette Rankin, who voted against the declaration of war against Japan.

    2. Those were the days, my friend…

    3. Really, we shouldn’t have women in congress. The 19th amendment is America’s greatest mistake and will go away eventually in one of two ways:

      1. Women continue to vote for massive wealth transfers killing the economy and open borders allowing for the invasion of our country, resulting in the fall of our country and the re-imposition of an oppressive feudal system.
      2. Men realize 1. will happen because of the 19th amendment, so wisely repeal it.

      1. Really, we shouldn’t have women in congress.

        We shouldn’t have anyone in Congress. Just keep the seats empty.

      2. My father like to say, “The worst thing we ever did was give women the right to vote and driver’s licenses”.

        In my day, it was, “Keep them barefoot and pregnant”.

        What do you youngsters say now?

        1. May I touch you there?

          1. What about now?

  11. Advocates of this also conveniently leave out that even under totally static revenue projections, it wouldn’t come remotely close to funding the agenda they want. There’s a reason why European countries with large welfare states have 20-30% VATs and their high income tax brackets that kick in at middle class levels. But it’s politically much more convenient to promise all this stuff and only talk about taxing the rich when asked about funding it.

  12. The first is that the rich paid higher taxes in the 1950s, and the economy grew just fine.

    I’ll refer to that as the Laugher Curve.

  13. I think it would be safe to say that economists have disagreed since the study of economics started. Benjamin Franklin note that “in this world nothing can be said to be certain, except death and taxes”. But his writing also suggest he thought about taxes and how they should work. It is worth noting that Americans have never liked taxation. Our anger at British taxation, Boston Tea Party 1773, was quickly replaced with anger at the new US government, Whiskey Rebellion 1791. That anger continues to this day.

    What I like about Representative Ocasio-Cortez’s suggestion is that it brings back progressive tax rates into the discussion. I don’t know that I would go with a 70% top tax rate but I think it is worth discussing.

    1. “What I like about Representative Ocasio-Cortez’s suggestion is that it brings back progressive tax rates into the discussion. I don’t know that I would go with a 70% top tax rate but I think it is worth discussing.”

      Fuck off, slaver.

    2. Mod, why would you want to discuss something so execrable, other than to condemn it? On what basis do you presume to take nearly everything produced by another? Are you just an unabashed thief?

    3. Tax rates are already progressive. There is no one with any political power that seriously wants to go to a completely flat tax. If you want what’s economically best as opposed to childishly punishing the rich for being rich, the question is *how* progressive.

      On a related note, there is an optimal point in tax overall rates where the maximum revenue is obtained. Less taxation results in less revenue. More taxation results in less revenue. The optimal point is also constantly shifting. Since we don’t really know what that point is, it’s better overall to err on the side of less taxation that more, since too much taxation has many more negative side effects than too little taxation.

      1. While we have a progressive tax system there have been claims of “simplifying” by reducing the number of rate brackets. I don’t consider this simplification because rates are merely math and today most of the tax math is done by computers. I would argue for more rate brackets with the goal of reaching your “optimal point”. I like to see a bracket for very low earners that taxed at a very low rate. In this way they would pay a small tax and have skin in the game. Larger earnings would pay higher rates. I think its fair that I being successful now pay more than young people starting in their careers. This gives them a chance to get where I am now.

        1. Income taxes are inherently complex simply because there are so many ways to define income.

          Too often in these discussions we fall into the myopic view of thinking of income as box 1 on a W-2 form. And even that is a falsehood when you consider all the non-taxable, fringe benefits that some receive and others don’t.

          Throw in income from a self-employed individual and complexities in regards to “fairness” really start to rise.

        2. You have that now.

  14. But she’s cute and the media loves her! I LOVE HER!

    1. I think she would be fun on a date, and almost certainly an E ticket ride in the sack, but she’s pretty stupid and shouldn’t have a say in important things.

      1. Sadly, this is true. She’s just so darned charming, that she makes Marxism seem fun. Even the firing squads look more inviting.

        1. I think she would make sex a lot of fun. She should stick to that.

          1. I think you need a real girlfriend

            1. True. Right now, I only have one bang buddy, and she has a busy schedule. My other one got a boyfriend amd is off the menu currently.

  15. Economists that want to bed AOC believe 70 percent tax rates are a good idea.

    Sometimes you have to change your beliefs to achieve your goals.

  16. Yglesias is a morally deficient and intellectual degenerate retard.

    I really couldn’t care less what that asshole thinks.

    1. This is the guy who, on Twitter, defended a group of thugs who wanted to seriously harm or murder Tucker Carlson’s family

      1. Precisely.

  17. Re 1950s. How many people actually paid those rates?

    Krugman. He’s another one. Didn’t he say the economy was going to tank when Orange Man Bad took office?

    I fear what these numbskulls are doing is fusing economics and VALUE JUDGMENTS.

    Two different things and will never work unless – TA DA! – you take full control of the economy. The *market* is just people interacting daily. The virtues and vices that play into those voluntary actions get managed by invisible hands and enforced by existing laws and regulations. You can’t do more than that to manage human nature.

  18. The debate over “soak the rich” continues because participants simply do not understand the US Individual Income Tax. Sadly, I hear all the time from people who should know better that they believe most of the rich have to pay income tax.
    Jonathon Hoenig, the self described “Capitalist Pig” probably has to pay income tax, because he is a hedge fund manager, and his job requires a special federal license. Don’t like it Jonathon? Then lobby to have the federal license requirement removed, and open up your trade to full competition , ie remove the anti free market privilege you profit from.
    Ever since the first income tax was passed in 1862, the tax was laid on government workers, their pensions and investments. The income tax is one of many excise taxes in Title 26. The other excise taxes are on the manufacture and distribution of commodities like alcoholic beverages, gasoline, etc etc. There is no mention of liability for a general tax on all that comes in for American workers, why? it would be unconstitutional to do so. Such a tax would violate the rule that direct taxes have to be apportioned among the States.
    Since 2003 tens of thousands of Americans have received full refunds of all withheld taxes, State and Federal, including payroll taxes, by standing up for the rule of law and filing educated tax return. See http://www.losthorizons.com.

    1. Warren Buffet isn’t helping either.

      Cui bono??

      He’d sell insurance for it.

    2. “Since 2003 tens of thousands of Americans have received full refunds of all withheld taxes, State and Federal, including payroll taxes, by standing up for the rule of law and filing educated tax return.”

      You’re full of shit.

  19. I guess the funniest thing about this is that the deep blue progressive states are the ones law suiting the SALT deduction elimination. Question..do deep blue progressives love taxes or hate taxes?

    1. do deep blue progressives love taxes or hate taxes?

      Both. Love taxes for others. Hate taxes for themselves.

      1. Exactly.

        Same is true of so many progressive demands.

        I worked in public transit for more than 20 years. As an exec. Virtually everyone supports public transit. They want more of it. But, they don’t plan to use it. They want everyone else to use it because they think their own private transportation will then be unrestricted by all of those others.

        Newsome, our new Gov, is already talking about “excellent health care for all” and a “Marshall plan for housing”. The standard prog visions of nirvana. But at the same time, they absolutely believe it can all be financed off the backs of “the rich” and evil corporations.

        None are so blind as those who will not see.

  20. Guys please, Socialism is the ticket to prosperity just ask Mar?a Gabriela Ch?vez ,Bernie Sanders or Fidel Castro’s grandson. It’s even more lucrative than Climate Change which itself is no small change. It’s hard on the toilet paper and food industry though.

  21. The idea that the value of rich people to the rest of society solely rests on their tax contributions, as Krugman implies, is bizarre.

    The assumed idea that poor people inherently turn unearned wealth into something of greater value is pretty equally bizarre.

    1. Yes. Certainly there are others on this forum that are old enough to remember the wonderful, housing projects of the 1960s and 70’s and how that all worked out.

      People place little value in that which they receive without having to work for it. Thus, they treat it like they don’t care.

  22. Well, there seems to be some controversy about the proposed 70% tax rate.
    I have an idea.
    The IRS will test this tax rate on all the proggies out there for the next 100 years, and we’ll see how that works out for them.
    Then a judgment will be made accordingly.
    That seems fair to me.

    1. I say something similar about gun control laws.

  23. When has reality ever interfered with ideology?

  24. If this wasn’t the era where Trump is an even bigger threat than socialism, I would use stronger language.

    BUT, I really wish that we could get beyond the simplistic world of Keynesian economics. If we where to tax the wealthy at an exorbitant rate, would that money ever be collected? NO. It really galls me that Krugman won a Nobel Prize…one of the most banal thinkers of the past century and a half. And, well, Ocasio-Cortez, she surely is cute. Seriously, I do like her energy…it just needs to be pointed in a better direction.

    1. How about a rocket ship to Neptune?

      1. Elon! Is that you?

    2. Is missionary a direction?

      1. Is there a missionary on Neptune?

      2. I’m pretty sure reverse cowgirl is a direction!

    3. “And, well, Ocasio-Cortez, she surely is cute.”

      Never stick it in crazy.

      1. Urban Dictionary: “A relatively recent but perennially true maxim, advising one to refrain from sexual congress with the unbalanced.”

  25. Economists do not get to decide the “optimal” tax rate for anyone but themselves. My optimal tax rate is zero. Anything above zero involves theft. Economists who support increases in taxation based on their “calculations” should be called by other names, none of which are very nice.

    1. Economists by their very nature are state supported – academia. (Are there any private sector “economists”?)

      So there might be more than a little self interest in their calculations providing a larger piece of economic activity to their employer.

  26. ” But they arrive at the decision to impose extremely high top marginal tax rates because they uniformly decide to put almost zero weight on the welfare of the rich.”

    I think that’s actually the honest way to start the analysis. View the rich and their resources as a resource to milk. How much can you squeeze out of them?

    But think long term. You want to squeeze and squeeze and squeeze, not just make a bonfire of all societal stored value at once.

    High marginal rates on income promotes all sort of distorted economics. Also holding out on realizing gains until a favorable, low tax administration comes into power. You want them to *make* money. Then *take* that money from them. But let’s not be commies and kill the goose that lays the golden eggs.

    I think it’s likely the best long term squeezing is by a wealth tax and not a profits tax. For tradeable corporations, print new shares of stock for the Gov and they sell them as they get them.

    Switzerland has a wealth tax. A tax on net worth, 0.3 to 0.5 percent. They seem to be doing quite well.

    1. Florida looks better all of the time:

      https://tinyurl.com/yb7urmyv

      Too bad I hate humidity.

      1. Not to mention hurricanes. And flying cockroaches

  27. Arguing what the optimal tax rate should be is pointless. It doesn’t matter what the tax rate for poor people is. You could take 100% of their income and make nothing. It also doesn’t matter what the tax rate of rich people is, the wealthy will always find ways to obscure or redirect their wealth so they appear to be as poor as they would like to be when the tax man arrives.

    A modest proposal: If you ask me the optimal solution is a head tax. It doesn’t matter how much income you have. Every person gets charged a flat amount. No more worrying about trying to figure out how much you earned and who is benefiting from which piles of money. You can fire almost the whole IRS and a good chunk of the SEC and CBP. What’s that? The average American couldn’t afford to pay the tens of thousands of dollars that their “fair share” comes to? With a head tax and a balanced budget requirement you’d see wasteful spending disappear in a nanosecond. People might start wondering whether America needs to pay farmers not to grow crops or whether replacing a third world dictator with another third world dictator is a good use of their money when they see a few dollars added to their yearly bill. Some elderly person might even be struck by the absurdity of their social security and medicare benefits being less than the percentage of their invoice dedicated to those things and wonder how such a thing is possible.

    1. Other benefits: Opposition to “those dirty messicans sneaking into our country to steal our welfare” would go away instantly. People who couldn’t afford to come to the US just wouldn’t, and I guarantee you there’d be people going to Central America and trying to recruit them to move to the US to take on a share of the tax burden.

      It sounds brutal and inhumane. How can we ask the homeless to pay tens of thousands of dollars they don’t have? But perhaps the question isn’t where people will get enough money to buy a piece of America but why a piece of America is so expensive that people cannot afford it.

    2. “…the wealthy will always find ways to obscure or redirect their wealth so they appear to be as poor as they would like to be when the tax man arrives….”

      That hypocrite Buffett pays himself only $100K in ‘income’ and the left swoons.

      1. Nah Warren Buffett paid $1.85 million.

        While that seems low there are two reasons. Most of that is capital gains and dividends which are taxed at a lower rate.

        Also it has nothing to do with net worth. If you buy a stock you don’t pay taxes on the gains until you sell it. Almost all his money is tied up in investments. For all he is worth he only took around $11 million in income.

        Most of us suckers are stuck with just earned income so we pay at a higher rate than investment income.

        1. Echospinner|1.10.19 @ 11:16PM|#
          “Nah Warren Buffett paid $1.85 million.”

          You missed the point. Buffett’s ‘salary’ is $100K:
          “Berkshire Hathaway pays Warren Buffett a $100,000 annual salary, technically speaking.” https://www.investopedia.com/ask/
          answers/020915/what-warren-buffetts
          -annual-salary-berkshire-hathaway.asp

          And he keeps it that low while complaining the tax rates are too low.

  28. Actual facts:

    We are already at “70%”, in that the top 20% of US households pays 70% of all individual federal taxes, including payroll taxes (2016 CBO report on 2013 data). To the other 80%, “You’re welcome”.

    In those fabulous golden 1950’s, the top marginal rate, on paper at least, was 80 to 90%, about double the top rate today. But in the 50’s, all the brackets, including the lowest, had tax rates about double today, and kicked in at lower income levels (adjusted for inflation). So everybody paid more, and more of the citizens had net positive tax bills. And in that same era, much less spending went towards social welfare and redistribution.

    Personal opinion:

    We seem to be on a convergence of unholy trends, with fewer people paying for government, and more of government spending for redistribution. Hearing Occasional-Cortex and progtard economists calling for 70% tax rates (or more) does not surprise.

    1. Actual facts – US Average Income, 2015:
      Top .1% = 6,747,439
      Top 1% = 1,363,977
      Top 5% = 477,293
      Top 10% = 312,526
      Bottom 90% = 34,074

  29. I’d take the 1950’s tax rate if we also reduced the size of the federal government to 1950s levels.

    How many regulations have been passed since then? How many new departments? How many new social programs?

    If the GOP had a brain in their head they’d be countering with talks about the above excellent properties of the 1950’s.

    Except they have no interest in reducing the federal government…

    1. “I’d take the 1950’s tax rate if we also reduced the size of the federal government to 1950s levels.”

      And all the 1950s deductions and exemptions…

      Today’s government is spending about $1T more than it did just 10 years ago. What exactly, pray tell, are we getting for $1T more government, especially since almost all of that “war spending” from 10 years ago is done?

      1. We get the pleasure of seeing cronies and proxies of the assholes in congress richly rewarded for stealing from us. Thanks in large part to democrat voters and spineless RINO collaborators.

      2. What is causing federal spending to be higher than in earlier years?

        The biggest increases in spending are in Social Security, Medicare and Medicaid for senior citizens (i.e. nursing homes), plus interest on the federal debt. About 10,000 citizens a day turn 65. Unless we abandon the promises we made to these senior citizens we can’t bring spending back to 1950’s levels.

  30. The correct answer is all laws apply to all people equally. Progressive taxation is discrimination

  31. Having been a federal contract worker during the Obama shutdown, they are exactly right. While the civil servants have a nice vacation with backpay, federal contract workers (who do most of the actual work) were not getting paid.

    My problem with the shutdown is that it’s an utter waste of money. The civil servants are getting paid, and we aren’t getting the benefits of their working. It’s a lose-lose situation.

  32. The first point is eminently fair, but the second two aren’t nearly as forceful.

    Clearly if you don’t eliminate deductions/exemptions the theoretical framework won’t be the same. As a practical matter, that might mean you can’t get the reforms “done” but it doesn’t real have any weight as an argument against her theory.

    Finally, while I agree that the value of the very rich is not “just” their tax contributions, the entire analysis of the third section confuses business and personal income and is largely speculative regardless. The depression of entrepreneurship based on market concentration (particularly in high fixed cost markets) and income disparity is probably a far greater threat to entrepreneurship rates than depressed income rates at the highest levels. Sure, you want a carrot at the end for innovators, but typically their emergence is from the bottom of the market, not the top, so preserving past innovators won’t change the rates and theoretically, having a higher floor for smaller entrepreneurs can boost entrepreneurship rates just as easily as creating a lower ceiling can restrict it. Even if you don’t want the government at the controls, how wealth is distributed in a market matters.

  33. The subheading on this site should tell you all you need to know: This site is for free marketeers. This means they don’t know shit about economics. 99.7% of economists are only mind-fucked with neoliberal bullshit economics, which means they don’t know shit about economics. Their heads are filled with lies, distortions, and fantasies of a time that never existed. Every thing this site has to say about economics should be viewed as suspicious.

    1. veritas loquitur|1.10.19 @ 12:02PM|#
      “…Every thing this site has to say about economics should be viewed as suspicious.”

      Fucking lefty ignoramus shows up

    2. I talked to an economics major, who was a senior in uni awhile ago… I basically know more about economics than he does. Somebody graduating from a “good” university. It’s ridiculous. On the up side, I may have turned him onto some awesome stuff, because he seemed genuinely interested in some of the concept and authors we talked about. He wasn’t a dumb kid, it was just that what they taught him was all garbage. Maybe I inspired the next great Austrian school economist!

  34. God I fucking hate that commie, crazy eyed bitch, of course if she were to steal seventy percent of the top earners income they would find a way not to be robbed, if they make it impossible they’ll just move their wealth out of the country, dipwad Krugman has been wrong most of the time and he is never held to account, I wish that stupid motherfucker would choke to death on his ratty beard.

  35. Hmm… back when there was a 70%+ marginal tax rate, wasn’t the percentage of GDP that was federal spending around 15-17%? Might that have had something to do with the relative strength of the economy? Also, recall, that disincentivizing taking income like that is what led to the “Rust Belt”.

    1. YUP. And the deductions were ridiculous. You could basically write off everything under the sun, including the kitchen sink! So effective rates were very comparable to what people pay today.

  36. You can find an economist to support any point of view.

    Libertarians have certain perspectives based on principles about individual rights, and the role of government.

    The Soviets and Marxists had economists too. They were not less intelligent, they were not lying, they thought they had the answers.

    History proved them wrong.

    We may not get libertopia but I think we matter more than we think and in the future the world will be more like it than it is now.

    1. You’re a lot more optimistic than I am.

      In the western world we’ve just been heading farther and farther left for over a century. The trend has only been accelerating lately. I hope you’re right, but if you are we’re going to need a dramatic reversal of some sort to get things going that direction.

  37. I don’t like this article because it implicitly admits that there might be beneficial to society if the tax rate were something above 0%, which we all know is bunk. Who fucking hired this socialist asshole to write for Reason. Geesch. IF YOU SUPPORT ANY KIND OF INCOME TAX OR SOCIAL SECURITY YOU ARE PART OF THE PROBLEM, MOOCHING LEECH!

    1. The social security system is garbage, but the people who paid in should get money back out of it.

  38. If we end up with tax rates ANYTHING close to that, I will actually finally leave this fucking country. I’m no billionaire, but I own businesses, and produce economic value. I WILL NOT stay here and put up with that shit. It’s already on the edge as it is, but if my combined tax rates end up at 60-70%, I am gone.

    Even Scandinavian countries have lower taxes than that, AND are at least more efficiently administered socialist hell holes. When moving to Sweden will REDUCE your taxes, you know something has gone VERY wrong!

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  40. To paraphrase Dillinger, “Politicians tax the rich because that’s where the money is”.

    They don’t think much beyond that.

  41. Arguably, the revenue maximizing marginal tax rate is somewhere around 60-70%. Probably close to 70% in the short run and 60% in the longer run as people adjust to the higher rates.

    But a revenue maximizing rate is not necessarily an optimal rate. There is a loss of economic activity as that revenue maximizing rate is approached. Less economic activity translates to fewer jobs. Krugman, et al, appear to ignore this effect when they label the revenue maximizing rate as “optimal.”

    As we approach an era of deficits greater than $1 trillion in a strong economy, a good case could be made for additional revenue. Perhaps a top federal rate of 40-50% on ALL INCOME (including capital gains, dividends, carried interest, etc.) above a certain level ($1 million, $2 million, $5 million, $10 million, ?) would be a good way to raise the revenue necessary to bring down the deficit and fully fund the Social Security and Medicare Trust Funds.

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  44. Pause. When do you stop to ask yourself whether human capital accumulation is even a worthy goal?

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