(Hemera)
People in the very upper tail of earnings distribution have seen their incomes rise far more rapidly than even the well-off folks in the top decile. That makes it hard to argue against President Obama’s proposed tax on millionaires, which just restores some progressivity to the tax structure. Nonetheless, we’ve seen arguments against it on grounds that it will reduce job creation (presumably because the rich have a higher marginal propensity to save than others). I’m always amazed at how concerned rich people and their apologists are about job creation (although their concerns are loudest at times when proposals are made to raise their taxes). It reminds me of arguments that got the short-lived tax on yachts in the 1990s repealed.
I don’t believe most macroeconomic arguments; but if one wants to argue on macro grounds, at a time of sluggish demand, if you want to balance budgets surely taxes should be raised on those with high propensities to save (arguably the well-to-do) and reduced on the rest of society, so as to stimulate consumer demand. You can’t have macro arguments both ways!
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I don’t really understand this. Since when did savings stop being about capital formation? The question is, are small businesses likely to reduce their plans to hire and invest if their taxes and expected taxes are higher? I also don’t see how you can say the issue is not about demand, since when small business hire and invest that means demand for goods. I’m quite puzzled at this point.
even a flat rate income tax would be progressive because those that earn more would pay more. what we have now is a massively progressive income tax. so your desire to “restore progressivity” is laughable. this fanatical focus on rates drives me crazy. warren buffett and obama have been making this point repeatedly…but the fact is even if the “millionaires and billionaires” were taxed at the same RATE as the secretaries, they would still be paying a lot more in actual dollars.
Hot debate. What do you think?
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Tax savings? Worst. Idea. Ever.
Here’s a clue: you can’t spend your way to prosperity.
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There are a mess of assumptions in Hamermesh’s snippet. First is that the wealthy are saving at a high comparative rate – they get the money and then don’t spend it at the same rate that mid/low income people spend money. Second is that the savings of the wealthy aren’t providing jobs. Third is that the taxes would decrease the amount of savings, but not spending (at least not significantly). Finally that the use of the taxes would stimulate jobs more than the mixture of spending and saving that the wealthy are doing now.
I’m embarrassed to share a common name with Hamermesh.
The first is pretty accurate – wealthy do save at a higher rate than lower income groups.
The next couple assumptions are ass-backwards.
Savings are an integral and extremely necessary part of the economy, and provide the basis for loans in the economy. Those loans help the economy grow. With all the recent action of the Fed aimed at lowering interest rates to encourage loans, does it make sense to try to decrease the savings which form the basis of those loans?
Granted, the decrease in raw savings would not be particularly impressive, but neither would the tax revenue increase from the higher taxes. An extra $100bn isn’t going to be much more than a drop in the bucket. Moving a $100bn out of savings by the wealthy over the course of 10 years won’t affect the ease of loans any, but neither will it affect anything in the government. However, if tax rates on the wealthy were to be high enough to start seriously affecting government revenues, the effect on savings would also start to become significant.
Next, raising taxes on the wealthy by a significant margin won’t just affect their saving rates, but also their spending rates. Spending (consumption) is one of those things that we’re trying to get going in this economy, not limit.
Example: Wealthy save 50% and spend 50% of their income. (nice round numbers) Let’s say taxes are raised by 15% on the wealthy. Their savings AND spending will drop by approx 15%. If the taxes grab $100bn/year, that is $50bn less saving and $50bn less consumption.
Then we have to look at how effective taxes are at stimulating the economy. Wow. I’m not even going to bother with that one. Taxes don’t boost the economy. If they did, we could tax everything at 95% and have a rip-roaring economy!
I can’t imagine what Hamermesh was thinking. Probably he just doesn’t.
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“I’m always amazed at how concerned rich people and their apologists are about job creation”
Businesses are not morally or economically obligated to create jobs. When businesses grow, jobs are created as result. It is not the RICH PEOPLE’s duty to create jobs, but it’s rather government’s to allow an environment for the RICH PEOPLE to invest and grow their businesses so that jobs are created along the way.
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You don’t believe most macroeconomic arguments? Arguments or theories? And which ones? Since you don’t believe most, which ones do you believe, and why? Anyone can have an economic argument, but having a logical discussion, based on theories or emperical evidence (which theories should be based on) is an entirely different animal.
I have no problem with taxing the wealthy but the latest proposals are nothing but politics and demagoguery.
The president keeps saying he is going after “millionaires and billionaires” and seeks to stir up the mobs to violent reactions. His actual proposals heavily tax people who are not close to being millionaires and billionaires” but he keeps silent on that.
When Hitler had problems, he blamed the Jews in order to distract people from who was really causing the problems and to give them someone to hate. Obama is playing the same game–give the mobs a group to hate and distract attention from his failed policies.
Hot debate. What do you think?
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http://en.wikipedia.org/wiki/Godwin's_law
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Accusing the President of stirring up mobs to violent reactions AND a comparison to Adolf Hitler? Did you leave out the statement that you take the President at his word that he was born here (you know, to complete the trifecta) ?
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“People in the very upper tail of earnings distribution have seen their incomes rise far more rapidly than even the well-off folks in the top decile.”
It’s not technically correct to say that the “people” at the top have seen their incomes rise more rapidly, unless you’re looking at the same people across the relevant time period, because that group is highly fluid (as is the top 10%, top 1%, etc.). It’s NOT the same “people” year after year. For example, Table 4 here (http://www.irs.gov/pub/irs-soi/07intop400.pdf) shows that there were 3,472 different filers in the top 400 by AGI from 1992-2007. Only 0.2% (7 filers) were in it every year; 72.4% were only in the top 400 once, another 12.2% were only in it twice.