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Lane Kenworthy's blog
I’m a social scientist who studies causes and consequences of poverty, inequality, employment, mobility, economic growth, and social policy. I focus mainly on the United States and other affluent countries.
Find it here. Posting isn't frequent, but so far all the posts are interesting. Here is Lane's research.
Posted by Tyler Cowen on January 15, 2008 at 07:49 AM in Web/Tech | Permalink
Comments
"...One reason is that it would be fairer. In the 1950s the top marginal income tax rate was 90%, and it was 70% as recently as 1980. These days the top rate is only 35%."
If you are the type of person capable of thinking a 90% top rate is "fair," (whatever they mean by "fair") then of course you are the type of person who will think that for no other reason than the top rates appear lower now than they have been in the past, they should be raised.
"The effective rate is lower now than it was in the late 1970s and in the mid-1990s."
I'd say this is true but misleading in implication. The data shows that the rate was trending down until the late 70s and then has pretty much stabilized, but of course there is fluctuation. Come again why it would be "fairer" just to return to cherry-picked historical values?
"Some...argue that...Taxation should be proportional rather than progressive. Not many people seem to share this view, however."
Appeal to the majority view isn't very convincing, nor is it very informative that the majority believe in some progressiveness. In fact, this would be consistent with an analysis based on self-interest. So, the middle of the bell curve wants the upper tail to cough it up. To not do so would require a specific morality (taxes shouldn't be purely punitive), a subtle rationality (rich folks tend to invest in OUR future), or a long-range perspective (I might be rich some day) tempering that self-interest.
"A second rationale for higher taxes on the most well-to-do is that it would increase government revenues, which could be used to help improve opportunity and outcomes for those less fortunate."
So, what is interesting, new or informative about this? This sounds like the basic liberal POV in a nutshell. Of course, they don't get that money taken from the "well-to-do" goes from the private sector to the public sector. I don't understand why it is so obvious that the money to "improve opportunity" should come from those who have proven that they have been very prudent with the capital they have been allowed to keep in the past to give it to an institution that is objectively innefficient at allocating capital. I understand why this follows for a socialist, but not to any reasonable people. Would it be used to "improve opportunity and outcomes"? More than the alternative, of leaving it where it is where it might be invested at a higher ROI and produce on the job training more-efficient jobs rather than make-work jobs and unfocused training?
"The taxes paid by those at the top matter a great deal for government finances."
One person might conclude that the rich (aka productive) already pay a lot in taxes. This guy concludes that the government is hurt by letting them keep more of their income than they otherwise might...worldview.
"an effective tax rate of 30-40% is hardly confiscatory
Oh yeah? Easy for him to say. 30% of a million bucks is $300K. I shouldn't even have to make this argument, there is a moral component. But we'll start from the point that it's perfectly okay for the gov't to take an arbitrary amount. Will the government or an individual allocate this capital more efficiently? It depends whose opinion we weight highly. The person who made the money, or the government, or the voter.
Here's the summary of his post:
"I believe the RICH should pay more. I ignore that they made this money somehow, maybe by being very smart about how they allocate their human or financial capital. I ignore that their future allocation of capital may create better opportunities than the governmnt. I reject the moral component of taxation. I reject the concept that taxes should be used to pay for services that one uses. I appeal to the authority of the majority. I set up the strawman of the Laffer curve, so I can argue that higher taxes result in higher government revenues. I use wide variability in GDP to "prove" no correlation between who is allocating capital and the return on that capital. I think drastic tax changes from one year to the next should reveal drastic and immediate GDP changes if such a correlation existed. I neglect that tax rates are often changed counter-cyclically and that these changes span more than one year. I ignore that the "effective" tax rate didn't reduce significantly until 1980 and then random variation ensued. I restrict my charts to the latter period and use a lack of statistical significance to prove statistical insignificance."
"This evidence is by no means conclusive."
Something I agree with! But I had to paste it out of context to get there.
I don't mind reading folks who disagree with me. But I don't need to read the sites obviously written for people who don't want their worldview challenged. Time is scarce.
Posted by: Andrew at Jan 15, 2008 10:06:23 AM
Yes, the graph is quite a joke. Good attempt at controlling for other factors ;)
Posted by: Cliff at Jan 15, 2008 11:49:44 AM
When I was reading this paper of his from 1990, it made me think of this from Timur Kuran.
Posted by: TGGP at Jan 15, 2008 5:38:22 PM
@Andrew: Why do you post your criticism here? Kind of wasting our time, is it not?
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