The economy and taxes
markin ball
Posts: 1,075
From Slate:
Feel free to critique or discuss or anything else.
Tax Fraud
Debunking the claim that higher income-tax rates reduce GDP.
By Eliot Spitzer|Posted Tuesday, Feb. 23, 2010, at 3:39 PM ET
The American debate over taxes is ferocious and highly partisan. Some, mostly Republicans, reflexively oppose all taxes. Others, mostly Democrats, decry the lack of progressivity and fairness in the tax system and favor higher tax rates for the wealthy.
This debate isn't new. The same arguments have been repeated, with the same passion, since our income tax system was created—first during the Civil War and then—after its initial rejection by the Supreme Court—following the ratification of the 16th Amendment in 1913. A wonderful book by Steven Weisman, The Great Tax Wars, brings this history to life.
Advertisement
But as Weisman makes clear, one thing has changed in a spectacular manner, and that is the American public's—and American politicians'—willingness to defend high marginal income-tax rates as an essential and proper way to pay for the cost of government. Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity. Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.
Leaders of a century ago invoked justice in remarkable language that is unimaginable today. President Woodrow Wilson called paying taxes "a glorious privilege." Supreme Court Justice Oliver Wendell Holmes Jr. observed that "taxes are what we pay for civilized society." In 1942, President Franklin Roosevelt said, "In this time of grave national danger, when all excess income should go to win the war; no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000." That $25,000 is the equivalent of $323,208 in today's dollars. Can you conceive of a modern president suggesting that no American should earn more than $323,000 after taxes? (President George W. Bush went to war twice without once calling for such a common sacrifice to pay for it.) And President Harry Truman in 1948 vetoed a broad-based tax cut, even in the face of an expected and eventual congressional override, and then asked for a tax increase following his upset victory.
But President Ronald Reagan transformed our conversation about government and turned taxes into the enemy of progress. It is commonly thought that President George H.W. Bush's violation of his "read my lips" pledge cost him re-election and President Bill Clinton's 1993 tax increases cost him control of Congress.
Central to the intellectual debate about marginal tax rates has been the question of whether higher rates discourage people from working. President Reagan is famously reported to have observed that, as an actor, once he hit the top marginal rate—then 91 percent—he stopped making movies for the rest of the year. The result of sky-high marginal rates, this anecdote was supposed to prove, was declining productivity and economic growth.
Is this true? Let's look at a graph of the nominal top marginal tax rate in any given year and GDP growth in that year.
A caveat—obvious but critical—is in order. Simultaneity does not equal causation. Annual growth rates are a consequence of many factors, macro and micro, and the isolated impact of marginal tax rates on growth is hard, if not impossible, to discern from these numbers alone.
That said, it's obvious that there is no correlation between higher marginal tax rates and slowing economic activity. During the period 1951-63, when marginal rates were at their peak—91 percent or 92 percent—the American economy boomed, growing at an average annual rate of 3.71 percent. The fact that the marginal rates were what would today be viewed as essentially confiscatory did not cause economic cataclysm—just the opposite. And during the past seven years, during which we reduced the top marginal rate to 35 percent, average growth was a more meager 1.71 percent.
More sophisticated efforts to analyze this relationship also produce decidedly murky results. An excellent review of this in the Yale Law Journal, "Why Tax the Rich? Efficiency, Equity, and Progressive Taxation," concludes that there is scant, if any, legitimate academic support for the proposition that moderate, as opposed to dramatic, increases in marginal rates have any impact on the willingness of the wealthy to participate in the economy.
So where does this leave us? Probably with Weisman's conclusion—that the debate between justice and virtue will continue for years to come. But this debate may be little more than a Rorschach test—an inkblot into which we read our underlying values about income distribution and social welfare. Those who see taxes as the bane of progress will still claim that higher marginal rates are the enemy of economic growth. Those who favor greater progressivity will say there is no evidence of such a claim. They will conclude—and they will be right—that the wealthier can afford to pay more, with no harm to the nation's economic growth.
Feel free to critique or discuss or anything else.
Tax Fraud
Debunking the claim that higher income-tax rates reduce GDP.
By Eliot Spitzer|Posted Tuesday, Feb. 23, 2010, at 3:39 PM ET
The American debate over taxes is ferocious and highly partisan. Some, mostly Republicans, reflexively oppose all taxes. Others, mostly Democrats, decry the lack of progressivity and fairness in the tax system and favor higher tax rates for the wealthy.
This debate isn't new. The same arguments have been repeated, with the same passion, since our income tax system was created—first during the Civil War and then—after its initial rejection by the Supreme Court—following the ratification of the 16th Amendment in 1913. A wonderful book by Steven Weisman, The Great Tax Wars, brings this history to life.
Advertisement
But as Weisman makes clear, one thing has changed in a spectacular manner, and that is the American public's—and American politicians'—willingness to defend high marginal income-tax rates as an essential and proper way to pay for the cost of government. Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity. Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.
Leaders of a century ago invoked justice in remarkable language that is unimaginable today. President Woodrow Wilson called paying taxes "a glorious privilege." Supreme Court Justice Oliver Wendell Holmes Jr. observed that "taxes are what we pay for civilized society." In 1942, President Franklin Roosevelt said, "In this time of grave national danger, when all excess income should go to win the war; no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000." That $25,000 is the equivalent of $323,208 in today's dollars. Can you conceive of a modern president suggesting that no American should earn more than $323,000 after taxes? (President George W. Bush went to war twice without once calling for such a common sacrifice to pay for it.) And President Harry Truman in 1948 vetoed a broad-based tax cut, even in the face of an expected and eventual congressional override, and then asked for a tax increase following his upset victory.
But President Ronald Reagan transformed our conversation about government and turned taxes into the enemy of progress. It is commonly thought that President George H.W. Bush's violation of his "read my lips" pledge cost him re-election and President Bill Clinton's 1993 tax increases cost him control of Congress.
Central to the intellectual debate about marginal tax rates has been the question of whether higher rates discourage people from working. President Reagan is famously reported to have observed that, as an actor, once he hit the top marginal rate—then 91 percent—he stopped making movies for the rest of the year. The result of sky-high marginal rates, this anecdote was supposed to prove, was declining productivity and economic growth.
Is this true? Let's look at a graph of the nominal top marginal tax rate in any given year and GDP growth in that year.
A caveat—obvious but critical—is in order. Simultaneity does not equal causation. Annual growth rates are a consequence of many factors, macro and micro, and the isolated impact of marginal tax rates on growth is hard, if not impossible, to discern from these numbers alone.
That said, it's obvious that there is no correlation between higher marginal tax rates and slowing economic activity. During the period 1951-63, when marginal rates were at their peak—91 percent or 92 percent—the American economy boomed, growing at an average annual rate of 3.71 percent. The fact that the marginal rates were what would today be viewed as essentially confiscatory did not cause economic cataclysm—just the opposite. And during the past seven years, during which we reduced the top marginal rate to 35 percent, average growth was a more meager 1.71 percent.
More sophisticated efforts to analyze this relationship also produce decidedly murky results. An excellent review of this in the Yale Law Journal, "Why Tax the Rich? Efficiency, Equity, and Progressive Taxation," concludes that there is scant, if any, legitimate academic support for the proposition that moderate, as opposed to dramatic, increases in marginal rates have any impact on the willingness of the wealthy to participate in the economy.
So where does this leave us? Probably with Weisman's conclusion—that the debate between justice and virtue will continue for years to come. But this debate may be little more than a Rorschach test—an inkblot into which we read our underlying values about income distribution and social welfare. Those who see taxes as the bane of progress will still claim that higher marginal rates are the enemy of economic growth. Those who favor greater progressivity will say there is no evidence of such a claim. They will conclude—and they will be right—that the wealthier can afford to pay more, with no harm to the nation's economic growth.
"First they ignore you, then they ridicule you, then they fight you, then you win ."
"With our thoughts we make the world"
"With our thoughts we make the world"
Post edited by Unknown User on
0
Comments
You all need schooled!
A man that stands for nothing....will fall for anything!
All people need to do more on every level!
"Mr. Madison, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul."
That is fantastic.
as a biz owner works ... perhaps it is not a trickle at all...
When the economy is doing well, people are working, have money to buy and travel,
in turn I have more work coming in.
When businesses have functions, conventions, celebrations, I have more work
and then my vendors sell me supplies providing more money for them.
When I make more money, we are busy, I can hire more people and raise their wages.
They can then go out and spend more cash.
What the really large corporations do is set the tone for business and the economy.
They are a gauge and instill confidence for others to expand. They also employ a
mind boggling amount of people who then feel secure in their jobs, buy houses, cars,
take vacations.
It's more like a big circle then a stinky trickle
More like the circle of life
That sounds like "trickle up" economics get's it started. Your scenario started with people that have more disposable income, which then they disposed to you and other businesses, which then allows for the growth of "Pandora's Printing Shoppe" and the other businesses.
"With our thoughts we make the world"
You're right, Markin, Pandora just described the opposite of trickle-down economics. What he stated is a great theory, unfortunately, it is a theory espoused by Democrats and reasonable Republicans and NOT by the silly nonsense that is trickle-down economics. Trickle down economics (supported by constant obstructionism) is what we have at the current moment. How is that working?
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
that's about as hard to envision as 17 trillion ...
but I get it
I think JB would have something to say about 'Pandora's Print Shop' though
there has not been much trickle up going on and if more available growing cash
is going towards taxes the trickle is gonna dry up entirely.
Whats wrong with this picture?
More taxes, more deficit, more spending, more unemployed, more on aid, more taxes,
more deficit, more spending, more unemployed, more on aid, more taxes, more deficit,
more spending, more unemployed, more on aid.
That's a bad bad circle of life, one where the working joe, be he a biz owner or not,
pays the price.