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« Good eats downtown | Main | To be Frank »

May 25, 2011

Comments

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Andrew Brod

It's interesting that Frog makes this distinction between the "productive class," whom Republicans allegedly defend and Democrats allegedly victimize because it's income--not wealth--that's taxed. The Democrats are, in Frog's view, on the side of the poor, who don't have much income to tax, and the very wealthy, who have untaxed wealth rather than a lot of income.

Like nearly everything Frog says, this is wrong. The wealthy have plenty of stocks and other instruments that aren't tax-protected. But they do have protection from tax, namely the Republicans. Wealth is great, but it's useless unless it can be converted into income. Wealth doesn't buy yachts or hire the help; income does. When conversion into income happens, the capital-gains tax is there, ready and waiting to take its share. It's been a cause celebre of the Republicans to keep that tax rate low, on the argument that taxing income from wealth at the same rate as income from labor would harm investment blah blah blah.

Most economists believe the tax system should distort incentives as little as possible (zero distortion is impossible), and this principle implies raising the capital-gains tax closer to the level of income tax. If it were left to the Democrats, that's precisely what would happen.

So the latest amphibian inaccuracy is that the Democrats are the darlings of the very wealthy, when in fact it's the Republicans who defend the very wealthy's right to pay taxes at a lower rate.

Roch101
Me: "however periods of increasing federal income taxes in the United States correlate to periods of declining poverty and vice versa."

Polifrog: "The bit in bold above are your words and they are indeed wishful thinking, as they contradict reality."


Reality is not what you say it is, polifrog, it has an objective meaning unaffected your faulty assumptions. Let us look at the empirical reality of two recent periods.

1983 - 1989
------------
Average effective tax rates: rose from 20.4 to 21.5
Persons living in poverty: declined from 35,303,000 to 31,528,000

1992 - 2000
------------
Average effective tax rates: rose from 21.5 to 23.1
Persons living in poverty: declined from 38,014,000 to 31,581,000

(Source, source)

I cannot make this any more plain, polifrog. If you insist on arguing that facts are fantasy and your make believe is reality, I can do no more to illustrate your folly.

Bubba

"I believe he likes the nice things the productive class pay for."

Perhaps he actually believes he's a member of the productive class.

Ed Cone

Bob, I think the evidence (including the chart linked in the post) shows conclusively that cutting taxes past a certain point reduces revenue, and we're well past that point.

I'm arguing for what I think is necessary to put the country on sound financial footing, given the political and social realities that make massive entitlement cuts unlikely.

Frog, I'm not sure whom you would include and exclude from your definition of "the productive class," but surely there are many people who do not make a ton of money or control great wealth who are, nonetheless, productive people.

Billy Jones

Do any of you have jobs?

Ed Cone

Billy, I got today off, but Elijah had to work. One of my happiest moments as a father.

Bubba

"Bob, I think the evidence (including the chart linked in the post) shows conclusively that cutting taxes past a certain point reduces revenue, and we're well past that point."

Even if that was true, I think the evidence would show we're nowhere near that "certain point", as usually defined by the "progressive" agenda.

Ed Cone

No, the chart indicates that we're past the threshold -- these tax cuts resulted in massive deficits.

Noting that reality is not part of an agenda, progressive or otherwise, just math.

What we do about it obviously involves politics. My guess is that major entitlement cuts won't happen.

Andrew Brod

Bubba's right that the evidence doesn't show it... if we close our eyes really hard and pretend with all our might that the plain data are wrong.

I swear, the most effective trait of his ilk is looking the rest of us straight in the eye and stating the opposite of what is actually true. It's nefarious, but it's a skill.

polifrog

Roch101

Let us look at the empirical reality of two recent periods.

1983 - 1989
------------
Average effective tax rates: rose from 20.4 to 21.5
Persons living in poverty: declined from 35,303,000 to 31,528,000

1992 - 2000
------------
Average effective tax rates: rose from 21.5 to 23.1
Persons living in poverty: declined from 38,014,000 to 31,581,000

What you are pointing to are two indirect measurements that result from a single source (an expanding economy) and claiming a false correlation.

Tax rates are more likely to rise under an expanding economy as the citizenry is more capable of absorbing them.

And the number of poor are more likely to drop during periods of expansion.

It is as if you are pointing to swollen rivers as an explanation for swollen steams while ignoring the rainy season.

Abusing statistics to create a false reality is the stuff of self delusion.

Andrew Brod

Frog's right about rising incomes and rising taxes. But it's only fair for Roch to use average tax rates.

For one thing, what else should he use? Going by the top marginal tax rate is misleading. A weighted average seems reasonable, and that's effectively what Roch used.

Second, Frog's observation about incomes and taxes paid is studiously ignored by conservatives when they claim that their taxes went up during the Bush years, and ergo (they claim) it was hardly a good era in which to be rich. Of course the reality is that their incomes rose by even more than their taxes, so it was a very good time indeed to be rich.

For both these reasons, (1) because a weighted average of taxes paid is a reasonable (though imperfect) measure and (2) because what's good for the goose should be good for the gander, Roch's correlations strike me as quite kosher.

For what it's worth, the 1980s were an era of declining top marginal rates, but the 1990s were the opposite. The top rate went from 31% to 39.6% under Clinton. The conclusion, I'd claim, is one that I've noted repeatedly: taxes matter a lot less to overall macroeconomic performance than conservatives believe. We had a long expansion in the 1980s after lowering tax rates and a long one in the 1990s after raising them.

Bubba

"I swear, the most effective trait of his ilk is looking the rest of us straight in the eye and stating the opposite of what is actually true. It's nefarious, but it's a skill."

Your judgement on this sort of thing is well known, it's wrong, and it's dangerous. But it IS expected of you.Your conclusions are the result of poor scholarship, a poorly disguised agenda, and an ability to claim things say what they don't say. You should have been an alarmist climate scientist instead of a constantly wrong academic interpretor of economics. You never fail to deliver the expected.

And then there's this gem:

"The conclusion, I'd claim, is one that I've noted repeatedly: taxes matter a lot less to overall macroeconomic performance than conservatives believe."

Yeah, sure. that's why there's still a huge amount of investment capital sitting idle, and that's why the creative class small/medium business owner creators of new employment and commerce are sitting on the sidelines.

PF was right right about your state of delusion.

Bubba

"No, the chart indicates that we're past the threshold -- these tax cuts resulted in massive deficits."

You're as delusional as Brod is.

polifrog

Andrew Brod:

Wealth is great, but it's useless unless it can be converted into income. Wealth doesn't buy yachts or hire the help; income does.

Wealth can buy untaxed interest income. With enough wealth one can tune in and drop out.

and

The wealthy have plenty of stocks and other instruments that aren't tax-protected.

I agree, there are many taxed investment choices. They generally give a greater return on risk, risk necessary for economic growth. Gives one wonder at how many investors are incentivised out of investing in risk needed for economic growth and toward financing government debt due to the tax advantages.

and

Most economists believe the tax system should distort incentives as little as possible (zero distortion is impossible), and this principle implies raising the capital-gains tax closer to the level of income tax.

I accept that most economists believe the tax system should distort incentives as little as possible, unfortunately that seems to be confined to equally abusing productivity. It would be far more egalitarian to shift toward a consumption based tax while being mindful of poverty.

Roch101

Let us remember that we are not looking at tax rates to say anything about economic expansion or swollen rivers as offered by polifrog's scrumptious plate of red herring; the correlations between tax rates and poverty were were offered merely as empirical examples to counter frog's claim that people get so discouraged by having to pay taxes that they give up their initiative and resort to living of the public dole.

His evidence? Cigarette taxes discourage people from smoking.

Empirical reality? Poverty declines even when taxes go up.

One argument here consists of faulty premises trying to fit into a broken foregone conclusion, the other is, what's the word? Oh, yeah, reality.

polifrog

Andrew Brod:

For both these reasons, (1) because a weighted average of taxes paid is a reasonable (though imperfect) measure and (2) because what's good for the goose should be good for the gander, Roch's correlations strike me as quite kosher.

You are reaching hard for correlation and whiffing (goose / gander?) , but as we know it is causality that you and Roch are after.

Where I argue increases in taxes dissuade individuals from increased productivity, Roch seems to argue that higher taxes increase individual productivity, that individuals will work harder to have more of their income taken from them.

He does so through two measures without proving either correlation or, more importantly, causality.

I point to a common cause for Roch's two measures moving in like step, economic expansion.

I said to Roch:
It is as if you are pointing to swollen rivers as an explanation for swollen steams while ignoring the rainy season.

Just as streams and rivers which rise and fall in like step should not be seen as an indication that rivers cause streams to rise (rivers do not feed streams) one would be mistaken to view commensurate changes in poverty and taxes as an indication that increases in taxes yield reductions in poverty.

And just as it is far more likely that swollen rivers and streams share a common source for their state ... heavy rain, it is far more likely that increases in taxes and decreases in poverty share a common source ... an expanding economy.

Furthermore, just as streams diverted negatively influence a river's flow whether in drought or not, so too do increases in taxes negatively influence productivity whether during economic expansions or not.

Causality.

polifrog

Roch:

Empirical reality? Poverty declines even when taxes go up.

Your empirical reality is explained by expanding economies, Roch. Increased taxes do not beget decreases in poverty absent expanding economies. That is what your empirical evidence shows.

Simple stuff, but diligently ignored by you in your desire to end up at your broken foregone conclusion, that changes on taxes do not impact individual productivity and by extension individual decisions by way of pretending a direct link exists such that increases in taxes decreases poverty.

Sigh.

Roch101

"Where I argue increases in taxes dissuade individuals from increased productivity, Roch seems to argue that higher taxes increase individual productivity, that individuals will work harder to have more of their income taken from them." -- Polifrog

Okay, this is my last comment in this thread. I should have bowed out much earlier. New rule: I'm only going to engage you if you are paying attention, are not putting words in my mouth, are not changing the subject or otherwise failing to rise to the level of an intelligent adult discussion. I will gladly discuss issues with you rationally but I have no more interest in having to first heard your thought process towards something logical before I can reply.

polifrog

Roch:

I have no more interest in having to first heard your thought process towards something logical before I can reply.

The resistance you sense was not a result of herding my thoughts as if herding cats but rather the resistance of an individual to accept the irrational.

Although two things may seem correlated they may actually be responding to the same stimulus and not be related at all or related only tangentially.

Your empirical evidence, comprised of two measures, certainly does seem related but that perception is more a result of a common and highly influential stimulus, the economy, than any relationship between the two.

You are asking me to discount the impact of the economy as it relates to your cited measures and view those measures in isolation. I can not; you are asking a rational person to do the irrational.

I refuse to follow you there.

Andrew Brod

This is the thing about many conservative commentators: they extol theory and ignore data. Therefore, because it seems plausible that higher taxes would discourage economic vitality, that's what conservatives believe, even though the data don't actually show that. But if you show such data to these conservatives, they'll flat-out disbelieve it because their theories seem so right. They'll actually argue that the data are wrong before they question their theories.

Bubba

"...they extol theory and ignore data"

As opposed to people like you, who invent theory with no basis of belief, and extol the misuse and misrepresentation of data.

Andrew Brod

Well, you're right that I have "no basis of belief," i.e. no agenda and no dog in the hunt regarding how the data will come out.

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