I’ve often thought that the flat taxers weren’t entirely wrong. It’s just they’re taxing the wrong stuff. A flat tax on wealth (real estate, investment assets, those yachts with their own helicopters and submersibles) might do just fine. Income, not so much.

Looks like a bunch of data points to me ... was there supposed to be something scandalous in all that?

Looks like a bunch of data points to me ... was there supposed to be something scandalous in all that?

Auguste’s point is that the list of effective tax rates is presented by Mankiw without any real context, probably to support some sort of “Lucky Ducky” economic argument. We should expect more from a Harvard economics professor—even a neoCon supply-side fantasist.

I think 8 years of this kind of BS and juking the stats is enough, don’t you?

Uggh ... well, if Redstate thinks it’s a problem, then by God something must be done.  Were they also parroting the “OMG Obama’s a Marxist” meme too?

Gracchus - I wasn’t disagreeing with Auguste; instead I was (maybe too vaguely) asking what issue Mankiw had with it, since the data was supposed to show something self evident.

Looks like a bunch of data points to me ... was there supposed to be something scandalous in all that?

The peasants are able to afford their very own guttyers in which to starve?

Sorry if I got snippy, Joshua. Your handle wasn’t familiar, and the comment was a little vague. As we near the end of Prince Bush’s reign of willful ignorance, I get less and less patient with intellectually dishonest stunts like Mankiw’s.

Phoenecian ... I’m agreeing with Auguste.  In effect, I was (not clearly) asking what point Mankiw - who I assume to be an opponent of middle class tax cuts - was supposed to be making with his simple chart.

Gracchus - no problem.  I just wanted to avoid a situation where we all end up “violently agreeing” but don’t know it

The peasants are able to afford their very own guttyers in which to starve?

Afraid so, old boy—lucky duckies, all of ‘em. Oh, the pain!

The funny thing is, most of these Redstate morons likely fall in the middle and fourth quintiles themselves. As any neoCon or moneyCon will tell you (in private, of course), there’s no peasant like a boot-licking, authority-worshipping Know-Nothing.

Over at Freakonomics, the commentors really rip this apart.

(By the bye, Mankiw is a douche.)

By the way, everyone’s talking about these linked op-ed pieces on the economy in yesterday’s NYT:

http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html

http://www.nytimes.com/2009/01/04/opinion/04lewiseinhornb.html

The over-arching points will be nothing new for Pandagonians, but the details are interesting and the piece is well written.

Also, I rather like this viral poll:

http://norecessionforme.us/

Gracchus - I wasn’t disagreeing with Auguste; instead I was (maybe too vaguely) asking what issue Mankiw had with it, since the data was supposed to show something self evident.

The “self-evident” thing it shows to Mankiw is that poor people don’t pay enough in taxes.  Of course, he gives the game away by noting that this is the percentage that people pay in federal taxes.  No mention of sales taxes, state income taxes, etc. that tend to boost the percentage of taxes that poor people pay.

pepito linked us to a cartoon about somebody designing a “submacopter!”, which should have made me laugh.  But my memory is too good, and I recalled this article from Defensetech.org:

Flying Submarine or Submerging Seaplane?
http://www.defensetech.org/archives/004550.html
...  That’s what the Defense Advanced Research Projects Agency (DARPA) is seeking to develop. A recent Request for Proposal (RFP) from DARPA calls for a submersible aircraft [that] would combine the key capabilities of three different platforms: (1) the speed and range of an aircraft; (2) the loiter capabilities of a boat; and (3) the stealth of a submarine.  ...

But remember, you can’t afford health care!

Flying Submarine or Submerging Seaplane?

Or modern sculpture with vaguely pornographic overtones?

Okay, now I’m laughing.  There’s a cartoon later on where she thinks that DARPA stole her idea.  She was right.
http://questionablecontent.net/view.php?comic=1301

Just FYI for everyone;

Submarines are no longer stealth.  We can do high-imagery satellite pictures.  When they first did these, they found wakes where there were no ships.  These wakes were where submarines are.  Unless the subs are sitting still, or going extremely slowly, they’re no longer stealth.

Amanda Marcotte on 01/05 at 11:36 AM:

Our current economic crisis owes a lot to the lack of higher taxes on the rich.  When you tax the wealthy heavily, you encourage prudent investment that grows wealth slowly but surely, so that they don’t get hit with the giant tax bill all at once. [et seq.]

Not quite correct.  If you change it to “tax the wealthy fairly and consistently” (which equates to higher than it is now, but not necessarily heavily) then you would be closer to the mark.  That would actually be a fairly sound and valid (now-dead sane) conservative argument against the sort of dramatic tax cuts associated with the last three GOP presidents.  “Spiking” taxes up and down heightens deficit problems and discourages long-term planning.  If you’re terrified that your taxes are going to rocket up to fix a budget mess (a la Clinton) or thrilled that they are going to rocket down because your friends are in power (a la Reagan or les Bushes) then your planning will rarely move beyond a four-to-eight year investment cycle.  Moreover, that psychological ripple effect will be especially high among small businessmen.

Let me give one specific example: I had the pleasure of having a drink last summer with a fellow who owns a tech corporation in the American NE.  He was cutting back on staff investments and reining in his expenditures in anticipation of an Obama win.  Why?  Because he knew his taxes would go up, as they did under Clinton.  (We will leave aside the fact that he was GOP and refused to concede that wild overspending - - with much of that spending on non-productive parts of the economy like defence - - and ludicrous deficits necessitated periods of fiscal correction.)  There are hundreds of thousands of small businessmen like him.  If they know that taxes will go up or down within a given percentage band then they can make operational and investment decisions which transcend the short-term; if they face an endless series of teeter-totter tax decisions then they have to short-term maximize during low tax periods because if they don’t then they won’t have the padding to adjust to the inevitable raising of taxes as a new administration tries to solve the deficit and debt problems left by the old one.

I must confess that it’s one of the things that drives me insane about my friends on the Canadian left.  They are too damned comfortable with deficit spending as long as its being spent on things they agree on.  They see balanced budgets or surpluses as fetishes of the right and of business.  They don’t grasp that deficits mean borrowing and borrowing means interest and that interest is a net wealth transfer from producing taxpayers of all income brackets to non-producing financial institutions and foreign countries.

For all you tech-heads out there, a NYT article on Antigone’s post about submarine wakes:
http://query.nytimes.com/gst/fullpage.html?res=9B07E6DC153FF932A25756C0A96F958260&sec;=&spon;=&pagewanted=all

I had the pleasure of having a drink last summer with a fellow who owns a tech corporation in the American NE.  He was cutting back on staff investments and reining in his expenditures in anticipation of an Obama win.  Why?  Because he knew his taxes would go up, as they did under Clinton.

Okay.

I’m no business owner, but I do have some friends who own their own businesses.  According to them, almost all of their business taxes tax profit not gross proceeds.  Is your friend aware that cutting back employees and expenditures will only make it look like he’s taking in more net profit and that will increase his taxes (probably more than whatever tax increases Obama is planning)?

I just completed ECON 202 course that used his book. Some crappy reading there.

My idealised tax situation - and I stress this is a thought experiment rather than advocating it as an actual goal, since getting from here to there would be nearly impossible - would be as follows:

i, A guarannteed minimum income for each person.  Based on the chart, say around $15,000-$18,000.  The government pays this to each and every person (forgetting kids for a moment).

ii, Paid for by a straight tax on all other income - say 35%.  This same amount is levied on income tax, capital gains, company profits - all the same.  The only exception might be dividends - if paid by a company that paid tax on them, they need not be double taxed.

iii, No minimum income.  No unemployment benefit.  No welfare.

iv, Any other payment made by an explicit subsidy.  Want to encourage home-owners?  Explicitly pay for mortgages. Want to get extra money to the chronically sick?  Pay them explictly.  Want to encourage sugar production?  Explicitly pay a sugar subsidy to producers.

You can quibble around the fringes of that scheme - how you handle kids for example.  But I suspect that this sort of structure would be simpler, cheaper to administer, and would make policy choices clear to voters.  Parties could propose different mixtures of the marginal rate, the guaranteed income, and the government deficit/surplus. Companies could hire at any rate they wanted - assuming they could get anyone willing to work at crap wages. Nobody would be trying to game the tax code. And I doubt society is going to collapse because of an overwhelmingly vast number of people deciding to sit on their hands with their magnificent $15,000.

Our social structures and tax codes are unwieldy because they accreted over years.  A society built around the above sort of idea would have a different social contract and feel, but I believe would still be capitalist and still be competitive.  Indeed, by offering explicit security to all citizens, I think it would free them to be more innovative.

But, you know, that’s just my idle musing.

If only there were someone with the genius of Admiral Nelson:

The Control Room, previously located amidships directly beneath the conning tower, was moved forward to connect directly with the Observation Room, and a large hangar bay was added to the bow, beneath the Observation Room/Control Room combination. This hangar held a fairly large flying submersible, aptly called the “Flying Sub” or “FS-1”, implying that there were several more back at the base, which would have to be the case since several Flying Subs were lost to mishaps or combat during the run of the show. (Promotional materials published between the first and second seasons referred to it as the Flying Fish, but the name was evidently dropped prior to the start of filming and was never used in the show.) It was deployed through bomb-bay like doors. As it broke the surface, its engines could generate enough thrust for the vehicle to take off and fly at supersonic speeds. <u>The Flying Sub was also nuclear powered</u>.

The best progressive and paperwork-friendly (for individual payers) tax would be to switch to a pure consumption tax for all items consumed in the USA, with luxury items like iPods and yachts taxed more than necessities like food.

keshmeshi, I can’t speak to that (having met the man only once) nor do I accept his position.  (I spent a very pleasant half-hour arguing with him on the very topic, truth be told.)  My points are these: taxes spiking up and down: (a) undermines predictability and have an objectively measurable impact; and (b) have a subjective psychological effect which may be linked to or separate from the objective reality.

I note that you are talking about only one form of tax.  Governments in fiscal crisis (as the USA’s is, after 8 years of Bush 2) look to multiple revenue sources.  Tax on my income and/or my business’ profits are not the only outflow that I need worry about.  Higher administrative fees for government services, higher interest paid on tighter credit and higher out-of-pocket costs as via increased taxes on goods and services (to choose just three examples) are all disincentives to risk and investment.  This fellow may not, say, risk the tens of thousands necessary to hire and train a new employee or may not be able to afford new technology when his out-of-pockets take a sudden spike.  The percentage that he pays on his profits may be moot. 

Add to this the fact that he believes that he will be running into trouble and will be pulling in his horns accordingly.  This is why huge GOP tax cuts which necessitate Dem tax spikes at a later date to fix the problems are dumb, dumb, dumb.  Oscillations undermine predictability and lack of predictability undermines both the ability and the willingness to plan for the long term.

i, A guarannteed minimum income for each person.  Based on the chart, say around $15,000-$18,000.  The government pays this to each and every person (forgetting kids for a moment).

ii, Paid for by a straight tax on all other income - say 35%.  This same amount is levied on income tax, capital gains, company profits - all the same.  The only exception might be dividends - if paid by a company that paid tax on them, they need not be double taxed.

iii, No minimum income.  No unemployment benefit.  No welfare.

Error.

I think it’s supposed to be “No minimum wage”

Quite right, Caren.  Sorry.

The best progressive and paperwork-friendly (for individual payers) tax would be to switch to a pure consumption tax for all items consumed in the USA, with luxury items like iPods and yachts taxed more than necessities like food.

Had that argument here when GST was introduced.  You don’t want different tax rates, because it leads to all sorts of hassles about what goes where - is an iPod a luxury item these days?  If I fish off my yacht, is it a work vessel?

So if you have a single rate, then you’re hitting the poor more than the rich; they tend to consume more of their income.

Am I supposed to proudly state that we make more money than 80% of americans and pay more taxes (as a percentage of our income) than 95% of americans and still live in a tiny apartment not renovated in decades, taking space from first generation immigrants?

I love our second-class citizen status!

Well, she’s not far off; the secret submarine development base is in Idaho.

That base is hardly secret.  It is in a state park.  It has visits from U of Idaho engineering students.  Most of the research is on acaustics and acoustic properties with sonar tests.  It’s been there, widely known to the locals, for at least 4 decades.

The research results?  Yeah, a lot of them are classified.

My husband and I have our own business.  He is the pricipal, and I am the investor (for the most part).  He does research and development with import export etc.  The GOP is NOT good for most small businesses and contractors.  They are good for major corporations, and larger local and regional businesses to some extent.  Clinton was far better for small business. 

Also, add property taxes on equipment (lathes, drills, computers & servers, raw materials like bar stock) as well as real estate for businesses in most New England states.

Well, she’s not far off; the secret submarine development base is in Idaho.

So they’re taking climate change seriously then?

That little dip at the end looks a little funny to me—maybe the point is supposed to be that the tax system is less progressive than we think it is?  (I sure thought the 99th percentile was paying a higher percentage of their income in taxes than that.)

If you look in table 1, you’ll see that where the rich really get “hammered” is the corporate income tax rate, which is “really” an individual tax on corporate shareholders.  The implicit argument is that since the rich own all the corporations, they pay all those taxes, amounting to 40% of their total taxes (in the highest bracket).  Which is true only if you believe the economy is completely non-competitive.  Otherwise, reduced corporate taxes would also result in lower prices, higher volumes, more labor demand, and higher wages.  I’m not arguing that corporate taxes should be lower, but it is amusing to see conservatives argue that the corporate sector is completely non-competitive in order to claim that the tax system is minimally progressive.