The top tax rate rose throughout the Roosevelt administration. During the Eisenhower administration it never got below 91 percent. During the Johnson administration it was reduced to 70 percent. During the Reagan administration it was reduced to 28 percent. It went up to 39.6 percent under Clinton, and down to 35 under Bush II, where it is now.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213
This is perhaps a more useful analysis.
I think John Mace is correct in saying that it is necessary, but not sufficient, for two things to be correlated in order for one of them to be causal on the other.
My problem is that the rest of it is pure hand-waving. He wants to end the discussion at that point. Why else might every economic indicator, whether contemporary or lagged, perform better under Democrats than Republicans? “[Shrug] I dunno, but correlation and causation and the invisible hand, and if you come up with more evidence, I’ll think of something else then too!”
And in a year or two, he’ll have forgotten about even the correlation part again.
[ETA: I remain curious as to which economic principles John Mace actually does affirmatively believe in because of their empirical validation.]
Very few of us are interested in “punishing the wealthy” for being so. Further, no one is asking you to directly provide for all the needs of the additional people your income could support. I don’t want to take all your extra income, give it away to poor people, and reduce you to the level of the average joe. That simply is not fair. Most people would acknowledge that everybody contributes differently to society and we have a right to profit from our contributions. We place higher value on certain goods and services and rightly so. Liberalism does equate with communism or pure socialism no matter how hard the right tries to spin it. Taxes are not direct wealth redistribution.
I expect you to pay more because you can. You benefit directly on a day to day basis from federal programs. You drive on the highways, purchase goods shipped from state to state, are served by people educated in public schools, etc. When compared to a world standard, even a lower income self sufficient American is far better off than most people in the world. The wealthy live like kings in most other countries, and like gods in the poor ones. Take a hundred more dollars a month from low income Joe and he may well find himself unable to pay his bills or feed his children. Take it from middle class Murray and it’s an inconvenience. Take it from wealthy William and he probably won’t notice. William should give more because the loss of that 1200.00 a year has *no material affect *on his lifestyle at all.
Those who are wealthy owe an ethical obligation to their society for their success. The way to a bright future for most people is through education, lower birth rates, and access to basic medical care when needed. Those things cost money to achieve.
I agree with you entirely. I would add, though, that from a purely selfish, pragmatic standpoint, it makes sense for the wealthy to invest in a system that is really working well for them. They’ve got more skin in the game, to use a phrase that conservatives seem to like, so it behooves them to make sure that it continues apace.
Wouldn’t it make more selfish sense for the wealthy to invest in change towards a system that would be even more overwhelmingly in their favour though ? Kinda like they do IRL ?
Well, maybe not overly biased a system though, because when the proles collectively realize just how deep they’re being introduced, they tend to react explosively. It’s a delicate balance of unfairness to achieve :).
All due respect ('cause you know I’d have your lovechild), you’re equivocating here. When people say “correlation doesn’t imply causation”, they’re using the mathematical acception of the verb. i.e. B is a necessary consequence of A.
Which is different from the popular understanding of the term, i.e. if A then B is likely.
In mathematical terms, correlation does not imply causation at all. Two seemingly linked data sets might not have anything to do with each other. If I roll two dice, one comes with three 1s in a row and one comes with three 6s in a row, does it mean one die’s “bad luck” caused the other’s “good luck” ?
Is that a threat or a promise? I’m fine with peer reviewed journals being the ultimate arbitrator of data presented here at any time. It’s the only way I know of to separate science from folk knowledge.
Well, it’s the standard I’m going to hold you to, since you apply it to [some] posts yourself. By the way, have you published in any peer-reviewed journals?
I have to honestly thank you. I promised myself that I was not going to get into this yet again, only to have it all fall on deaf ears. But low and behold, looking into it yet again turned up a new treasure trove of information, which helps to address some additional shrugs of yours. Bolding is mine in all cases.
http://www.presimetrics.com/blog/?p=34
http://www.presimetrics.com/blog/?p=50
Nope. If we decide that is the standard, then it applies across the board. I’m OK with that. If you’re not, then you are taking an agenda driven course of action instead of one designed to get at the truth of the matter.
Yes, although that was during my time as a graduate student, which was some time ago. I don’t expect the process is much different now, though. I’m guessing that you haven’t since what you call “hand waving” is exactly the type of questions that the most junior reviewer would ask if that analysis had been submitted for review. Anyone who didn’t consider the effect of Congress (same or opposite party) being in power is missing a big piece of the puzzle. And that’s just the beginning. Without identifying the mechanism that drives economic growth and just looking for correlation shows a fundamental misunderstanding of what scientific inquiry is about. And that would apply to the field of economics just as well to the field of physics or chemistry.
Those are all very interesting bits of folk knowledge. But they wouldn’t get past the first gate of the peer review process for the same reasons I noted above.
I’d very much like greater preference given to empirical data here (although that is a larger set than peer-reviewed evidence), but it would curtail discussion greatly. I dislike the degree to which posters here eschew data, but the board would be pretty dry if opinion-based posts were prohibited.
But you yourself foisted the peer-review standard on others. You have to admit that you would be hypocritical to not hold yourself to the same standard, no?
I’m actually an ISI highly cited researcher, although in psychology, not in economics. I’ve also got three manuscripts on my desk that I’m currently reviewing as a peer-reviewer. I didn’t realize that there were “junior” or other designations to reviewers. If so, I suppose I would have graduated to whatever you believe to be above “junior” status several years ago.
Scientific inquiry starts by making observations (such as data from the past 100 years of US economic indicators, but it doesn’t then shrug its shoulders and say I dunno, which you have done here.
How do you define “folk knowledge”? Those are data - measurements of economic performance. How are real GDP or federal tax rates “folk knowledge”?
You’re correct that one cannot conclude that one thing caused another from this data. However, in my experience with publishing my own work and reviewing other researchers work, I can assure you that peer reviewed publications also do not make conclusions about cause, at least in my field. So, your dismissal of the observed relationships among these data as insufficient to prove cause and your invocation of peer-review status is in fact frantic hand-waving.
I continue to await any information you might give me about economic (or monetary or fiscal) processes that have been demonstrated empirically. There may very well be such. I’m asking you, given your stance on folk beliefs versus empiricism in economic matters, to guide the rest of us. Surely you don’t believe anything that isn’t empirically validated in this realm, while sniping down beliefs of others for their want of such validation?
One obvious problem with the presimetrics data is that it defines a president as a “tax cutter” or “tax increaser” based on whether the percentage of GDP taken in taxes increased during his watch.
This introduces an obvious bias into the results. During a recession the government take automatically falls, and during an expansion it rises. So of course the economy will do better during periods when the government take is rising; the former is causing the latter rather than the reverse.
Thus presimetrics presents us with such historically illiterate nonsense as labelling John F. Kennedy as a tax increaser and Herbert Hoover as a tax cutter.
Hentor: As I said above, I don’t think there is one set tax policy that works independent of a whole lot of other factors. I’m not an expert on economics, but I know enough about it know at least that much. And if we were to go by your cited blog analyses, what do they tell us? Are you proposing that we institute a top tax rate of 65 - 90%? Your third cite tell us that is the “sweet spot” for economic growth. If not, then what good is the analysis if it doesn’t provide any predictive ability?
And just to be clear, this is not a partisan thing. I would raise the same objection if someone tried to push a Republican president = better economic growth position.
And further, the debate we typically have in the real world is about marginal tax rates +/- some small delta. I’m not someone who is going to rant and rave about how fiddling with tax rates in and around that delta is going to spur or hinder economic growth. I suspect there are external factors that are much bigger factors in play than whether the top tax rate is 28% or 32%.
Given the truism that past behavior is the best predictor of future behavior, I would disagree with your conclusion that data on US economic performance over the past century gives us no predictive information. I don’t think that this tells us the ideal tax rate, but it does tell us that predicting GDP collapse based on an increase from our present tax rate is diametrically opposed to what has happened in reality before this time.
This is a bit of false equivalence, since all the data point in one direction. Again, we agree that correlation is necessary for causation, right? In your offering of bipartisan rationality, you don’t even have the necessary condition for causation, do you? You have to agree that the data tell us that the two positions are not equal, despite your high Broderism.
It amazes me that every four years we can have these rancorous discussions that are about the economy stupid when there’s just no relationship between what the president does and the economy! Of course, the data indicate that there is a relationship between the presidency and the economy. The data also tell us that there is a relationship between tax policy, tax rates and the economy. There are similar relationships involving stock market performance, individual/family income, jobs and so on and so forth.
Right now, one of the Republican candidates for president is suggesting that severe tax cuts will lead to 10 years of consistent 5% growth, and is arguing that history suggests GDP growth every time taxes are cut. I disagree with you that the reality of the debate is about a four percentage point difference in top tax rates.
I didn’t claim it had no predictive power. I was asking you to use to make a prediction. I agree that claiming GDP collapse if taxes are raised is not accurate.
I wasn’t offering an equivalence. Just noting that I don’t hold any grudges against Democrats.
I agree that the this guy is an idiot and is oversimplifying things at best and flat our lying at worst. I pulled the 4% number out of the air. It really doesn’t matter what the exact number is. My point is that it is small and no one is talking about going back to 75% tax rates-- the “sweet spot” of what the historical data tells us.
There may be candidates who suggest big tax reductions on the GOP side, but those are non-starters. When it gets into Congress, where the real horse trading is done, the debate is always about relatively small changes to income tax rates. There might be larger changes discussed about capital gains rates, but not income taxes.
So what made it your land? Because you bought it fair and square? Who’d you buy it from? Someone who bought it before you. Who’d they buy it from? And who’d they buy it from?
Eventually, and you don’t have to go back very far, you reach a point where people with either guns or swords came along and decided the ownership of that land, not by a free market trade, but by violence. And you find all sorts of non-free market land transfers, and so on.
So where does that put us? Does that mean it’s good public policy, since you bought your land from someone who bought it from someone who bought it from someone who expropriated that land, to expropriate it from you? No it isn’t.
The question isn’t, “Does emacknight have a natural right to this land?”, it’s “what’s going to happen if the rest of us stand by and watch if we allow thugs with swords/guns to force emacknight off this plot of land?” And it has been proven over and over again throughout history that places where thugs can take what they like turn out to be miserable shitholes. So the reason I agree to live in a society where if I pull out a gun and demand that Rolex on your wrist I’d be arrested and sent to prison, is because I like living in a society where if you pulled out a gun and demanded the Rolex on my wrist you’d be arrested and sent to prison.
This is elementary stuff. Libertarians and Randians are particularly susceptible to the notion that property rights are natural rights, handed down by God or Nature. Except this is obviously wrong. You don’t own that land or that Rolex because God gave it to you. You own it because the rest of us agree that you own it, and we agree that you own it because it turns out that we all lead more pleasant lives when we do. Our rights aren’t natural rights, they are empirical rights based on our preferences. Our preferences are subjective, but the results of a particular set of preferences are objective. We can want whatever we want, but we can’t get whatever we want just by wishing for it. So if we want to live in a society where most people lead comfortable dignified lives we’ve only discovered a few ways where that turns out to be possible. If we don’t choose the correct social and economic rules we’ll find out that the result is misery.
And so, capitalism, private property, democracy, the rule of law. These ideas weren’t handed down by God, they were discovered as ways to avoid living in a miserable shithole. If we don’t care if we live in a miserable shithole, then we can choose all sorts of social arrangements. If we’d rather not live in a miserable shithole, then our choices become constrained.
You’re implying that they got something for nothing, or that they leeched off the rest of society for their success, etc… which isn’t true, at least not any more than someone who’s not wealthy did the same thing.
Look at it this way: 2 identical twins grow up middle class, go to state college, and then go out into the world. Fred was an English major. He ends up an English teacher in high school. Ned on the other hand, went into IT. He comes up with a great idea for a new killer app. Through hard work and long hours, he develops it into the next Skype/AIM/Facebook. He ends up filthy rich.
Why would Ned have a greater obligation than Fred? They both partook and partake of the public services and benefits equally. Ned just happens to have done something that makes him more money.
I’d argue that if say… Fred had become a heroin addict in college and dropped out, and was living on welfare with 3 illegitimate kids on WIC and going to the public hospital for health care, then Fred has just as much of an obligation to straighten his shit out and be productive, as Ned would to pay more because he’s rich.
Well, the stock market part can be explained, at least, because in the stock market, perception is reality, shapes reality. A civil war in Africa, early reports of drought in the Midwest, a mere rumor of a scandal that just might affect the outcome of the next election, anything might send the market into a tizzy – regardless of whether the news has any actual conceivable effect on the business performance of any given publicly-traded company; and the reverse with calming or encouraging news. So, if investors generally know, sort of subconsciously, that the economy does better during Democratic admins, then, during such periods, they will be readier to invest, and less ready to pull out right away when things look stormy.
Did Ned set up the technology infrastructure that allows for a market for his app? Did he distribute the resources for enough people to have disposable income sufficient to pay for his app? Did he create the communications and transportation infrastructure for people to become aware of and purchase the devices to use his app? Did he provide sufficient general education to support the economy to provide the resources for his app?
To put it a different way, what if Ned went to Eritrea State University? How much benefit would he derive from his IT dreams then?
Why? Say that American society fell apart tomorrow. Ned’s ass is going to be out there scrapping with Fred for food and resources. Who is going to feel that they lost out more?
Sure, but you could argue the same thing about Fred- did he set up the school system? Did he set up the laws requiring compulsory education? Did he set up the rules requiring English to be taught in high school?
Or in the alternate case, did Fred set up the welfare? Did Fred set up WIC to provide for his children? Did Fred set up the public hospital?
It’s hard to argue that a person necessarily took more advantage of government provided or sponsored resources in the process of becoming wealthy than someone who is not wealthy.
I guess the main problem I have with highly progressive taxes is that the wealthy are basically being penalized for their success without commensurate benefits or say. It’s like being required to pay more for the same services without seeing any more return on that investment.
You could argue that they ought to get more voting power- maybe they ought to get votes in proportion to the taxes that they pay? That would at least be somewhat fair- you tax them more, they have more say.