Iowa Caucuses are underway

[Sam_Stone]

@jshore

(1) It is quite likely that the revenue stayed about roughly the same by design and not the magic of voodoo economics. In particular, I think that when the marginal rates were very high, there were a lot more tax loopholes. The tradeoff was to lower marginal tax rates but getting rid of a lot of the loopholes.

Yes, of course. But Bernie is talking about returning to sky-high rates while removing loopholes.

But it’s more than that. Notice in the corporate data the effective tax rate has dropped from 40% in 1987 to about 17% today, and that counts all tax avoidance loopholes. In 1987 corporate taxes collected 1.7% of GDP. Today, it’s 1.9%. Why didn’t overall taxes go down by as much as the effective tax rate? I really don’t know. Higher corporate profits? Changes in corporate structure? I really don’t know.

(2) A better breakdown would also look at the percentage of income that fell into those highest tax rates. If you have very high marginal rates but only a small percentage of the total aggregate income (e.g., few people) subject to them, then the rates won’t cause very large changes in tax revenue. Is Bernie Sanders really claiming that he can dramatically increase the income tax revenue as a percentage of GDP just by taxing the rich more?

That’s part of my point - there aren’t enough people in the highest brackets to really return that much revenue.

But there’s more going on here. I think it’s very striking that U.S. tax revenue has remained remarkably flat over 50 years while major changes to the tax code in both directions have taken place. It’s almost like it’s an emergent property of a complex system that has feedback - change the dial, and it will counteract the change. I have no idea why that’s the case, and I’m not sure anyone else does, either. But the fact remains that regardless if Jimmy Carter, Ronald Reagan, George Bush or Barack Obama is president, and tax rates fluctuate dramatically, overall tax revenue really doesn’t seem to change much. There’s no basis to assume that you can jigger taxes and push overall revenue up by more than a couple of percentage points of GDP.

By far the more important factor is the health of the economy. The big moves in tax revenue happen during recessions and booms. For example, tax revenue was 10.7% of GDP in 2007, and had dropped all the way down to 7.3% of GDP by 2010. Some of that was tax cuts, but not that much. Mostly it was the recession. By 2013 tax revenue was back to 8.9% of GDP.

In comparison, between 1986 and 1988 the top marginal bracket was lowered from 50% to 28%, and personal tax revenue went from 7.7% to 7.8%. It had basically no effect on revenue at all.

Since revenue is so closely correlated with economic performance, it may be that raising taxes simply lowers GDP by an offsetting amount, and vice versa. I believe the widely cited Romer and Romer paper on exogenous tax increases basically came to this conclusion - that raising taxes simply results in an offsetting decline in GDP growth.

It could also be that in a world of globalization and floating exchange rates, changes to taxation levels just cause trade patterns to change and profits to shift around rather than being captured by the government raising the taxes. Raising the tax on a manufacturer does no good if it forces the manufacturer to relocate to China. Raising payroll taxes does no good if it forces enough people out of work and makes them tax consumers rather than generators. And so it goes.

(3) I think few people would argue that very high marginal tax rates like 91% yield diminishing returns. (Just like very few would claim that we can raise the minimum wage as high as we want without ever having a significant negative effect on employment.) However, that doesn’t mean that raising the highest marginal tax rate from whatever it is now (39.6%) to, say 50%, will be subject to much diminishing returns. (Remember, by the way, that the incomes in that tax bracket don’t face the additional marginal rate tax for social security that really need to be factored in when looking at the lower tax brackets.)

Show me any evidence that an increase like the one you propose will raise any new revenue at all, let alone enough to pay for Bernie’s long wish list. You can look at the cites I posted for historical tax rates and historical revenue. I see no correlation between them whatsoever. Changing rates seem to be absorbed by the economy and the result is modifications that keep revenue about where they were before.

[Sam_Stone]

@Do_Not_Taunt

The 6.2% tax is also born by most workers. That it’s paid by employers is not material.

You know that and I know that - so why not just make it transparent and put it on the employee? It’s the same thing. This is part of the typical dishonesty of such proposals. By putting the tax on employers, you can claim that you aren’t raising taxes on the middle class but that you’re sticking it to ‘corporate America’. But yes, it is a tax directly on employees. To the bean counter in the HR office, whether the money comes out before the payroll cheque is cut for you or your cheque is simply reduced by that amount makes no difference. You’re paying it either way.

I’m not a Sanders supporter, so if you want to argue if his proposals are good policy, I’ll let one of those guys take over. My concern is that you represent his proposals correctly, rather than parroting this meme that Sanders is telling his supporters that they’ll get health care and education and cookies for free and never ever have to pay one thin little dime.

That’s essentially what he IS saying. The people getting free education don’t have retirement savings or stock investments. They don’t own companies, and many of them aren’t even employed. So he’s promising them a free lunch. The middle class workers are being promised free health care and 12 weeks of leave for a measly 2.2% payroll tax which replaces their expensive health insurance payments, so it’s essentially a tax cut for them too.

Show me where he’s telling people in the middle class that they are going to have their taxes raised not for their benefit, but to pay for the benefits of others, and that they will have to take a hit to their standard of living for the common good. Because that’s what would have to happen. You can’t possibly have a system where you can offer a trillion dollars per year in new government benefits without some people taking it on the chin, and the ‘rich’ don’t have enough money to pay for it.

[elucidator]

We got a consumer economy, and if the consumers don’t have money to spend, you got squat. Any solution will have to put more money in the hands of more people. To spend. More flow going to those who already have doesn’t mean they spend more, it means they invest more. Good, sure, but they expect a return, which they also will not spend. The gravity increases due to the miracle of compounded interest.

Now, if any of you conservative guys got a plan to put more money in people who don’t have it, let us know. Just remember, the cool kids at the conservative’s lunch table won’t like you any more, once you turn socialist.

[DrDeth]

@jshore

(1) It is quite likely that the revenue stayed about roughly the same by design and not the magic of voodoo economics. In particular, I think that when the marginal rates were very high, there were a lot more tax loopholes. The tradeoff was to lower marginal tax rates but getting rid of a lot of the loopholes.

Yes, scads of Tax shelters, etc.

The tax changes were not designed to bring in more net taxes- just cut out many of the shelters.

[Do_Not_Taunt]

@Sam_Stone

That’s essentially what he IS saying.

Really? Are you listening to a lot of Sanders’s speeches? Have you watched the Democratic debates? It sounds like you’re getting your sense of what Sanders is saying filtered through someone else. He certainly focuses on a stick-it-to-the-rich message, but that’s because he actually wants to make the tax system more progressive. But the actual evidence shows that he isn’t shying away from telling people that the middle class is going to pay more and get more, and it’s worth it.

The people getting free education don’t have retirement savings or stock investments. They don’t own companies, and many of them aren’t even employed. So he’s promising them a free lunch. The middle class workers are being promised free health care and 12 weeks of leave for a measly 2.2% payroll tax which replaces their expensive health insurance payments, so it’s essentially a tax cut for them too.

Well, he’s offering them a deferred lunch. That’s kind of how eduction for the young works.

As for the health care question, again I haven’t run the numbers, but I have no particular reason to doubt that a single payer system could be implemented for less total aggregate cost than we’re paying in premiums today. Other developed countries seem to pull it off. So in that sense, there really is a free lunch to be had.

Show me where he’s telling people in the middle class that they are going to have their taxes raised not for their benefit, but to pay for the benefits of others

Why would I show you that? That isn’t his message. His message is that you pay a bit more, you get a lot more, and a few people at the top get soaked. You seem to think his numbers don’t add up, but other than proposing a magic law where government revenue as a percentage of GDP stays constant regardless of tax policy, you haven’t really demonstrated why.

And as for your magic law of government revenue: my hypothesis is that we’re at a cultural sweet spot where it is really hard to move the ball in any direction. Cut taxes and revenue falls, but it’s politically impossible to decrease spending sufficiently to match, so the deficit skyrockets. Then it becomes politically palatable to increase revenue back up. Conversely, increase spending, but it’s politically impossible to increase revenue sufficiently to match, so again, the deficit skyrockets, and it becomes politically palatable to trim spending back down. But, if you could convince people that it’s worth hiking their taxes to cover x, y, and z, you cut through that inertia, and potentially rebalance the ball at a different local minimum. That’s what Sanders is trying to do.

[Rick_Kitchen]

@kunilou

Nonsense. Every whispered, unsubstantiated smear I’ve heard about Rubio had to do with his numerous girlfriends and illegitimate children.

Not the one I heard. His former roommate was arrested for running a gay brothel. The roommate and lil Mario were allegedly arrested at the age of 18 in a park where gay cruising took place, although what they were arrested for has never been revealed.

[BrainGlutton]

@Rick_Kitchen

Not the one I heard. His former roommate was arrested for running a gay brothel. The roommate and lil Mario were allegedly arrested at the age of 18 in a park where gay cruising took place, although what they were arrested for has never been revealed.

It was a moving violation. Specifically, tailgating.

[rimshot]

[wolfpup]

@Sam_Stone

Paid for by taxes on the ‘rich’, mind you. His supporters may understand theoretically that taxes will pay for all this, but they apparently can’t do the math.

You can’t possibly tax the rich enough to pay for Sanders’ schemes. You would have to dig deep into the middle class to raise that kind of money. And then you run into the reality that people soon learn to avoid taxes, which is why even when top marginal rates were 90% government revenue from taxes weren’t really any higher than they were when tax rates were 30% …

There’s a rich irony in your claim that Sanders’ “schemes” are totally unworkable. Since no one else has mentioned it yet, I feel I ought to: you live in a country where they work.

Indeed broadly speaking Canada is practically a model of the Bernie Sanders vision: universal single-payer health care, a strong social safety net, progressive taxation, a well regulated and stable financial system and a consequent strong and robust housing market. I’m sure it must be frustrating for you to be living Bernie Sanders’ dream and even more frustrating for you that it works, but don’t be telling us that it’s impossible, eh?

No doubt we’ll now hear all about how there are vast intrinsic differences between the US and Canada, or that the same thing can’t happen in the US because it has ten times the population, or something.

Studies like the Gilens-Page one done at Princeton show that Bernie is right, that the rich run the place to the almost complete exclusion of the interests of everyone else, and there are numerous books that back that up, like Dark Money by Jane Mayer. Another one is Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. Know who wrote that one? Christia Freeland, now a Cabinet Minister in the new Trudeau government responsible for international trade. I think that sort of dichotomy with the US Republicans is pretty funny. Feel the Bern!

[Left_Hand_of_Dorkness]

@Sam_Stone

And if Bernie wins, well… Expect election night to deliver McGovern-Dukakis-Mondale levels of Democratic voter turnout.

@Sam_Stone

I’m not making any predictions this year.

Okay.

[Snowboarder_Bo]

@Sam_Stone

You’re right - most of this would never happen - even if he’s elected. But do most of his supporters understand that he’s either lying to them or living a fantasy?

Let’s go to the quarry and throw stuff down there how is talking about what one wants to do “either lying to them or living a fantasy”?

Why are those the only two options you see?

[elucidator]

At least there are two!

[Elendil_s_Heir]

There can only be one.

[Rick_Kitchen]

A Santorum precinct captain didn’t vote for Santorum because his pen ran out of ink.

[JKellyMap]

@Rick_Kitchen

A Santorum precinct captain didn’t vote for Santorum because his pen ran out of ink.

Surely he could have come up with some ink substitute – something viscous yet producing a dark stain…

[BrainGlutton]

@Elendil_s_Heir

There can only be one.

No, you see, because I am he as you are he as you are me and we are all together, so that adds up to two, you see? But one is one and all alone and ever more shall be so.

[Sam_Stone]

@Left_Hand_of_Dorkness

Okay.

Heh. Busted. No, I’ll stick by “I really have no idea” at this time. Maybe Bernie can win.

[davidm]

@wolfpup

…
No doubt we’ll now hear all about how there are vast intrinsic differences between the US and Canada, or that the same thing can’t happen in the US because it has ten times the population, or something.
…

This always gets me. The people who say such things are usually the ones who loudly trumpet American Exceptionalism. We can do anything… except, apparently, something that a number of smaller less wealthy countries seem to be doing with ease.

[DrDeth]

@wolfpup

There’s a rich irony in your claim that Sanders’ “schemes” are totally unworkable. Since no one else has mentioned it yet, I feel I ought to: you live in a country where they work.

Indeed broadly speaking Canada is practically a model of the Bernie Sanders vision: universal single-payer health care, a strong social safety net, progressive taxation, a well regulated and stable financial system and a consequent strong and robust housing market. I’m sure it must be frustrating for you to be living Bernie Sanders’ dream and even more frustrating for you that it works, but don’t be telling us that it’s impossible, eh?

Canada has free college for everyone?

Canada has free health Insurance for all that includes prescription drugs?

[DrDeth]

@davidm

This always gets me. The people who say such things are usually the ones who loudly trumpet American Exceptionalism. We can do anything… except, apparently, something that a number of smaller less wealthy countries seem to be doing with ease.

We have a large Military that keeps those smaller less wealthy countries free. But yes, we can do all those, but do we want to?

[CarnalK]

All drugs administered in a hospital. The different provinces have different coverage for outside that setting which may cover you depending on income level and/or the type of condition being treated, for instance cancer drugs.

But yes, SOME of Sanders’ schemes would better describe it.