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> They find that enacting any of these policies by growing the federal debt — that is, without raising taxes to pay for it — would substantially grow the econom

> They find that enacting any of these policies by growing the federal debt — that is, without raising taxes to pay for it — would substantially grow the economy. The effect fades away within eight years, but GDP is left permanently higher. The big, $12,000 per year per adult policy, they find, would permanently grow the economy by 12.56 to 13.10 percent — or about $2.5 trillion come 2025. It would also, they find, increase the percentage of Americans with jobs by about 2 percent, and expand the labor force to the tune of 4.5 to 4.7 million people. > They also model the impact of the plan if it's paid for with taxes. That amounts to large-scale income redistribution, which, the authors argue, would stimulate the economy, because lower-income people are likelier to spend their money in the near-term than rich people are. Thus, they find that a full $12,000 a year per adult basic income, paid for with progressive income taxes, would grow the economy by about 2.62 percent ($515 billion) and expand the labor force by about 1.1 million people. So, borrowing and spending 300 million adults * $12,000/adult/year = $3.6 trillion/year would grow the economy by $2.5 trillion? And raising it in taxes would grow the economy by just half a trillion? Or what am I missing? Also this: > because lower-income people are likelier to spend their money in the near-term than rich people are But what about the long term? We can debate the finer points about when and how much etc, but it remains uncontroversial that rich people invest nontrivial amounts in long term stuff. With near-70% top average (not marginal!) tax rates, this will go down by a lot. How will this redistribution from long-term investments to near-term spending affect the economy over the long term? Yes, fewer yachts and private jets (there are also people employed supporting those, and the net employment benefit suggested is already quite modest), but would an Elon Musk or Jeff Bezos subject to a 70% tax rate invest in the next SpaceX/Blue Origin (not to mention thousands of other startups backed by angels and personal/friends&family savings)?

jrs95 9y ago
What else are they going to do with the money but invest it? Even if they let it sit in a relatively conservative investment, a bank is still probably going to be investing their money. In my opinion, the more important impact of higher taxes on investors is what that does to the total pool of investment money over time, since they are likely to reinvest a lot of their earnings. But that is also the exact thing a progressive tax system is meant to do -- shrink their wealth and redistribute it to others.
logicchains 9y ago
I did my bachelors in economics, and one of our textbooks taught that all other things being equal (ceteris paribus), more wealth equalisation (taking from the richer and giving to the poorer) means less wealth creation in the long term. Why? Wealth will naturally concentrate in the hands of those more capable of creating it: if Jo is making 2% per annum return and Jane is making 4% per annum return, and they both start with the same amount, then Jane's share of the total wealth pool will continuously increase relative to Jo. The key thing to note is that as Jane's producing twice as much from her wealth as Jo, if we take resources from Jane to give to Jo then they'll be used less effectively, slowing overall growth. To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According tohttp://www.moneychimp.com/calculator/compound_interest_calculator.htm http://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased. Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $50,504.92 and Jo will have $7,244.65, with the total wealth pool being $57,749.57. If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01. This is 83.12% of the total wealth pool that there would be if no wealth transfer took place. This effect is applies similarly if wealth redistribution happens every year through redistribution of income. In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).
- StormChaser_5 9y ago
  This argument breaks down in a couple of different ways but lets just look at one: Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20). Now it turns out that Joe Junior works hard and is really smart. He can get a 5% per annum return. Meanwhile Jenny is a bit of a flake but can still get 1% per annum from her investment. After 50 years Joe Junior has $219,351.63 and Jenny has $114,022.65. So the hardworking Joe has turned his more modest beginning around and overtaken the less hardworking Jenny. The total wealth pool is now $333,374.28. However if we had equalised their wealth on the death of their parents so that they had both started with $34,816.57. Jackie would then have ended up on $57,260.44 while Joe Junior would be on $399,255.53 for a combined wealth of $456,515.97 - significantly more than if wealth equalisation had not taken place So that is one way it makes sense for the economy a a whole to redistribute wealth. Another is the fact that both Joe Junior and Jackie may have seen fixed costs (Medical bills?) on their life journeys. Jackies initial capital advantage measn she could weather those a lot more efficently then Joe Junior even if the return on her wealth she is generating is less. And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing. TL;DR While completely flat wealth distribution is obviously a daft idea a simple argument shows some level of movement seems to be in the best interest of the economy as a whole.
falcolas 9y ago
If the cost of ensuring that every person in the US has food, health care and housing is SpaceX, that's OK by me. The advancements from SpaceX are certainly cool, and have likely dropped the price of many services I consume; but that extra bit of convenience is hardly worth leaving so many in society behind. Not to mention, if everyone was not tied to selling their time/body/skills just to survive, what other advancements could arise?

jrs95 9y ago

What else are they going to do with the money but invest it? Even if they let it sit in a relatively conservative investment, a bank is still probably going to be investing their money. In my opinion, the more important impact of higher taxes on investors is what that does to the total pool of investment money over time, since they are likely to reinvest a lot of their earnings. But that is also the exact thing a progressive tax system is meant to do -- shrink their wealth and redistribute it to others.

logicchains 9y ago

I did my bachelors in economics, and one of our textbooks taught that all other things being equal (ceteris paribus), more wealth equalisation (taking from the richer and giving to the poorer) means less wealth creation in the long term. Why? Wealth will naturally concentrate in the hands of those more capable of creating it: if Jo is making 2% per annum return and Jane is making 4% per annum return, and they both start with the same amount, then Jane's share of the total wealth pool will continuously increase relative to Jo. The key thing to note is that as Jane's producing twice as much from her wealth as Jo, if we take resources from Jane to give to Jo then they'll be used less effectively, slowing overall growth. To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According tohttp://www.moneychimp.com/calculator/compound_interest_calculator.htm http://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased. Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $50,504.92 and Jo will have $7,244.65, with the total wealth pool being $57,749.57. If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01. This is 83.12% of the total wealth pool that there would be if no wealth transfer took place. This effect is applies similarly if wealth redistribution happens every year through redistribution of income. In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).

StormChaser_5 9y ago
This argument breaks down in a couple of different ways but lets just look at one: Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20). Now it turns out that Joe Junior works hard and is really smart. He can get a 5% per annum return. Meanwhile Jenny is a bit of a flake but can still get 1% per annum from her investment. After 50 years Joe Junior has $219,351.63 and Jenny has $114,022.65. So the hardworking Joe has turned his more modest beginning around and overtaken the less hardworking Jenny. The total wealth pool is now $333,374.28. However if we had equalised their wealth on the death of their parents so that they had both started with $34,816.57. Jackie would then have ended up on $57,260.44 while Joe Junior would be on $399,255.53 for a combined wealth of $456,515.97 - significantly more than if wealth equalisation had not taken place So that is one way it makes sense for the economy a a whole to redistribute wealth. Another is the fact that both Joe Junior and Jackie may have seen fixed costs (Medical bills?) on their life journeys. Jackies initial capital advantage measn she could weather those a lot more efficently then Joe Junior even if the return on her wealth she is generating is less. And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing. TL;DR While completely flat wealth distribution is obviously a daft idea a simple argument shows some level of movement seems to be in the best interest of the economy as a whole.

falcolas 9y ago

If the cost of ensuring that every person in the US has food, health care and housing is SpaceX, that's OK by me. The advancements from SpaceX are certainly cool, and have likely dropped the price of many services I consume; but that extra bit of convenience is hardly worth leaving so many in society behind. Not to mention, if everyone was not tied to selling their time/body/skills just to survive, what other advancements could arise?