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The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not chang

The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not changed considerably since then. Try to actually understand the totality of the circumstances you're talking about. Too many people think they have just-so solutions to a problem they can't even characterize in any useful way. Please don't add fuel to the fire. The problems facing America can not be reduced to a misunderstood slogan or the name of a president or a street name or a single policy strategy. "Fight for fifteen"-ism and "the one per cent!"-ism do not magically make ordinary Americans richer. The catchier it is, the more likely there is a hidden beneficiary you aren't considering.

dctoedt 7y ago
> Try to actually understand the totality of the circumstances you're talking about. Please enlighten us. > The tax code is completely different today from what it was when there were considerably higher marginal tax rates. I'm aware. (I was in law school taking a couple of tax-law courses during the 1980 election debates about Reagan's proposed tax cuts.) > The actual ratio of tax to GDP has not changed considerably since then. Please explain how this is relevant to individual incentives and the "emergent behavior" that they create.
- microcolonel 7y ago
  > I'm aware. (I lived through those days, and was in law school and newly in practice during the Reagan tax cuts.) So yes, like most people here, you did not personally file taxes as a one-per-center before the Reagan administration. Nobody here is expecting you to muse accurately on pre-Reagan tax filing and how people accounted for their wealth. Just remember that nobody pays marginal rates on any money, ever. The deduction structure changed with the rates, as happened for FY 2018. The relationship between marginal rates and revenue/liability is modulated by deductions. > Please explain how this is relevant to individual incentives and the "emergent behavior" that they create. I'm saying that the "incentives" you cite (marginal tax rates you arbitrarily consider to be low) probably don't create that behaviour, because those same people have actually been paying about the same amount of tax this whole time; with the difference mainly coming in the form of subtle differences in compliance and in the way that people account for wealth. If you want to tax the caricature baron-type people you seem to be talking about, make playing by the rules as cheap as the creative strategies they inevitably and understandably employ when nominal marginal tax rates are higher than the cost of doing business a bit differently. Also consider that dragging down the rich doesn't uplift the lower and middle classes. If we have a monopoly problem (as the article's framing conveys), then we should maybe look at a solution to the incentives for excess corporate consolidation and anti-competitive behaviour, rather than getting dragged into the weeds with tired conversations about personal income taxes. Or if we're looking at the personal income tax side of things, at least look at something more relevant to the pain that small businesses face: people who are self-employed are at a tax disadvantage in the U.S, and self-employed people are often the ones who start businesses with their after-tax self-employment income.
  - dctoedt 7y ago
    https://en.wikipedia.org/wiki/Gordian_Knot https://en.wikipedia.org/wiki/Gordian_Knot Or: The swordsman scene in Raiders of the Lost Ark: https://www.youtube.com/watch?v=anEuw8F8cpE https://www.youtube.com/watch?v=anEuw8F8cpE
    - microcolonel 7y ago
      > https://en.wikipedia.org/wiki/Gordian_Knot https://en.wikipedia.org/wiki/Gordian_Knot Recall for me a competing principle with its very own meta-relevant renaissance painting. You are not going to untangle this knot with "just raise the top marginal rate"; it does not eliminate any underlying assumptions which preempt a solution. You do not have indy's gun, and this is not a bumbling swordsman.
      - dctoedt 7y ago
        > You do not have indy's gun You're awfully confident. > this is not a bumbling swordsman. "Bumbling"? The swordsman in the Raiders clip seemed to be quite skilled; unfortunately for him and his mission, his skills — and more importantly, his assessment of his situation — were badly mismatched to the reality. Putting it another way: As my late father used to say, you can be the world's most-skilled rain dancer, but that doesn't mean you'll be able to make it rain. Supply-siders urge tax cuts and more tax cuts because that will supposedly "make it rain" due to innovators doing more innovating and entrepreneurs doing more enterprising; they also scold anyone who suggests raising the top marginal tax rate. There's more than a little reason to wonder whether the supply-siders are like rain dancers. If I understand supply-side economics correctly, the underlying model of human motivation assumes that innovators and entrepreneurs will change their behavior in response to almost any increase or decrease in marginal tax rates. While that's likely somewhat true when the marginal rates are at confiscatory levels, there's ample reason to doubt that it's true in the general case, because: 1. Optimizing after-tax revenue is not the only thing that motivates innovators and entrepreneurs. Many other things play roles as well, in varying degrees for different people: A quest for status; a sense of solidarity with "the tribe"; personal satisfaction from the work; and altruism, to name just a few factors. 2. We're nowhere near confiscatory marginal tax rates and haven't been for many years. The Reagan tax cuts were followed by his tax increases [0]. The tax hikes of the early 1990s, under Bush the Elder and Clinton, were followed by a major economic boom (yes, I know, correlation ≠ causation). Most economists who have studied the matter have estimated that the optimum maximum tax rate for generating tax revenue is around 70%. [1] Economics Nobel laureate Paul Krugman (in whom I have considerable confidence because of his epistemological modesty and his track record) endorses this view [2]. The Cato Institute recently published an opposing view [3], but I don't find it persuasive, for socio-political reasons that I don't have time to go into. [0] https://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm https://money.cnn.com/2010/09/08/news/economy/reagan_years_t... [1] https://en.wikipedia.org/wiki/Laffer_curve#Empirical_data https://en.wikipedia.org/wiki/Laffer_curve#Empirical_data [2] https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio... [3] https://www.cato.org/publications/commentary/no-economists-dont-agree-70-percent-top-marginal-tax-rate-good-idea https://www.cato.org/publications/commentary/no-economists-d...
rossdavidh 7y ago
"The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not changed considerably since then." That part, was a good and highly relevant addition to the conversation. It would be given more attention, if it were not surrounded by the rest.
- microcolonel 7y ago
  Fair enough. I'm a bit frustrated today and I let too much of that come out in my phrasing. Sorry to dctoedt and everyone else who felt I was too coarse. I've moved things around a bit (without removing anything, for posterity, and so that the replies make sense), and moved the important statement to the top.
  - rossdavidh 7y ago
    Thank-you!

dctoedt 7y ago

> Try to actually understand the totality of the circumstances you're talking about. Please enlighten us. > The tax code is completely different today from what it was when there were considerably higher marginal tax rates. I'm aware. (I was in law school taking a couple of tax-law courses during the 1980 election debates about Reagan's proposed tax cuts.) > The actual ratio of tax to GDP has not changed considerably since then. Please explain how this is relevant to individual incentives and the "emergent behavior" that they create.

microcolonel 7y ago
> I'm aware. (I lived through those days, and was in law school and newly in practice during the Reagan tax cuts.) So yes, like most people here, you did not personally file taxes as a one-per-center before the Reagan administration. Nobody here is expecting you to muse accurately on pre-Reagan tax filing and how people accounted for their wealth. Just remember that nobody pays marginal rates on any money, ever. The deduction structure changed with the rates, as happened for FY 2018. The relationship between marginal rates and revenue/liability is modulated by deductions. > Please explain how this is relevant to individual incentives and the "emergent behavior" that they create. I'm saying that the "incentives" you cite (marginal tax rates you arbitrarily consider to be low) probably don't create that behaviour, because those same people have actually been paying about the same amount of tax this whole time; with the difference mainly coming in the form of subtle differences in compliance and in the way that people account for wealth. If you want to tax the caricature baron-type people you seem to be talking about, make playing by the rules as cheap as the creative strategies they inevitably and understandably employ when nominal marginal tax rates are higher than the cost of doing business a bit differently. Also consider that dragging down the rich doesn't uplift the lower and middle classes. If we have a monopoly problem (as the article's framing conveys), then we should maybe look at a solution to the incentives for excess corporate consolidation and anti-competitive behaviour, rather than getting dragged into the weeds with tired conversations about personal income taxes. Or if we're looking at the personal income tax side of things, at least look at something more relevant to the pain that small businesses face: people who are self-employed are at a tax disadvantage in the U.S, and self-employed people are often the ones who start businesses with their after-tax self-employment income.
- dctoedt 7y ago
  https://en.wikipedia.org/wiki/Gordian_Knot https://en.wikipedia.org/wiki/Gordian_Knot Or: The swordsman scene in Raiders of the Lost Ark: https://www.youtube.com/watch?v=anEuw8F8cpE https://www.youtube.com/watch?v=anEuw8F8cpE
  - microcolonel 7y ago
    > https://en.wikipedia.org/wiki/Gordian_Knot https://en.wikipedia.org/wiki/Gordian_Knot Recall for me a competing principle with its very own meta-relevant renaissance painting. You are not going to untangle this knot with "just raise the top marginal rate"; it does not eliminate any underlying assumptions which preempt a solution. You do not have indy's gun, and this is not a bumbling swordsman.
    - dctoedt 7y ago
      > You do not have indy's gun You're awfully confident. > this is not a bumbling swordsman. "Bumbling"? The swordsman in the Raiders clip seemed to be quite skilled; unfortunately for him and his mission, his skills — and more importantly, his assessment of his situation — were badly mismatched to the reality. Putting it another way: As my late father used to say, you can be the world's most-skilled rain dancer, but that doesn't mean you'll be able to make it rain. Supply-siders urge tax cuts and more tax cuts because that will supposedly "make it rain" due to innovators doing more innovating and entrepreneurs doing more enterprising; they also scold anyone who suggests raising the top marginal tax rate. There's more than a little reason to wonder whether the supply-siders are like rain dancers. If I understand supply-side economics correctly, the underlying model of human motivation assumes that innovators and entrepreneurs will change their behavior in response to almost any increase or decrease in marginal tax rates. While that's likely somewhat true when the marginal rates are at confiscatory levels, there's ample reason to doubt that it's true in the general case, because: 1. Optimizing after-tax revenue is not the only thing that motivates innovators and entrepreneurs. Many other things play roles as well, in varying degrees for different people: A quest for status; a sense of solidarity with "the tribe"; personal satisfaction from the work; and altruism, to name just a few factors. 2. We're nowhere near confiscatory marginal tax rates and haven't been for many years. The Reagan tax cuts were followed by his tax increases [0]. The tax hikes of the early 1990s, under Bush the Elder and Clinton, were followed by a major economic boom (yes, I know, correlation ≠ causation). Most economists who have studied the matter have estimated that the optimum maximum tax rate for generating tax revenue is around 70%. [1] Economics Nobel laureate Paul Krugman (in whom I have considerable confidence because of his epistemological modesty and his track record) endorses this view [2]. The Cato Institute recently published an opposing view [3], but I don't find it persuasive, for socio-political reasons that I don't have time to go into. [0] https://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm https://money.cnn.com/2010/09/08/news/economy/reagan_years_t... [1] https://en.wikipedia.org/wiki/Laffer_curve#Empirical_data https://en.wikipedia.org/wiki/Laffer_curve#Empirical_data [2] https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio... [3] https://www.cato.org/publications/commentary/no-economists-dont-agree-70-percent-top-marginal-tax-rate-good-idea https://www.cato.org/publications/commentary/no-economists-d...

rossdavidh 7y ago

"The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not changed considerably since then." That part, was a good and highly relevant addition to the conversation. It would be given more attention, if it were not surrounded by the rest.

microcolonel 7y ago
Fair enough. I'm a bit frustrated today and I let too much of that come out in my phrasing. Sorry to dctoedt and everyone else who felt I was too coarse. I've moved things around a bit (without removing anything, for posterity, and so that the replies make sense), and moved the important statement to the top.
- rossdavidh 7y ago
  Thank-you!