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> 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 p

> 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...
majormajor 7y ago
> 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. How do you discourage consolidation without increasingly punitive tax levels on concentrated wealth and income (individual and corporate)? There are strong financial incentives for winner-take-all, I don't see non-financial tools being effective at fighting them.
- dctoedt 7y ago
  > increasingly punitive tax levels After-tax income is not the only incentive that drives people. Entrepreneurs and corporate executives did their thing even when tax rates were significantly higher than today.
- AnthonyMouse 7y ago
  > How do you discourage consolidation without increasingly punitive tax levels on concentrated wealth and income (individual and corporate)? Income taxes can't do that anyway. If you have a pile of money collecting interest, it gets bigger over time whether you keep 80% of the interest or only 10%. It changes the rate but not the trend. And that's assuming it even does that, rather than having a nominally high marginal rate that nobody pays in practice, as was the case prior to the 1980s. The way you fight consolidation is by facilitating competition. You can't keep a monopoly if anyone with a dominant market position is prohibited by antitrust from vertically integrating and anybody with $100 in their pocket and an hour's notice can join the market and compete with you. The way you get stable monopolies is regulatory capture and a regulatory environment with many overlapping barriers to entry for small businesses.
dctoedt 7y ago
> Also consider that dragging down the rich doesn't uplift the lower and middle classes. You're pretty confident about your view of human motivation. 1. There's a certain motivational boost that comes from feeling that "we're all in the same boat." There's a reason that highly-paid NFL quarterbacks make a point of buying watches for their linemen, hosting banquets for them, etc. It's the same reason that military officers are taught never to ask your troops to do something you wouldn't be willing to do yourself if necessary — along with principles such as officers should only eat after they've made sure the troops are being fed, and they should sleep only when they've made sure the troops are getting sack time.* * In reality, of course, there are circumstances when that won't be the case, e.g., when standing watch in a 24-hour rotation. 2. On the other hand, resentment, triggered by a feeling of being ignored and abandoned, is "a thing," whether we like it or not (probably programmed by natural selection). Moreover, people tend to view their well-being in comparison with that of their neighbors [0]; failing to keep up with the Joneses can be a real demotivator. That's especially true if you've come to believe that what you see the Joneses have, and you don't, is not a luxury but a necessity. For good or ill, most of us have that tendency, to one degree or another — ask any parent who has heard, But Dad, I NEEEEED a [whatever]! 3. The rich didn't get that way entirely on their own merits (and sometimes not even principally that way). If you haven't seen or read Elizabeth Warren's famous remarks, here they are: <QUOTE> "There is nobody in this country who got rich on their own. Nobody. You built a factory out there — good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea — God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along." </QUOTE> This is spot on. [0] https://users.nber.org/~luttmer/relative.pdf https://users.nber.org/~luttmer/relative.pdf [1] https://www.goodreads.com/quotes/439207-there-is-nobody-in-this-country-who-got-rich-on https://www.goodreads.com/quotes/439207-there-is-nobody-in-t... and https://www.youtube.com/watch?v=60fQCDqXfq0 https://www.youtube.com/watch?v=60fQCDqXfq0
- nosianu 7y ago

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...

majormajor 7y ago

> 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. How do you discourage consolidation without increasingly punitive tax levels on concentrated wealth and income (individual and corporate)? There are strong financial incentives for winner-take-all, I don't see non-financial tools being effective at fighting them.

dctoedt 7y ago
> increasingly punitive tax levels After-tax income is not the only incentive that drives people. Entrepreneurs and corporate executives did their thing even when tax rates were significantly higher than today.
AnthonyMouse 7y ago
> How do you discourage consolidation without increasingly punitive tax levels on concentrated wealth and income (individual and corporate)? Income taxes can't do that anyway. If you have a pile of money collecting interest, it gets bigger over time whether you keep 80% of the interest or only 10%. It changes the rate but not the trend. And that's assuming it even does that, rather than having a nominally high marginal rate that nobody pays in practice, as was the case prior to the 1980s. The way you fight consolidation is by facilitating competition. You can't keep a monopoly if anyone with a dominant market position is prohibited by antitrust from vertically integrating and anybody with $100 in their pocket and an hour's notice can join the market and compete with you. The way you get stable monopolies is regulatory capture and a regulatory environment with many overlapping barriers to entry for small businesses.

dctoedt 7y ago

> Also consider that dragging down the rich doesn't uplift the lower and middle classes. You're pretty confident about your view of human motivation. 1. There's a certain motivational boost that comes from feeling that "we're all in the same boat." There's a reason that highly-paid NFL quarterbacks make a point of buying watches for their linemen, hosting banquets for them, etc. It's the same reason that military officers are taught never to ask your troops to do something you wouldn't be willing to do yourself if necessary — along with principles such as officers should only eat after they've made sure the troops are being fed, and they should sleep only when they've made sure the troops are getting sack time.* * In reality, of course, there are circumstances when that won't be the case, e.g., when standing watch in a 24-hour rotation. 2. On the other hand, resentment, triggered by a feeling of being ignored and abandoned, is "a thing," whether we like it or not (probably programmed by natural selection). Moreover, people tend to view their well-being in comparison with that of their neighbors [0]; failing to keep up with the Joneses can be a real demotivator. That's especially true if you've come to believe that what you see the Joneses have, and you don't, is not a luxury but a necessity. For good or ill, most of us have that tendency, to one degree or another — ask any parent who has heard, But Dad, I NEEEEED a [whatever]! 3. The rich didn't get that way entirely on their own merits (and sometimes not even principally that way). If you haven't seen or read Elizabeth Warren's famous remarks, here they are: <QUOTE> "There is nobody in this country who got rich on their own. Nobody. You built a factory out there — good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea — God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along." </QUOTE> This is spot on. [0] https://users.nber.org/~luttmer/relative.pdf https://users.nber.org/~luttmer/relative.pdf [1] https://www.goodreads.com/quotes/439207-there-is-nobody-in-this-country-who-got-rich-on https://www.goodreads.com/quotes/439207-there-is-nobody-in-t... and https://www.youtube.com/watch?v=60fQCDqXfq0 https://www.youtube.com/watch?v=60fQCDqXfq0

nosianu 7y ago