7 ms·

“We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect r

by mhoad 5y ago

“We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.”

asdf333 5y ago
anyone surprised?
- rcMgD2BwE72F 5y ago
  Why is it, then, on the front page?
  - pavlov 5y ago
    “Such reforms do not have any significant effect on economic growth and unemployment” is in direct contradiction of a central tenet in center-right politics in the West for the past 40 years. It bears repeating.
  - revscat 5y ago
    To annoy pg?
  - toomuchtodo 5y ago
    To reinforce that the concept that tax cuts for the wealthy creates growth and jobs is patently false. Some are still uninformed, or in disbelief, despite the data and scientific consensus.
    - seneca 5y ago
      > Some are still uninformed, or in disbelief, despite the data and scientific consensus. I think calling this a "scientific consensus" is a bit inaccurate. There's very little consensus in economics (and one can argue about the level of science as well).
      - toomuchtodo 5y ago
        Let's split the difference. "Emotionally rejecting strong evidence contrary to their belief system."
- deleted 5y ago
  [deleted]
- pbecotte 5y ago
  A little. The thesis behind 'trickle down' sorta makes sense if you think about it. Less taxes = more money to invest = more investment = more economic activity. I did kind of expect to see SOME impact, though have felt for a while that the financial markets have become so disconnected from actual investment behavior that the impact would be marginal...and looks like this study concludes its even less then that.
  - NotSammyHagar 5y ago
    That might be obvious to you but history has shown it to be inaccurate. Of course rich people, who have lots of influence will be in favor of things that lower their own personal taxes. But in the us it has been show this does not lift others up. The thing that helps lift the overall economy is more money to less wealthy people, especially poorer, because they spend any extra income they receive on necessities.
  - thek3nger 5y ago
    It makes sense until you cross the point of diminishing returns. And I think many countries crossed that point by at least 20 percentage points.
  - deleted 5y ago
    [deleted]
  - simonw 5y ago
    That's exactly the problem: arguing that taxing the rich less will lead to trickle down / more economic activity / jobs etc sounds like it should work. As the linked study (and many others like it) shows, it doesn't actually work in practice.
  - tstrimple 5y ago
    This is one of many dangers of "common sense" style policy and legislation. It's very easy to make misleading or outright false statements and dress it up as "common sense" and sell it to millions of people over and over again decade after decade despite all evidence building up refuting it.
  - 5y ago
- jjoonathan 5y ago
  Surprised? No. Upset? Yes. Every time someone dares to suggest that a policy designed to benefit elites will hurt others, a clown car full of economists drives up. They pile out, tripping over each other to explain to us how we just aren't smart enough to understand economics and how actually cutting taxes for the rich (for the Nth time) will create such extraordinary economic growth that everyone's boat will float upwards as a result. Of course, they are wrong, but next time this topic comes around I guarantee the clown car will be there and in the meantime it behooves us to stockpile ammunition. See also: shipping all the manufacturing to China.
  - throwaway6734 5y ago
    >shipping all the manufacturing to China. How is this related? I enjoy not having to pay $2000 for a cellphone and $500 for a pair of sneakers
    - NotSammyHagar 5y ago
      You'd never have to pay $500 for sneakers made in the us, other than fancy designer shoes, prices unrelated to costs. You can already pay 2k for a cell phone.
    - ShroudedNight 5y ago
      The hypothetical $2000 cellphone doesn't exist in a vacuum. It's entirely conceivable that income difference from the increased purchasing power of domestic labour would more than offset the potentially increased prices.
    - jjoonathan 5y ago
      Yeah, but the American middle class got absolutely wrecked. Cheap sneakers don't make up for a lost job. Also, the numbers you cite seem pretty dubious. Yes, if you want to do onshore manufacturing today, it's twice as expensive, but propagating that all the way into the cost of the goods assumes 100% of the cost is in manufacturing, that there would be zero economy-of-scale benefit from retaining our manufacturing base, and it assumes no benefit to your income from the increased economic re-circulation. Those... aren't neutral assumptions. This is a separate matter from the one in TFA but the players and strategies are similar.
mushufasa 5y ago
This has been the consensus within academic econometrics for ~15-20 years, FYI, going back to the Laffer Curve argument. Econometrics != economics; you will still find economics people, especially at think tanks, who will hawk the 'tax cuts solve all problems' theory (typically associated with think tanks funded by wealth people).
- mumblemumble 5y ago
  “In statistics it’s enough for our results to be cool. In psychology they’re supposed to be correct. In economics they’re supposed to be correct and consistent with your ideology.” http://www.stat.columbia.edu/~gelman/book/gelman_quotes.pdf http://www.stat.columbia.edu/~gelman/book/gelman_quotes.pdf Possibly the most fundamental distinction between economics and other fields is that, in economics, it seems to still be permissible to start with your conclusions and then work back from there.
  - nickff 5y ago
    >"Possibly the most fundamental distinction between economics and other fields is that, in economics, it seems to still be permissible to start with your conclusions and then work back from there. " This is only really true in the most contentious subjects studied in economics, and even then, I don't think economics is unique or even unusual in this respect. Unpalatable results go unpublished in many of the social sciences.
  - rory 5y ago
    > start with your conclusions and then work back from there Sadly this doesn't make it distinct from other fields at all, at least within the social sciences. Much of sociology is built on explicit anti-positivism and anti-empiricism.
- Mikeb85 5y ago
  Well think-tanks are basically political lobbying groups that try to justify ideology.
dantheman 5y ago
I think this misses the fundamental issue, isn't necessarily absolute growth, but the right to force people to pay taxes. There are lots of things that are morally correct, but in the short/medium term are inneficient.
- Analemma_ 5y ago
  This is moving the goalposts. I’ve absolutely heard countless people state, with total conviction, that huge tax cuts for the rich will definitely boost growth, and even be revenue-positive because of all that additional growth. You’re backpedaling now that that clearly isn’t true.
- mumblemumble 5y ago
  I think one could make a case that the disconnect is even more fundamental than that. It's a conflict between people who (for the most part, I presume) prefer consequentialist ethics, and people who prefer deontological ethics. If we take, for the sake of argument, (edit: what I'm guessing is) your unstated major premise of a deontological approach to ethics, then yes, you're absolutely right, no amount of positive economic outcome could possibly justify forcibly depriving people of their rightful property, because the ends never justify the means. However, for the sake of keeping the discussion sane, I'd argue it's important to come out and say that this is where you're coming from, rather than just saying that "this misses the fundamental issue." Because, to someone who prefers almost any other general approach to ethics, it is absolutely central to the fundamental issue. And you can't really just dismiss all those other ways of thinking by just ignoring them.
- specialist 5y ago
  Obsolete metaphor. The new metaphor is: Government spending is a loan repaid thru taxes.
ramesh31 5y ago
>We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. This isn't surprising; a tautology almost. But it doesn't really give us any answers. The real question is: is that a bad thing, and if so how bad is it?. Wealth inequality has been a constant of the human condition since the first farmers learned to aggregate more grain than others. But what, if any, deleterious effect does this actually have on society? And does the concentration of wealth lead to innovations only possible with such an ability to deploy capital in a highly targeted manner?
- KittenInABox 5y ago
  My understanding is that wealth inequality is suboptimal because it leads to political and economic power being concentrated in a few people, which makes the system fragile and leads to instability, thus causing less investment, and then it becomes a fallout.
  - missedthecue 5y ago
    Michael Bloomberg threw his fortune at becoming president and lost miserably. Jeff Bezos is the most hated person in Washington. I don't see any evidence or a correlation that wealth is buying people political power, at least in my country.
    - jimbilly22 5y ago
      Here's one small example that I found illuminating and funny. Bezos (a major political donor) lost a NASA contract for 10 billion to SpaceX. He freaked So the US Senate, looking out for their buddy, simply added the 10 billion to their next budget directly for him: https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-senate-bailout/ https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-s... Just one small example
      - missedthecue 5y ago
        "The Endless Frontier Act, a bill to beef up resources for science and technology research is being debated on the Senate floor this week. An amendment was added to that legislation by Democrat Sen. Maria Cantwell, to hand over $10 billion to NASA. Cantwell’s amendment is no sure bet though." This doesn't sound like money for Jeff Bezos. It's money for NASA. What it sounds like is some tortured analysis of a bill that probably isn't going to pass by a journalist who also hates rich guys.
jimbilly22 5y ago
in the short term perhaps. In the long term, countries with less regulated markets have better economic outcomes. Nearly the entire first-world has adopted the US model of economics. People forget that at one time it was radical.
- PaulDavisThe1st 5y ago
  > in the short term perhaps. In the long term, countries with less regulated markets have better economic outcomes This is just a laffer-curve-style argument. Draw a graph. Point to one end, and mumble. Point to the other end and mumble something else. Say "We want to be here" while pointing somewhere on the curve. While it remains unhappily true that lots of people are taken in by this sort of argument, it also remains true that it's an astonishingly weak sort of argument.
  - jimbilly22 5y ago
    I think that's fair, it just depends on what frame we are arguing in. Because the motivation of a lot of the people arguing for "raising taxes on the rich" is to indeed leave the curve altogether. Will small increases or decreases in tax rates fundamentally alter GDP? I think obviously not. But those attempting to make a data-based argument for introducing MMT or a UBI with significantly nationalized elements of the economy (healthcare, energy, etc.) are laughable, when the evidence is so overwhelming that these ideas lead to adverse outcomes in the long-term. I'm not attempting to straw-man, just to cut the meat to what people are actually arguing about (which isn't a couple percentage points in a tax rate). And it's important to flip it and be honest...and say, no, the data does indeed show without question that freer societies are way better -- and it's just that simple.
    - PaulDavisThe1st 5y ago
      > the data does indeed show without question that freer societies are way better -- and it's just that simple. This is just absurd. "Better" is not a metric. By the metrics most widely used worldwide, the Scandavian countries are "better" than the US, while also being "less free". You may disagree with the metrics for "better", and/or you might disagree with the metrics for "less free", but the core point is that these things are not simple.

by mhoad 5y ago

asdf333 5y ago

anyone surprised?

rcMgD2BwE72F 5y ago
Why is it, then, on the front page?
- pavlov 5y ago
  “Such reforms do not have any significant effect on economic growth and unemployment” is in direct contradiction of a central tenet in center-right politics in the West for the past 40 years. It bears repeating.
- revscat 5y ago
  To annoy pg?
- toomuchtodo 5y ago
  To reinforce that the concept that tax cuts for the wealthy creates growth and jobs is patently false. Some are still uninformed, or in disbelief, despite the data and scientific consensus.
  - seneca 5y ago
    > Some are still uninformed, or in disbelief, despite the data and scientific consensus. I think calling this a "scientific consensus" is a bit inaccurate. There's very little consensus in economics (and one can argue about the level of science as well).
    - toomuchtodo 5y ago
      Let's split the difference. "Emotionally rejecting strong evidence contrary to their belief system."
deleted 5y ago
[deleted]
pbecotte 5y ago
A little. The thesis behind 'trickle down' sorta makes sense if you think about it. Less taxes = more money to invest = more investment = more economic activity. I did kind of expect to see SOME impact, though have felt for a while that the financial markets have become so disconnected from actual investment behavior that the impact would be marginal...and looks like this study concludes its even less then that.
- NotSammyHagar 5y ago
  That might be obvious to you but history has shown it to be inaccurate. Of course rich people, who have lots of influence will be in favor of things that lower their own personal taxes. But in the us it has been show this does not lift others up. The thing that helps lift the overall economy is more money to less wealthy people, especially poorer, because they spend any extra income they receive on necessities.
- thek3nger 5y ago
  It makes sense until you cross the point of diminishing returns. And I think many countries crossed that point by at least 20 percentage points.
- deleted 5y ago
  [deleted]
- simonw 5y ago
  That's exactly the problem: arguing that taxing the rich less will lead to trickle down / more economic activity / jobs etc sounds like it should work. As the linked study (and many others like it) shows, it doesn't actually work in practice.
- tstrimple 5y ago
  This is one of many dangers of "common sense" style policy and legislation. It's very easy to make misleading or outright false statements and dress it up as "common sense" and sell it to millions of people over and over again decade after decade despite all evidence building up refuting it.
- 5y ago
jjoonathan 5y ago
Surprised? No. Upset? Yes. Every time someone dares to suggest that a policy designed to benefit elites will hurt others, a clown car full of economists drives up. They pile out, tripping over each other to explain to us how we just aren't smart enough to understand economics and how actually cutting taxes for the rich (for the Nth time) will create such extraordinary economic growth that everyone's boat will float upwards as a result. Of course, they are wrong, but next time this topic comes around I guarantee the clown car will be there and in the meantime it behooves us to stockpile ammunition. See also: shipping all the manufacturing to China.
- throwaway6734 5y ago
  >shipping all the manufacturing to China. How is this related? I enjoy not having to pay $2000 for a cellphone and $500 for a pair of sneakers
  - NotSammyHagar 5y ago
    You'd never have to pay $500 for sneakers made in the us, other than fancy designer shoes, prices unrelated to costs. You can already pay 2k for a cell phone.
  - ShroudedNight 5y ago
    The hypothetical $2000 cellphone doesn't exist in a vacuum. It's entirely conceivable that income difference from the increased purchasing power of domestic labour would more than offset the potentially increased prices.
  - jjoonathan 5y ago
    Yeah, but the American middle class got absolutely wrecked. Cheap sneakers don't make up for a lost job. Also, the numbers you cite seem pretty dubious. Yes, if you want to do onshore manufacturing today, it's twice as expensive, but propagating that all the way into the cost of the goods assumes 100% of the cost is in manufacturing, that there would be zero economy-of-scale benefit from retaining our manufacturing base, and it assumes no benefit to your income from the increased economic re-circulation. Those... aren't neutral assumptions. This is a separate matter from the one in TFA but the players and strategies are similar.

mushufasa 5y ago

This has been the consensus within academic econometrics for ~15-20 years, FYI, going back to the Laffer Curve argument. Econometrics != economics; you will still find economics people, especially at think tanks, who will hawk the 'tax cuts solve all problems' theory (typically associated with think tanks funded by wealth people).

mumblemumble 5y ago
“In statistics it’s enough for our results to be cool. In psychology they’re supposed to be correct. In economics they’re supposed to be correct and consistent with your ideology.” http://www.stat.columbia.edu/~gelman/book/gelman_quotes.pdf http://www.stat.columbia.edu/~gelman/book/gelman_quotes.pdf Possibly the most fundamental distinction between economics and other fields is that, in economics, it seems to still be permissible to start with your conclusions and then work back from there.
- nickff 5y ago
  >"Possibly the most fundamental distinction between economics and other fields is that, in economics, it seems to still be permissible to start with your conclusions and then work back from there. " This is only really true in the most contentious subjects studied in economics, and even then, I don't think economics is unique or even unusual in this respect. Unpalatable results go unpublished in many of the social sciences.
- rory 5y ago
  > start with your conclusions and then work back from there Sadly this doesn't make it distinct from other fields at all, at least within the social sciences. Much of sociology is built on explicit anti-positivism and anti-empiricism.
Mikeb85 5y ago
Well think-tanks are basically political lobbying groups that try to justify ideology.

dantheman 5y ago

I think this misses the fundamental issue, isn't necessarily absolute growth, but the right to force people to pay taxes. There are lots of things that are morally correct, but in the short/medium term are inneficient.

Analemma_ 5y ago
This is moving the goalposts. I’ve absolutely heard countless people state, with total conviction, that huge tax cuts for the rich will definitely boost growth, and even be revenue-positive because of all that additional growth. You’re backpedaling now that that clearly isn’t true.
mumblemumble 5y ago
I think one could make a case that the disconnect is even more fundamental than that. It's a conflict between people who (for the most part, I presume) prefer consequentialist ethics, and people who prefer deontological ethics. If we take, for the sake of argument, (edit: what I'm guessing is) your unstated major premise of a deontological approach to ethics, then yes, you're absolutely right, no amount of positive economic outcome could possibly justify forcibly depriving people of their rightful property, because the ends never justify the means. However, for the sake of keeping the discussion sane, I'd argue it's important to come out and say that this is where you're coming from, rather than just saying that "this misses the fundamental issue." Because, to someone who prefers almost any other general approach to ethics, it is absolutely central to the fundamental issue. And you can't really just dismiss all those other ways of thinking by just ignoring them.
specialist 5y ago
Obsolete metaphor. The new metaphor is: Government spending is a loan repaid thru taxes.

ramesh31 5y ago

>We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. This isn't surprising; a tautology almost. But it doesn't really give us any answers. The real question is: is that a bad thing, and if so how bad is it?. Wealth inequality has been a constant of the human condition since the first farmers learned to aggregate more grain than others. But what, if any, deleterious effect does this actually have on society? And does the concentration of wealth lead to innovations only possible with such an ability to deploy capital in a highly targeted manner?

KittenInABox 5y ago
My understanding is that wealth inequality is suboptimal because it leads to political and economic power being concentrated in a few people, which makes the system fragile and leads to instability, thus causing less investment, and then it becomes a fallout.
- missedthecue 5y ago
  Michael Bloomberg threw his fortune at becoming president and lost miserably. Jeff Bezos is the most hated person in Washington. I don't see any evidence or a correlation that wealth is buying people political power, at least in my country.
  - jimbilly22 5y ago
    Here's one small example that I found illuminating and funny. Bezos (a major political donor) lost a NASA contract for 10 billion to SpaceX. He freaked So the US Senate, looking out for their buddy, simply added the 10 billion to their next budget directly for him: https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-senate-bailout/ https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-s... Just one small example
    - missedthecue 5y ago
      "The Endless Frontier Act, a bill to beef up resources for science and technology research is being debated on the Senate floor this week. An amendment was added to that legislation by Democrat Sen. Maria Cantwell, to hand over $10 billion to NASA. Cantwell’s amendment is no sure bet though." This doesn't sound like money for Jeff Bezos. It's money for NASA. What it sounds like is some tortured analysis of a bill that probably isn't going to pass by a journalist who also hates rich guys.

jimbilly22 5y ago

in the short term perhaps. In the long term, countries with less regulated markets have better economic outcomes. Nearly the entire first-world has adopted the US model of economics. People forget that at one time it was radical.

PaulDavisThe1st 5y ago
> in the short term perhaps. In the long term, countries with less regulated markets have better economic outcomes This is just a laffer-curve-style argument. Draw a graph. Point to one end, and mumble. Point to the other end and mumble something else. Say "We want to be here" while pointing somewhere on the curve. While it remains unhappily true that lots of people are taken in by this sort of argument, it also remains true that it's an astonishingly weak sort of argument.
- jimbilly22 5y ago
  I think that's fair, it just depends on what frame we are arguing in. Because the motivation of a lot of the people arguing for "raising taxes on the rich" is to indeed leave the curve altogether. Will small increases or decreases in tax rates fundamentally alter GDP? I think obviously not. But those attempting to make a data-based argument for introducing MMT or a UBI with significantly nationalized elements of the economy (healthcare, energy, etc.) are laughable, when the evidence is so overwhelming that these ideas lead to adverse outcomes in the long-term. I'm not attempting to straw-man, just to cut the meat to what people are actually arguing about (which isn't a couple percentage points in a tax rate). And it's important to flip it and be honest...and say, no, the data does indeed show without question that freer societies are way better -- and it's just that simple.
  - PaulDavisThe1st 5y ago
    > the data does indeed show without question that freer societies are way better -- and it's just that simple. This is just absurd. "Better" is not a metric. By the metrics most widely used worldwide, the Scandavian countries are "better" than the US, while also being "less free". You may disagree with the metrics for "better", and/or you might disagree with the metrics for "less free", but the core point is that these things are not simple.