Can Afford Higher Taxes. Will Work Less.

[boedicca]

The macro issue raised by the OP is that higher taxes do affect economic activity.

Arguing about whether one person can afford to pay more is beside the point (he's lived in his house since 1987 - many others at his income level who purchased homes in 2005 might not feel quite so sanguine).

When politicians say that tax cuts "cost money" they based their claims on Static Models which assume that changes in taxes do not cause participants in the market to alter their behavior. History has proven how wrong these models are, yet we hear this nonsense spewing from DC ad nauseum.

High Taxes suppress Economic Activity, lower GDP Growth, and result in Less Job Creation.

Add a big dose of new laws and regulatory uncertainty, and we have our present jobless "recovery" (which is really a growth recession - just enough growth to hold unemployment flat}.

 

[hipeter924]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

Exactly. Right now those with money just don't know where 'all this' is going, so gold and silver keep rising. When the investor class decides the economy has bottomed, those commodities will begin to fall, right now? Nope, they don't think bottom's hit yet.

Same with this class warfare. The poor and middle class, they'll keep working and paying, no choice. The high earners? They have choices. Oftentimes like doctors, they work many, many hours. They could choose to work less and fall below to the other side of no man's land.

Well in truth we don't need a government (or any tax at all). Non-for profit organizations can cover the void left by social services, hospitals and schools can be private or community owned, and the same with the military and police. The government and mainstream media want people to believe government in any form works, because they have their money and jobs on the line if they don't keep up the propaganda story.

 

[boedicca]

We do need a government to enforce the Consitution, the rule of law, and for diplomacy and national defense.

The rest could be eliminated.

 

[Annie]

So is this Mankiw's way of announcing he's giving up his column at the NYT because the pay for that extracurricular won't be worth it anymore?

I think he stated clearly enough what he meant. See, it's about choice. Those with choices, make them. Middle class? Working poor? They don't get to pick and choose. They just get screwed.

 

[Annie]

If they work less and there is a demand for their work, someone else, some younger whipper snapper, will come in and fill the void.

Perhaps, they will not be paid as much. Nor will the draw the same audience, thus the presenter will not make as much. It 'depresses' the outlet.

 

[Annie]

Not to mention the fact that the "young whippersnapper" won't fall into this same marginal tax bracket, at the old rate or the new, so the government will be worse off than if they didn't raise the taxes in the first place.

that's just how our system works and how it has worked Revere.

those that are older and more experienced slow down in their latter years and those initially less experienced, take their places....then those that were less experienced become more experienced, and eventually older and work less themselves, while another youngun comes in and takes their spot.

No one is indispensable.

And when demand for something is there, the market will fill the void.

Care, no one is speaking of being indispensable, rather it's maximizing the outcome for the greater system. If only one person makes that type of choice, no effect other than person. If only one part of the array of outlets, again little or no impact. In this type of choice however, when those making the most have little incentive to 'do more', they likely will choose to do less. Not about one column, article, speech, but about investing, creating, etc.

 

[Baruch Menachem]

If they work less and there is a demand for their work, someone else, some younger whipper snapper, will come in and fill the void.

True, but the revenue to the government will be less.

Young wipper snapper will probably get paid less, and will pay a lower rate.

And it will not be what the customer wants.


By charging the higher rate, there are three losers to this transaction. M gets less money, the state gets less taxes and the consumer has to make do with a lesser product.

The new guy is happy, to be sure. But his gain is less than the social loss.

 

[Greenbeard]

I think he stated clearly enough what he meant. See, it's about choice. Those with choices, make them. Middle class? Working poor? They don't get to pick and choose. They just get screwed.

That's a nice attempt to reframe it but that's clearly not what he's saying. The key phrase is "In effect, once the entire tax system is taken into account, my family’s marginal tax rate is..." That is, it's about his total tax burden, in which he includes the estate tax that will be paid after his death. Only by incorporating a 50%+ post-death estate tax into his calculation of his effective tax rate can he argue that he's paying a 90% tax rate because, of course, on a given dollar in a given year he's not paying that much.

The primary component of his effective tax rate calculation--the estate tax--doesn't apply to the vast majority of households in the United States. So this is a statement only about Mankiw, not about the plight of the middle class or poor.

But it will be interesting to see if he puts his money where his mouth is and stops writing in the NYT once the old tax rates return.

 

[Annie]

I think he stated clearly enough what he meant. See, it's about choice. Those with choices, make them. Middle class? Working poor? They don't get to pick and choose. They just get screwed.

That's a nice attempt to reframe it but that's clearly not what he's saying. The key phrase is "In effect, once the entire tax system is taken into account, my family’s marginal tax rate is..." That is, it's about his total tax burden, in which he includes the estate tax that will be paid after his death. Only by incorporating a 50%+ post-death estate tax into his calculation of his effective tax rate can he argue that he's paying a 90% tax rate because, of course, on a given dollar in a given year he's not paying that much.

The primary component of his effective tax rate calculation--the estate tax--doesn't apply to the vast majority of households in the United States. So this is a statement only about Mankiw, not about the plight of the middle class or poor.

But it will be interesting to see if he puts his money where his mouth is and stops writing in the NYT once the old tax rates return.

The 'vast majority of households' do not make his salary. Granted, no contest. However, those in his tax bracket do pay the overwhelming total tax collected. No contest. Less work, less collection, no matter how how the rate. They can afford to make that choice.

 

[Cecilie1200]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

Exactly. Right now those with money just don't know where 'all this' is going, so gold and silver keep rising. When the investor class decides the economy has bottomed, those commodities will begin to fall, right now? Nope, they don't think bottom's hit yet.

Same with this class warfare. The poor and middle class, they'll keep working and paying, no choice. The high earners? They have choices. Oftentimes like doctors, they work many, many hours. They could choose to work less and fall below to the other side of no man's land.

That's what I don't get: why leftists don't understand that they aren't making their decisions and taking their actions in a vacuum. They seem to assume that other people will continue to behave in exactly the same way, changing none of their actions, regardless of what the government does or what policies it enacts.

 

[Cecilie1200]

but none of those people couldve become wealthy without society and government protecting their wealth. if there was no government to create law and order, there would be no security, and anyone could have come around to seize their fortune. taxes are essentially a citizen's fee to be a citizen and enjoy (theoretically) protection, justice, public roads, public parks, public everything. that is why wealthy people dont deserve tax cuts. but hell, wouldnt you rather live in squallor in a shack paying no taxes than live in a mansion paying alot of taxes, wondering if perhaps you shouldnt buy another ferrari?

Spare me. Trying to pretend this is about people objecting to paying taxes for basic services like roads and cops and such is as disingenuous and dishonest as trying to pretend that abortion-on-demand is about women who've been raped by their own dads. We are so far past the taxes that pay for essential public services, they look like a dot on the horizon in our rearview mirror. It doesn't take a 90% tax rate on ANYONE'S income to cover that stuff. Be honest.

 

[edthecynic]

I think he stated clearly enough what he meant. See, it's about choice. Those with choices, make them. Middle class? Working poor? They don't get to pick and choose. They just get screwed.

That's a nice attempt to reframe it but that's clearly not what he's saying. The key phrase is "In effect, once the entire tax system is taken into account, my family’s marginal tax rate is..." That is, it's about his total tax burden, in which he includes the estate tax that will be paid after his death. Only by incorporating a 50%+ post-death estate tax into his calculation of his effective tax rate can he argue that he's paying a 90% tax rate because, of course, on a given dollar in a given year he's not paying that much.

The primary component of his effective tax rate calculation--the estate tax--doesn't apply to the vast majority of households in the United States. So this is a statement only about Mankiw, not about the plight of the middle class or poor.

But it will be interesting to see if he puts his money where his mouth is and stops writing in the NYT once the old tax rates return.

Not even then because the first $3.5 million is exempt from the estate tax. The 90% is a complete fabrication.

 

[Cecilie1200]

Not to mention the fact that the "young whippersnapper" won't fall into this same marginal tax bracket, at the old rate or the new, so the government will be worse off than if they didn't raise the taxes in the first place.

And gosh, once that young whippersnapper DOES advance to that level, HE'LL stop working as much and be replaced by yet another young person earning a lot less and paying a lot less in taxes. What a wonderful cycle.

 

[Revere]

What's really funny is, Mankiw can avoid those taxes, but a guy making half as much as he does (or less) won't. The lower wage earner will see Federal income taxes raised 20%, with no way to avoid that.

Is this how it's supposed to work, lefties?

 

[Toro]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

This is a good point, but it should not be overblown. After all, Greg Mankiw could make millions of dollars a year as a consultant in the private sector but instead chooses to make far less as an academic. Therefore, something other than after-tax income drives his major decisions.

Economist's View: Is It Really the Money?

 

[Toro]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

Exactly. Right now those with money just don't know where 'all this' is going, so gold and silver keep rising. When the investor class decides the economy has bottomed, those commodities will begin to fall, right now? Nope, they don't think bottom's hit yet.

Same with this class warfare. The poor and middle class, they'll keep working and paying, no choice. The high earners? They have choices. Oftentimes like doctors, they work many, many hours. They could choose to work less and fall below to the other side of no man's land.

I know many, many extremely wealthy people who run financial firms, hedge funds, etc. (Unfortunately, I am not one of them.) None of them will work a minute less because taxes are higher. They will try like to hell to avoid paying taxes, but do people honestly think that someone will work less hard making $80 million than $100 million?

 

[Care4all]

If they work less and there is a demand for their work, someone else, some younger whipper snapper, will come in and fill the void.

True, but the revenue to the government will be less.

Young wipper snapper will probably get paid less, and will pay a lower rate.

And it will not be what the customer wants.


By charging the higher rate, there are three losers to this transaction. M gets less money, the state gets less taxes and the consumer has to make do with a lesser product.

The new guy is happy, to be sure. But his gain is less than the social loss.

It's done ALL THE TIME, whether taxes go up or whether they don't BM.

the younger, paid less, replace those choosing to retire or not work as much.

THANK GOD, this happens, so that the younger can get experience and keep our economy going while those older, make their choice to head out of the working scene.

I see nothing wrong with this....as long as it is the individual making the CHOICE, and not being FORCED out of their jobs.

 

[Revere]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

Exactly. Right now those with money just don't know where 'all this' is going, so gold and silver keep rising. When the investor class decides the economy has bottomed, those commodities will begin to fall, right now? Nope, they don't think bottom's hit yet.

Same with this class warfare. The poor and middle class, they'll keep working and paying, no choice. The high earners? They have choices. Oftentimes like doctors, they work many, many hours. They could choose to work less and fall below to the other side of no man's land.

I know many, many extremely wealthy people who run financial firms, hedge funds, etc. (Unfortunately, I am not one of them.) None of them will work a minute less because taxes are higher. They will try like to hell to avoid paying taxes, but do people honestly think that someone will work less hard making $80 million than $100 million?

Starting at $250,000, they will do what they can to avoid paying them. And they can, moreso than someone making $75,000 who will see his taxes go up and can't avoid paying them.

 

[Toro]

Starting at $250,000, they will do what they can to avoid paying them. And they can, moreso than someone making $75,000 who will see his taxes go up and can't avoid paying them.

Of course they will try to avoid paying taxes. I would expect nothing less. But they aren't going to work any less.

 

[Annie]

People make decisions on the margin. you move the margin, you change the decisions they make.

Lower income people have no real choice in the matter. They have to produce to the limit of their time, or they lose.

At the level of income that the Tax cuts are at, increases in taxes result in less economic activity, which means those who need the services do without, and the government looses income.

Exactly. Right now those with money just don't know where 'all this' is going, so gold and silver keep rising. When the investor class decides the economy has bottomed, those commodities will begin to fall, right now? Nope, they don't think bottom's hit yet.

Same with this class warfare. The poor and middle class, they'll keep working and paying, no choice. The high earners? They have choices. Oftentimes like doctors, they work many, many hours. They could choose to work less and fall below to the other side of no man's land.

I know many, many extremely wealthy people who run financial firms, hedge funds, etc. (Unfortunately, I am not one of them.) None of them will work a minute less because taxes are higher. They will try like to hell to avoid paying taxes, but do people honestly think that someone will work less hard making $80 million than $100 million?

Oh no doubt there are many like that, especially those that tend towards the gambling type of behavior with systems. I'd say that whether or not someone who can afford to, makes the choice to work less depends on many factors: age, family time concerns, joy the employment itself makes.

People make choices for many reasons. One who chose to stop working, to avoid paying out: Tom Clancy. Motivation: screwing ex-wife. Lots of reason.