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February 26, 2008 10:26 PM   Subscribe

In 1980 Ronald Reagan surrounded himself with economic thinkers that challenged the prevailing Keynesian doctrine with supply side economics. In the same way that Arthur Laffer and Milton Friedman drove Reagan's thinking. A new generation of economists from the University of Chicago are advising Barack Obama. Will behavioral economics change politics the way supply side economics did a generation ago?
posted by humanfont (58 comments total) 17 users marked this as a favorite

 
Hopefully not in exactly the same -way- that Economists of yore shaped Reagan.
posted by socalsamba at 10:35 PM on February 26, 2008


I'd like to see 15% flat sales tax, no income tax, 40% capital gains tax.

Credit/loan interest capped at 20%. ARM mortgages made illegal.

And a flower in every gun.
posted by plexi at 10:39 PM on February 26, 2008 [1 favorite]


ARM mortgages made illegal.

You don't even know what "ARM" stands for.
posted by Mr. President Dr. Steve Elvis America at 10:41 PM on February 26, 2008 [6 favorites]


Yeah, raise the capital gains tax! Americans need to save and invest even less!!!
posted by Spacelegoman at 10:46 PM on February 26, 2008


Yeah, raise the capital gains tax! Americans need to save and invest even less!!!

Not exactly. Apparently plexi just strongly feels that Americans should invest in debt, not equity. Why? No clue. Actually, equity is OK, but only if it's a non-growth stock that distributes corporate earnings currently.
posted by Mr. President Dr. Steve Elvis America at 10:57 PM on February 26, 2008


I know what ARM stands for.

But I know that I don't know enough about economics to answer flippantly about serious policy discussion. And I'm guessing that no one else in the thread so far does either.

So I'll stick to what I'm trained for...snarking the snarkers.

Good articles and fpp by the way.
posted by afflatus at 11:03 PM on February 26, 2008


Will behavioral economics change politics the way supply side economics did a generation ago?

Well, I don't know if supply side economics changed politics, or just made being a consumerist sociopath stylish.
posted by wfrgms at 11:07 PM on February 26, 2008 [1 favorite]


Actually, equity is OK, but only if it's a non-growth stock that distributes corporate earnings currently.

I'm paying 40+% taxes all total on my present annual income. I'll get some of that back via SS retirement benefits but let's not pretend that the 40% taxation level is confiscatory.
posted by panamax at 11:08 PM on February 26, 2008


This is a great article. Is there something that similarly covers the motivations behind the current administration* that goes beyond its Reagan influence?

*I do realize it's mostly "how much money can I and my friends make?," but they obviously feel that war stimulates the economy; to that end, there's probably patterns in how they distribute contracts and allocate funds.
posted by spiderskull at 11:08 PM on February 26, 2008


I'm paying 40+% taxes all total on my present annual income. I'll get some of that back via SS retirement benefits but let's not pretend that the 40% taxation level is confiscatory.

Hardly the point. If one investment is taxed at 40% and another is taxed at 0%, well, that's going to influence your decision making, no?
posted by Mr. President Dr. Steve Elvis America at 11:10 PM on February 26, 2008


^ It is entirely the point. You implied that 40% taxation is "not OK" above. I was correcting you.

Removing the distinction between investment income and regular income would result in the change plexi is proposing above.
posted by panamax at 11:21 PM on February 26, 2008


Get over yourself. I implied nothing of the sort. In your rush to "correct" me, you've apparently overlooked a key aspect of plexi's proposal.

In his or her proposal, plexi said there would be "no income tax." I can only take this to mean a 0% rate of tax on ordinary (what you call "regular") income.

The proposal consequently heavily disfavors investments that produce capital gain, and favors those that produce ordinary income. I illustrated some such investments, describing the ones that produce ordinary income as "OK" because they are favored under plexi's proposal.
posted by Mr. President Dr. Steve Elvis America at 11:31 PM on February 26, 2008


I don't know if plexi's proposal would work or not, but it got to be alot simipler, and less expensive than the CPA I'm paying now to do my taxes for my business.
posted by brickman at 12:04 AM on February 27, 2008


"I'd like to see 15% flat sales tax, no income tax, 40% capital gains tax.

Credit/loan interest capped at 20%. ARM mortgages made illegal."


Nice start. Capital gains might be a little high - why not cap those at 15%, and disregard long term / short term? Also, the interest caps might get interesting if we see another sharp Fed response to inflation. Keep in mind in the 80's with inflation at about 14% then Federal Reserve Chairman Paul Volcker pushed rates well above 20%.

Even mortgages were approaching 18% back then, and unsecured debt (credit cards, etc) pushed well above 20%. Due to usury laws in many states, lots of entities providing financial services to the retail crowd dropped out of the markets until these caps were lifted.

Agreed on ARMs, at least for primary residences, but you left out all mortgages should be structured as 80% LTV, 30 year simple fixed rate only.

Finally, preserve or reject deductibility of mortgage interest? I'm an American living in London, own property here and curious - on the British side can't deduct, but still can on the US side.
posted by Mutant at 12:39 AM on February 27, 2008


" let's not pretend that the 40% taxation level is confiscatory."

Which is better... living in Sweden with a 52% average tax rate?

Or Russia, with a 13% flat tax... a country that the neocons over at the Heritage Foundation consider to be a "miracle"?

And, indeed, it is quite miraculous, so long as you're not living there.
posted by markkraft at 12:40 AM on February 27, 2008 [2 favorites]


Which is better... living in Sweden with a 52% average tax rate?

To value a given taxation rate, we should examine the "decision making" that goes on in that country.

What do Swedish citizens value? Health care, education, low violent crime rates, clean air and water, among other matters, appear to influence their decision making, insofar as they are happy to pay for maintaining these aspects of their culture and country.

On the other hand, Russia, with a 13% tax rate, values using tax revenue to maintain a quasi-dictatorship, recognized by numerous groups as corrupt, polluted, unhealthy, murderous, and otherwise violently intolerant to dissent and cultural minorities.

What the taxation question secretly boils down to, for Americans who support low taxation, is how best to get someone else to pay for shared cultural values—whether that's through propaganda or buying laws—for capital gains tax cuts, or by getting tax cuts for buying SUVs and other luxuries, etc.

It pays, literally, to look at any economist's theories, as implemented in policy at a cabinet level, as furthering the values of people whose wealth make them disproportionately powerful and influential on the values we must "share" with them.
posted by Blazecock Pileon at 1:06 AM on February 27, 2008 [8 favorites]


I remember all of this was covered by Adam Curtis' series The Trap.

The New discipline of behavioral economics has been studying to see if people really do behave as the simplified model suggests. Their studies show that only two groups in society actually behave in a rational self-interested way in all experimental situations. One is economists themselves, and the other is psychopaths.


Synopsis of part 2 of The Trap - Self link
posted by quarsan at 1:06 AM on February 27, 2008 [4 favorites]


Curious about taxes; income tax was first introduced (as a "temporary measure") in Britain in 1799 to fund the Napoleonic wars.

An income tax were permanently introduced to the British people in 1842, with an initial rate of 10% on a income above £60 per year. I'm not sure how that shakes out in 2008 pounds, but I suspect it was fairly high.

The highest marginal rates in England peaked during the Second World War at 99.25% and then due to shaky British finances (they were almost bankrupt!) remained at about 95% until the late 1970s.

The United States didn't introduce a tax on personal income until 1861. This was sold to the American people as a "temporary" levy to finance the Civil War. This tax was repealed in 1871, and income taxes weren't again levied on Americans until 1913.

In 1913 the top rate of tax was 7%, rising to 77% by 1918 due to WWI. After the war rates dropped to 25% but started rising again and hit an astounding 94% in 1945. The highest rate stayed above 90% after 1945 until 1964, when it was reduced to 70%.

That datum is extracted from a book I read while in Business School (I liked it so much I captured it to text, and as I write market commentary for the bank I'm employed by I've used it in the past). Another point about taxes, especially American vs. some of the Nordic countries - the higher rates one pays in some of those nations includes cradle to grave care, and at a very high quality. Personally I find the rates confiscatory but (and maybe someone from that region will comment here) many Nordic people accept these rates as a given, and don't have a problem with them. I suspect from personal experience (I've worked over there) this view is driven largely by age, with younger workers getting out even for a short period to work in a lower tax regime and acquire capital. Older folks seem much more happier with this situation, which makes sense as they probably just want to settle down in comfort.

As an American living in England (long term ex-pat) I'm in a curious situation where I can reduce my nominal rate somewhat even though I have to pay taxes in both countries. As some of my income is tax free on the US side on personal income US ex-pats living in England are effectively taxed at a nominal rate of roughly 20%, even though the British levy is higher.

My wife is Dutch and I've had some revelations while getting to know her (we're talking tax wise here guys!). She used to get sixty days holiday which, naturally, I found a lot (I'm get six weeks myself and find excessive).

Turns out that given the choice between cash or time off it's rational to chose for increased holiday and the argument is simple; as the top rate approaches 52% there, if someone receives a bonus they'll be taxed accordingly.

But give someone another week of holiday and they will personally be able to fully utilise the time off, the benefit received. Unlike the taxed money.
posted by Mutant at 1:17 AM on February 27, 2008 [4 favorites]


I would tax Raquel Welch.

And I've a feeling she'd tax me.
posted by Serial Killer Slumber Party at 2:20 AM on February 27, 2008 [2 favorites]


Two words, long overdue: gas tax.
And yeah, definitely, more vacation.
posted by DenOfSizer at 4:02 AM on February 27, 2008


I'd like to see 15% flat sales tax, no income tax, 40% capital gains tax.

Credit/loan interest capped at 20%. ARM mortgages made illegal."

Nice start.


Ha. Ha ha ha ha ha. Ha. Ha ha. Ha.

Wow, you guys are killing me. That is hillarious. You really think taxing poor people and home owners is a positive step?

Which is better... living in Sweden with a 52% average tax rate?

Actually, have you been to Sweden? It's not that bad, really.
posted by Pollomacho at 4:02 AM on February 27, 2008 [1 favorite]


She used to get sixty days holiday

She worked as a teacher?
posted by DreamerFi at 4:05 AM on February 27, 2008


I'm physically giddy with excitement over the prospect of having behavioral economists in a position of power.
posted by Skorgu at 4:55 AM on February 27, 2008 [1 favorite]


From the article: “most economists recognize that some of the people are not fully rational some of the time, and some of the time that matters.”

Maybe I'm hanging out with the wrong crowd, but in my experience most of the people are not fully rational most of the time in ways that matter a lot. I grew up poor, and hardly anyone I know saves or invests long-term, and in fact the concept is foreign to them. I didn't have a bank account until I was twenty five. I kept my entire paycheck in my wallet until it was spent, or until, as happened twice, I set it on top of the car at the gas station and drove away, fluttering cash all over the highway. I was over thirty before the concept of "buy and hold" was introduced to me. Nobody taught me these things, and hardly anyone I know outside of the corporate environment I sometimes work in has learned it either.

This is why it drives me crazy to hear politicians like our current president talking about how people should be given the freedom to invest however they like, that he trusts the people to make good decisions about their futures. That line of thinking is so out of touch with reality. Most people aren't going to do that. Most people watch their bank accounts fluctuate between $10 and $[their paycheck], and any extra money may go to a hurried vacation or a big screen TV to alleviate the stress of the work week. It isn't that they aren't intelligent. It is that they are used to a certain way of life and nobody has taught them anything about this. I know because I feel like I was just there. Plus we live in an intense consumer culture. It's what everyone does. We're trained a certain way, and that is to go shopping. I know there are many exceptions- I'm sure there are kids who grew up poor and who went to the library and figured out for themselves how to be financially secure, but I don't think that's the majority of people.

Add to that the fact that the people who are raised to understand the concepts of investing are almost assuredly already in a secure financial situation. Amassing wealth is easy if you were born a billionaire, and with this group pushing for the end of the estate tax (or "death tax," as they call it) there is nothing to stop the divide growing between the very wealthy and the poor.

No matter what, a lot of people are going to make choices not in their best interest. It is always going to be the case. The question in my mind is whether to just say, well, they didn't save, so they deserve what they get, which is to spend the last twenty years of their lives in poverty. Or whether they should be taken care of. And on the flip side, whether it's ok for the very rich to continue amassing their fortunes and passing it on to their heirs until we have dynastic situations like the one we're in now.

Man, I have a headache. I'm going to take some aspirin. I don't think I'm probably making any sense here anyway since I don't know what the hell I'm talking about.
posted by The Loch Ness Monster at 5:25 AM on February 27, 2008 [22 favorites]


She used to get sixty days holiday

She worked as a teacher?


Technically teachers do not get 2 month holiday. They are unemployed for those several months, though they cannot draw unemployment. Wacki-ly enough, bus drivers can.

(kid of teacher, former busdriver) Wink!
posted by Wink Ricketts at 5:31 AM on February 27, 2008


It's someone disingenuous to say "income tax was first introduced (as a "temporary measure") in Britain in 1799 ". Taxation has been around for much longer than that. It's just that once the industrial revolution was under way, and there was a middle class, it was finally possible to tax everyone.

Under feudalism, only the lords had any money, and the peasants were "taxed" by working the land. The king demanded tribute from the nobles. The Magna Carta (1215) was a response by the nobles to the excessive powers of the king, including the power to tax.
posted by CheeseDigestsAll at 5:33 AM on February 27, 2008 [1 favorite]


Which is better... living in Sweden with a 52% average tax rate?

Or Russia, with a 13% flat tax... a country that the neocons over at the Heritage Foundation consider to be a "miracle"?


Hey, I'd pick Sweden, but then I'm not the greedy, backstabbing, selfish type that would be most likely to succeed in Russia. I'll take QOL anyday.
posted by malaprohibita at 6:06 AM on February 27, 2008


The TNR article is good.
Despite Obama's reputation for grandiose rhetoric and utopian hope-mongering, the Obamanauts aren't radicals--far from it. They're pragmatists--people who, when an existing paradigm clashes with reality, opt to tweak that paradigm rather than replace it wholesale. As Thaler puts it, "Physics with friction is not as beautiful. But you need it to get rockets off the ground." It might as well be the motto for Obama's entire policy shop.
Pragmatic hope. What a great combination.
The idea is that, if you had no tax deductions or freelance income the previous year, the IRS would send you a tax return that was already filled out. As long as you accepted the government's accounting, you could just sign it and mail it back. Goolsbee estimates this small innovation could save hundreds of millions of man-hours spent filling out tax forms, and billions of dollars in tax-preparation fees.
My liberal friends call Obama too much a of a centrist. They want a revolution. Who needs a revolution when small, smart, practical changes can make big differences without the drama?
posted by AceRock at 6:08 AM on February 27, 2008


I'd like to see 15% flat sales tax, no income tax, 40% capital gains tax.

That would be great for retirees.

What I would do, actually is tax assets at probably 1% or 2%. If you're making back 15% APR on your investments, that means that money is doing a lot of productive work in the economy. If, on the other hand, you're making back 2% that money isn't doing anyone much good.

I mean in this country today if you're just out of school making $70k with a mountain of student loans, you're going to be paying a pretty high tax rate, including Social Security, and Medicare. But if on the other hand you're a multimillionaire living off interest, you'll pay a much lower tax rate (just capital gains). My proposal would flip that around.

Essentially, you'd have a national property tax except covering all assets.

(The problem, of course, is that it's probably easier to hide assets then income)

More realistically, I'd just like to see our income tax system made more progressive, and eliminate income tax for those making less then, say $50k. That way, republican cries of 'tax relief' would fall on deaf ears.
posted by delmoi at 6:49 AM on February 27, 2008 [1 favorite]


I'd like to see 15% flat sales tax

15% flat sales tax, especially if food, clothing, and energy were taxed at that rate, would be terribly regressive. This means that it would cut much more into poor people's food, clothing, and shelter money than it would middle-class or rich people.

If it were everything but necessities (which are inelastic goods, meaning that we can't just eat less food or use less energy indefinitely -- there's a threshhold of each of these we need to maintain life), that might be closer to fair. But it is still regressive.

There's a reason federal income tax is so convoluted. It's actually based on ability to pay much more than any other type of tax in the US. Exemptions exist to account for differences in family size, deductions account for differences in family situation, and tax credits usually exist to encourage behavior that is good for the country but expensive for individuals.
posted by lleachie at 6:53 AM on February 27, 2008 [1 favorite]


BTW, I think markkraft's point was that Sweden is better. Read it again.
posted by fungible at 7:04 AM on February 27, 2008


The TNR article was particularly AWES. The entire intellectual approach to policy over at the Obama camp is strikingly similar to changes in software development methodologies over the past 10 years. It seems to me that they are taking a very iterative approach using as many metrics as they can get their hands on, taking care to remain devoid of ideology. These are all tenents of XP, Scrum, Agile... methodologies that focus on solving problems in small incremental fashion.

As a developer, I believe in a lot of these things because I've seen them work.
posted by butterstick at 7:27 AM on February 27, 2008


"She used to get sixty days holiday

She worked as a teacher?"


No, she worked as a banker on a Netherlands contract. We married in September and she resigned at the end of 2007. She was with the bank for a little over ten years so the length of holiday wasn't that unusual. I'm on a UK contract for the same bank, and I got six weeks just to walk in the door (ok, I negotiated one additional week upon signing as the cash side was a little lacking).

"Actually, have you been to Sweden? It's not that bad, really."

I've been to Sweden and have worked throughout the Nordic region. I agree it's not that bad in terms of living standards, rather nice actually compared to some places I've been to (e.g., sub Saharan Africa). A lot of the young people I've spoken to, however, want to get out at least once in their lives for, as previously posted, lower taxes and a chance to acquire capital.
posted by Mutant at 7:34 AM on February 27, 2008


Inflation is basically a tax on assets. Perhaps we should eliminate national taxes altogether. Instead create an independent Treasury print money based on a target inflation rate. The government then spends the leftover money. Fiat money allows the government to make money without any backing, by drawing on the value created by the sovereign (rule of law, standard, national defense, etc). The money created by the independent treasury becomes the basis of the budget; with debt instruments used to make up for shortfalls.
posted by humanfont at 7:41 AM on February 27, 2008 [1 favorite]


From the article: “most economists recognize that some of the people are not fully rational some of the time, and some of the time that matters.”

Maybe I'm hanging out with the wrong crowd, but in my experience most of the people are not fully rational most of the time in ways that matter a lot.


I interpreted Thaler's quote as his attempt to describe the "common ground" in the dispute (i.e., "most economists). I'm not an expert, but I suspect Thaler would probably agree with you that most of the people are not fully rational most of the time, and most of the time it matters.
posted by pardonyou? at 7:47 AM on February 27, 2008


This is why it drives me crazy to hear politicians like our current president talking about how people should be given the freedom to invest however they like, that he trusts the people to make good decisions about their futures.

Maybe there are plenty of people who have no idea how to save and invest, but what about the people who do? Why shouldn't they be able to opt out of the system and invest for their retirement themselves with their own money instead of having it confiscated by the government?

And it will never drive me crazy to hear politicians talk about giving people *more* freedom.
posted by gyc at 8:10 AM on February 27, 2008


I'd like to see 15% flat sales tax, no income tax, 40% capital gains tax.

Credit/loan interest capped at 20%. ARM mortgages made illegal.

And a flower in every gun.
posted by plexi at 1:39 AM on February 27


A flat sales tax is probably the worst taxation idea ever. It might surprise you to learn that most rich people don't spend money haphazardly - that's how they got rich. Poor people, on the other hand, do spend money. Increasing the sales tax would crush consumer spending, which would send all those Best Buy and Walmart workers already at the margins right over the edge into unemployment and poverty.

Furthermore, it doesn't generate the revenue of a European style VAT that could go to support social programs, and it is so punishingly regressive that it would create a black market in second hand goods that are not taxed.

What we really need is a flat income tax, somewhere around 20-23%, probably.

And when economists use the word rational, they don't mean the same thing as a psychologist who uses it. Rational = profit maximizing, and profit doesn't necessarily mean money. IF you choose not to work a night job because you want to sleep, and it's because you want to get some sleep, that is rational, even if you really need the money, because you've decided for yourself that you need the sleep more than the money.

The solution to the current problems is not new some new avant garde untested theory. The old theories explain quite well the present mess.

The government has to borrow money to support current levels of entitlement spending and defense spending. It has to borrow because tax revenues don't cover both, and that is because there isn't enough economic activity generated by domestic businesses, which is in turn because we make very little that is worth exporting. We export a lot of raw materials and ag products, but very little in the way of value-added products, clearly not enough to allow a nation of 300 million to sustain itself. This is in turn because of a very substandard educational system and a popular culture that applauds ignorance. But what do I know.

And Sweden isn't any kind of model for the United States, so please stop that silliness. The population of Sweden is roughly the same as the population of New York City, without the attendant urban density problems. Once things grow beyond a certain size they need more and more layers of management to control them, and that is typically the point at which the bureaucracy overwhelms the system and grinds it to a halt.
posted by Pastabagel at 8:13 AM on February 27, 2008 [4 favorites]


It's ironic that this thread shows people (from all points of view about economics) taking an approach completely different from the Obama advisors discussed in the TNR article. The TNR article stresses how Obama's brain trust generally consists of pragmatic problem-solvers who aren't into grand schemes. Instead, what do we get in this thread? We get everybody's half-cocked schemes about remaking the entire tax code from top to bottom, with very little discussion about what effects these changes in the tax code are supposed to have.
posted by jonp72 at 8:49 AM on February 27, 2008 [1 favorite]


gyc: And it will never drive me crazy to hear politicians talk about giving people *more* freedom.

I may have worded that poorly. I don't really see it as giving people more freedom. When Bush stands up there and says he's giving people the "freedom" to invest, he is really talking about taking away the safety net. What he's really saying is, "I have my billion dollars, and I shouldn't have to give any of it up if I don't want to and I should be allowed the freedom to give it all to my kids. The good part is that all of you chumps are welcome to go and get your billion as well." He's talking in code, and what the code means is "every man for himself."

I think that by and large people should be able to do whatever they please. And I admit that in a perfectly free society you couldn't tax the wealthy any more than you tax anyone else. In a perfectly free society, there would be no tax at all. But also none of the perks that come from taxes like roads and fire departments. Or, if there were, they would be bought and paid for by 'patrons' of society. At the extreme you would have a situation where a very small number of people were very very wealthy, and they would have their own private security forces, and commoners like myself would either be forced to live under the protection of someone like that or fend for myself, and fending for myself would be difficult. Perhaps I am making a leap here, but you can see this sort of thing playing out in small ways; it's why gated communities give me the heebie jeebies. Yes, sure, someone with an income of $300k per year should be free to build a giant wall around his neighborhood and hire a private security company to make sure it's safe. Some of them even have a whole town in there, with schools and stores and everything inside. Yeah, I guess they're free to do that. But I would argue that it damages society at large. Especially where issues like education come into play: so the guy inside his gated community sends his kids to the school which is also inside the gated community. It's a good school. Meanwhile, just a few miles away is a neighborhood with a school that sucks, roads that suck, and where there is scant police protection. The kids there are, of course, welcome to get a job when they turn sixteen and start investing ten percent of their income, but nobody is teaching them how to do that. They are welcome to go into massive debt so that they can get into college, but nobody is teaching them how to do that either. It is a foreign concept to them.

I'm all for freedom. I think people should be able to do what they want. They just have to ante up is all. They should be able to travel, to read or write or say what they want, to sleep with whomever they please, to go to whatever church. But I bristle a little bit at the idea that collecting taxes is assaulting anyone's freedom. And while it may infringe on the "freedom" of the wealthy to hoard their money, I feel like we need a system of making sure that everyone in the country has a good education, has good health care and isn't going to be booted out of the hospital and onto the street, and feels safe. And I think that giving these things to people who either can't or won't plan to get these things for themselves makes society a better place for everyone, even the wealthy.
posted by The Loch Ness Monster at 8:50 AM on February 27, 2008 [5 favorites]


jonp72: Instead, what do we get in this thread? We get everybody's half-cocked schemes about remaking the entire tax code from top to bottom, with very little discussion about what effects these changes in the tax code are supposed to have.

Yeah, for sure, I don't know enough to know the solution or to know what the precise tax structure should be and I don't know that I'm smart enough to figure it out. But I know the broad strokes of how I would like it to go: very progressive tax scheme (the very wealthy pay way more than everyone else), socialized health care and excellent education all around, and some way for people to be taken care of in their old age whether or not they "deserve" it.
posted by The Loch Ness Monster at 8:55 AM on February 27, 2008


Turns out that given the choice between cash or time off it's rational to chose for increased holiday and the argument is simple; as the top rate approaches 52% there, if someone receives a bonus they'll be taxed accordingly.

That's where we get the famous anecdote of the Scandinavian doctor who spends her holiday painting her own house.

In a perfectly free society, there would be no tax at all. But also none of the perks that come from taxes like roads and fire departments. Or, if there were, they would be bought and paid for by 'patrons' of society.

Heh. A lot of small-l libertarians (myself included) have no problem whatsoever with taxes paying for roads and fire departments. As long as the taxes that support them are tolls/gas taxes and property taxes, respectively.


And, in the RTFA camp, I'd like to note that Austan Goolsbee is the most sensible centrist economist in America.
posted by Kwantsar at 9:02 AM on February 27, 2008


My problem with all of these types of discussion is that it leaves out half the equation, that of how the money taxed will be best spent for economic stimulus and other concerns. If a salesman offers me $1000 down vs $100 plus a $10 per use fee, or continuous monthly $50 payments, or etc, I might have vague biases based on my personal financial situation, but without knowing what he's trying to sell me, they'll remain simply biases. Personally, on the spending side, let me suggest, for the second time in two days, educational funding to mandate money-management curricula in public schools. Loch Ness Monster is correct in tat most of the poor (and a hell of a lot of the middle class on up) just never learns these things, and that is very detrimental to us as a nation.

Moving over to the tax side, I can't get behind the gas tax. I like what it would attempt to accomplish, but it would be highly regressive and impact the people with the least power to change the status quo. In short, no change, except that the poor are screwed a little bit harder. This is likely something which will need to be changed on the spend side as well, with a timeline for a shift over to post-petroleum technology and credits for oil and car companies for making and beating the milestones.
posted by Navelgazer at 9:03 AM on February 27, 2008


Yeah, for sure, I don't know enough to know the solution or to know what the precise tax structure should be and I don't know that I'm smart enough to figure it out.

It's pretty simple actually. You just look for the phrases "confiscatory taxes", "fiat money", or "supply side" and you know you're talking to a nut.
posted by JackFlash at 10:26 AM on February 27, 2008 [1 favorite]


We tax things we want to punish people for, right? Drinking, polluting the environment with carbon. Gambling.

Our economy depends on people working, and on people spending money. Why in the holy name of the flying spaghetti monster do we ever punish people for doing those things?

Why not tax things that allow people to become and remain wealthy without laboring, like land, inheritances, and capital gains?
posted by mullingitover at 10:54 AM on February 27, 2008


Progressive taxes are, of course, the proper answer. (With the exception of vice taxes, those I support unequivocally even though they are heavily regressive. I have no upper limit for taxes on cigarettes and booze.)

And progressive taxes should be the norm for corporations as well.

The worst part about Voodoo Economics is the fact that it poisoned the thinking of an entire generation of Americans.

Does anyone think that Exxon, after several years of record breaking profits, would suddenly collapse or choose to cease operation, if their taxes were increased 5%?

The trick to doing any kind of flat rate, which even then is somewhat recessive due to savings habits (see below), is to capture ALL income. So, you have to pay whether you worked a job, won the lottery, got stock options at work, earned a king's ransom off of investment income, or grandma died and gave you a fortune.

Trickle down does not work. At all. That's because the wealthy save, both proportionally and in real dollars, more than the poor. When you give financial incentives to the wealthy, some portion, often a large portion, of that incentive merely further accumulates as wealth to the top tier, and drives no economic engine outside of investment, and I'm not talking about primary investment, such as opening a new hospital, it is in the modern era most likely just going to purchase a few more shares of Exxon for that wealthy person.

But see, government can do investment itself, and leave out the middle man.

Or, government can funnel that money into low interest loans for small business, minorities, women, inner-city entrepreneurs, something that will actually contribute to the economy.

They even sold it as "trickle" down, not "pour" down, or "rain" down. Reaganites knew this already, they knew that most of what they provided would simply accumulate at the top, and they were okay with this.

Further enriching the top tier of society does precious little to drive the economy. I guess you could argue it might marginally increase the luxury goods market, but how large of a segment of american industry is yacht building, anyway?

Giving money to the top tier is just about the worst thing the government could do with a big pile of money. Which is another reason Bush's "tax cuts for the rich" were so offensive.

The wealthy get more benefit from modern society than the poor. It only makes sense they should pay, both in actual dollars and by percentage, more.
posted by Ynoxas at 11:06 AM on February 27, 2008 [4 favorites]


XP, Scrum, Agile... As a developer, I believe in a lot of these things because I've seen them work.

I hope you got pictures.
posted by Herodios at 11:10 AM on February 27, 2008


Does anyone think that Exxon, after several years of record breaking profits, would suddenly collapse or choose to cease operation, if their taxes were increased 5%?

You're asking the wrong question.
posted by Kwantsar at 11:28 AM on February 27, 2008


Heh. A lot of small-l libertarians (myself included) have no problem whatsoever with taxes paying for roads and fire departments. As long as the taxes that support them are tolls/gas taxes and property taxes, respectively.

Well, even if I don't drive, I depend on the existence of roads for multiple things - for my friends to be able to drive to see me, for the goods I buy to be driven to the stores where I shop, for workers who produce what I need to be able to drive to work - why should they have to pay an extra tax to go to work while I pay nothing extra for the product? If we were to try to allocate taxes exactly to whoever was using them, the prices on everything would just go up dramatically... though I suppose that could be considered a sort of "green" alternative, dissuading big cross-country deliveries with prohibitive prices. That would lower the GDP, probably, but might be better for the environment. But it would certainly be a much more complicated system, which could easily lead to only richer people being able to use the roads at all, given how expensive tolls and gas would end up having to be, etc.
posted by mdn at 12:01 PM on February 27, 2008 [2 favorites]


why should they have to pay an extra tax to go to work while I pay nothing extra for the product?

Because you will pay for them in the proportion that you use them! And the cost of the roads will be passed on to you in the proportion that the producers of the goods you consume use the very roads that are being taxed. If you live in New York, trucked-in-from-Washington Gala apples would probably be more expensive, but upstate Cortland and McIntosh apples, for example, would get cheaper.

If we were to try to allocate taxes exactly to whoever was using them, the prices on everything would just go up dramatically...

That's an odd conclusion. The tax infrastructure itself wouldn't be meaningfully more complex, so what would cause the general level of prices to go up? Certainly some things would get more expensive, and others would get cheaper-- but this is a consequence of appropriately allocating the true economic costs of resources.
posted by Kwantsar at 12:13 PM on February 27, 2008


kwantsar: I assume mdn is describing a metering problem, which is indeed real, and the cost of accurately metering multivariate public goods based on consumption could indeed result in the increased cost of everything. Who gets more utility from the municipal water supply of Atlanta? Individuals, or Coca-Cola?

What I was getting at wrt Exxon is the commonly used old saw that if you raise taxes on corporations or the wealthy, then the corporations will just close, unemploying people, and the rich will stop doing rich people things, like building factories and opening off shore financial holdings.

None of this is necessarily true however. As long as tax rates are less than 100%, then the profit motive still operates normally, and as long as there is profit to be made in an industry, it will thrive, regardless of what the tax rate is. New entrants will be attracted, existing actors will expand, etc.
posted by Ynoxas at 12:29 PM on February 27, 2008


Heh. A lot of small-l libertarians (myself included) have no problem whatsoever with taxes paying for roads and fire departments. As long as the taxes that support them are tolls/gas taxes and property taxes, respectively.

I agree. If kids in low-income neighborhoods want decent fire and rescue service, they should get a job and move to a better neighborhood.

If you live in New York, trucked-in-from-Washington Gala apples would probably be more expensive, but upstate Cortland and McIntosh apples, for example, would get cheaper.

Shutting down interstate commerce is definitely the way to go.
posted by The Loch Ness Monster at 12:33 PM on February 27, 2008 [2 favorites]


Ynoxas, I think the issue regarding the fearmongering about tax-raising on corps isn't so much that they will collapse as they will move to a location where the costs are less prohibitive. This race to the bottom is really what we're dealing with, here.

It's why wage depression happens in a global market where not all actors have adequate protections for workers (amongst many other cost factors).

The problem in this case is that capital has limited restrictions in it's global movement, while labor is restricted much more, due to geography, national immigration quotas, culture differentials, and the fact labor (people) are physical commodities. Money as a virtual entities faces far fewer hurdles to migrate.

Anyways, yeah, I think the idea that if you hit corps with high taxes they're going to be hurting is a joke since, if everyone is on a level playing field (or should be) within a given domain, they will all suffer the same financial hardships. If all oil companies face a 50% tax on profits, the competition itself is level.

But we know that's not the gripe, it's about making the most money for the actual actors behind the scenes. There are real people profiting handsomely or suffering miserably on their respective ends of the economic scale.
posted by symbioid at 1:37 PM on February 27, 2008


I assume mdn is describing a metering problem, which is indeed real, and the cost of accurately metering multivariate public goods based on consumption could indeed result in the increased cost of everything. Who gets more utility from the municipal water supply of Atlanta? Individuals, or Coca-Cola?

The utility derived from the water use is irrelevant, isn't it? The consumer surplus derived from municipal water is no doubt enormous. And water is metered already!

What I was getting at wrt Exxon is the commonly used old saw that if you raise taxes on corporations or the wealthy, then the corporations will just close, unemploying people, and the rich will stop doing rich people things, like building factories and opening off shore financial holdings.

None of this is necessarily true however. As long as tax rates are less than 100%, then the profit motive still operates normally, and as long as there is profit to be made in an industry, it will thrive, regardless of what the tax rate is. New entrants will be attracted, existing actors will expand, etc.


In a closed economy, maybe. But that's a fiction that bears no relation to reality. And the profit motive cannot operate even close to normally when competing firms (especially those with existing fixed and intangible assets) have vastly, vastly different capital costs. So Exxon has a higher pretax hurdle rate than do ENI and Total. Which means fewer positive-NPV projects. Add that to the capital-market haircut resulting from PV(new taxes), throw in the effect of reduced employment, and you've managed to fuck a whole lot of workers and pensioners, while barely taking a bite from Lee Raymond's corpulent hide. And you ignore deadweight loss (Is that an "old saw," too?) completely.

I agree. If kids in low-income neighborhoods want decent fire and rescue service, they should get a job and move to a better neighborhood.

I refuse to argue with anyone whose first instinct is "Won't somebody please think of the children?"

Shutting down interstate commerce is definitely the way to go.

Heh. Properly allocating the costs of the roads would do nothing of the sort, and you'd know that if you thought about it for a second. The interstate highway isn't costless. Why do you think people who consume transport-intensive goods should get a free ride on the backs of those who do not?
posted by Kwantsar at 3:38 PM on February 27, 2008


let's not pretend that the 40% taxation level is confiscatory.

Depends on what you're getting in return.

And whether you could get it cheaper on your own.
posted by IndigoJones at 5:16 PM on February 27, 2008


Why not tax things that allow people to become and remain wealthy without laboring, like land . . .

ah, The LVT!.

If land rents are taxed fairly I can maintain no great degree of enthusiasm for taxing capital returns.

Capital puts people to work, in return it demands its interest.

Land rents just take from people, charging access for the ground space that was originally already theirs.
posted by panamax at 7:36 PM on February 27, 2008


Why not tax things that allow people to become and remain wealthy without laboring, like land, inheritances, and capital gains?

Because that would put an excessive burden on the people that buy influence in Washington. And by excessive burden I mean, not really very excessive, and not at all a burden.

As long as the taxes that support them are tolls/gas taxes and property taxes, respectively.

And what if the money generated from tolls and gas taxes don't cover the expenses? Fuck the highways? I suppose we should pay police with the money generated from recovered stolen automobiles? We could easily pay for the libraries if we just charged a small annual fee, like Sam's Club. And we could pay firemen with the money generated from... hmm--maybe fire services should be pay-as-you-go. If you can't afford to have a fire put out, you really shouldn't be buying a home in the first place.

Yeah, this sounds like a great idea. Really 21st century thinking, there.
posted by Civil_Disobedient at 11:27 PM on February 27, 2008


And what if the money generated from tolls and gas taxes don't cover the expenses? Fuck the highways?

Erm. Raise the taxes?

I suppose we should pay police with the money generated from recovered stolen automobiles?

No, because we employ police (primarily) to protect property and keep order.

We could easily pay for the libraries if we just charged a small annual fee, like Sam's Club.

Libraries aren't as clear-cut as the other example, because you can make a public-good type argument in a way that you can't with roads, where demand is more inelastic.

Honestly, I don't understand the hostility to using gas taxes to pay for road maintenance. Western countries price the vast majority of things to their users at levels commensurate with their costs. Why should highways be different?

Really 21st century thinking, there.

Ha! This from someone who likes the LVT! I like it too, but the juxtaposition in your comment is quite striking.
posted by Kwantsar at 8:38 AM on February 28, 2008


BTW.
Goolsbee has joined both Skull and Bones and the DLC.
posted by hortense at 9:48 AM on March 1, 2008


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