[FoRK] so is it for real now?
J. Andrew Rogers
andrew at ceruleansystems.com
Tue Oct 14 13:16:08 PDT 2008
On Oct 14, 2008, at 10:01 AM, Stephen Williams wrote:
> It is probably political suicide to get too far into suggestion
> income tax increases. Obama however has strictly limited increases
> to the over-250K crowd, and in that area is reasonably aggressive.
I do not care about this issue much, but it ignores the consequences
of this in practice every time punitive income tax rates are levied on
high income brackets: compensation structures are altered to shield
more of the aggregate compensation from the income tax. These types
of taxes tend to underperform because the tax base evaporates with
predictable regularity. It makes good political theater to
aggressively tax very high incomes, but it does not generate much
revenue and discourages transparency in corporate compensation. You
cannot force people to earn high incomes and it is virtually
impossible to prevent alternative compensation in practice.
The other issue I would raise is that when punitive top brackets start
to under-deliver revenue, the punitive tax brackets have this reliable
tendency to climb pretty far down the income ladder to make up for the
loss of expected revenue in the top bracket. That is never what is
being proposed, but over the long term that is what tends to happen
when you have large bracket disparities.
> Republicans seem less able to stomach that since much of their power
> seems to come, or at least is directly influenced, by those super
> rich who are working to avoid taxes at all costs. It should be
> mentioned that there are, I believe, plenty of Democratic supporters
> who are in the rich category and don't mind contributing more if it
> is useful.
The super rich, Democrat and Republican alike, are not significantly
impacted by income tax rates. If you are significantly impacted by
top bracket rates, you are pretty much upper-middle class by
definition. I would expect the greedier among the "super rich" to
applaud higher income tax rates, since it is essentially a political
bait-and-switch that primarily impacts the non-wealthy.
Punitive income tax rates in the upper brackets adversely impact class
mobility and might be philosophically disagreeable on that basis, but
there is no need to perpetuate the myth that we are soaking the
wealthy with high income tax rates.
> If you take Obama's proposal on the income tax side and scale it up
> more, while dropping or making the other changes more wise, it
> sounds like you would be happy, right?
I do not care much about his income tax proposals, as the adverse
consequences to the economy are under the noise floor of the adverse
consequences of stupid capital gains tax policies. If he wants to
naively fumble around with the economy, income tax policy changes are
a pretty decent sandbox as such things go -- lots of levers and dials,
only a modest economic impact.
I do see that Obama's latest set of economic proposals pretty much got
a "wtf?" even from the economists that support him:
J. Andrew Rogers
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