by Linda Beale
originally published at ataxingmatter
by Linda Beale
originally published at ataxingmatter
Based on the notions of economic efficiency that I laid out here, if I could do whatever I wanted I would make the following changes over a ten-year period. (Some faster, some slower, some phased in, some implemented instantly on a given date.) The appropriate amounts in each case require a better calculator than I have access to.
Tax All Corporate Profits Like S-Corps, and Eradicate Taxes on Corporations, Dividends, and Capital Gains. Credit for the idea goes to Milton Friedman (Capitalism and Freedom, page 174 in my edition). Shareholders pay taxes on the year’s corporate profits (at normal earned-income rates or higher), whether or not they’re distributed. No more double taxation, but no more preferencing over earned and interest income, or indefinite/eternal deferral.
Eradicate Tax Deductions for Interest Payments — Personal and Corporate. Mortgage- and corporate-interest deductions are terribly distortionary; they encourage borrowing — debt financing — over equity- and self-financing. And they’re regressive.
Eradicate Business Deductions for Employee Health Care/Insurance. Destroy the distortionary historical artifact of employer-based health care coverage. Stop discouraging self-employment and personal choice of health-insurance options. (Having been self-employed for decades, I take this very personally. It’s cost me many tens of thousands of dollars.)
Scrap the Cap on Social Security Taxes. Include all earned income. This only makes a terribly regressive tax somewhat less regressive, and it expands the tax slice from that still-regressive tax — a tax that discourages working for a living because it only taxes earned income. But it makes Social Security cash-flow solvent beyond the foreseeable horizon (revenues support outlays). Other propositions here should be scaled to compensate for its regressiveness and work disincentive.
Change All Local Property Taxes to Land-Value-Only Taxes. Land value taxes are the least distortionary taxes around. This would remove the disincentive to improve land. Since it’s non-distortionary, it would also be good to increase its total share of the tax take.
Greatly Expand and Simplify the Earned Income Tax Credit, and Deliver it on Weekly Paychecks. Beyond its manifest benefits to tens of millions, and turbocharger effect on the economy, it could allow for some reduction or eradication of other (economically inefficient) means-tested payments.
Tax Carbon. Since people/businesses aren’t paying for their negative externalities, it’s distortionary not to tax carbon. All hail Arthur Pigou. This is a non-progressive tax, so other taxes would need adjustment to compensate.
Reduce Income Taxes and Make Them More Progressive. As possible and needed, given the other changes, to achieve:
1. Make the whole tax system — local, state, and federal combined — actually progressive. All the way from the bottom to the top.
2. Increase the total tax take by a few percentage points of GDP. Because Americans (notably, Tea Partiers) want the amount of government we’ve got. So they need to cover the costs. True conservatives pay their bills.
Cross-posted at Asymptosis.
Joseph Stiglitz in an op-ed in Vanity Fair tells us about a more basic set of problems we face than actually discussed in public media. It is very long.
The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to “where it was” does nothing to address the underlying problems.
It’s a mystery.
Or, maybe not:
Sorry, the JOLTS data only goes back to 2001.
Which directly addresses Mulligan’s basic assertion: People are lazy. They don’t like to work.
Well yeah. (People especially don’t like working at unpleasant jobs — those at the low end of the spectrum.)
But how lazy are they?
Rob Valletta and Katherine Kuang of the Federal Reserve Bank of San Francisco do a lot to answer that question. Returning here to an earlier post, on Valletta and Kuang’s study of unemployment insurance and unemployment. This graphic stands out:
People who quit their jobs or are just entering the job market aren’t eligible for unemployment compensation. People who lose their jobs are. The money quote:
The differential increase of 1.6 weeks for job losers is the presumed impact of extended UI benefits on unemployment duration. It is straightforward to translate this increase in unemployment duration into an effect on the unemployment rate, based on their proportional relationship and adjusted for the share of job losers in overall unemployment, which was about 67% in December 2009. The implied increase in the unemployment rate is quite small, slightly less than 0.4 percentage point, indicating that without UI extensions, the measured unemployment rate would have been 9.6% in December 2009 rather than the observed 10.0%.
Job losers (eligible for UIC) take an extra week and a half to get jobs.
So the “obvious” is true: if you pay people not to work, they will work less, in aggregate. Some people will opt for “funemployment” insurance and take the summer off. But that simplistic truism hides the truly important reality:
The effect is very small — even when you throw five UI extensions into the mix.
Simplistic arithmetic based on this study suggests that any given moment, because of UIC there are about 600,000 people not working, who would be working without it. (.004 times the U.S. work force of 150 million.) That sounds like a lot, and it’s certainly enough to inflame many people’s hot-wired “cheater resentment” genes.
But I say: Get Over It. They’re a tiny percentage, and in the big picture the effects are trivial. The shortage-of-job-openings effect utterly dwarfs the “laziness” effect.
Maybe my resentment genes are pathologically inoperative, but these numbers do a hell of a lot more to light up my compassion genes — compassion for the 14.4 million hard workers who are protected from personal economic meltdown, resulting from an economic catastrophe that was none of their doing. (I won’t even start on how the whole economy is better off as a result of their spending.)
If 600,000 people at a time get a week and a half of extra leisure along the way — the kind of extended leisure time that I, lucky soul, have been blessed with throughout my life — I say more power to ’em.
Cross-posted at Aysmptosis.
Dr. Black has already embedded one of the few worthwhile modern Xmas songs.* And I usually leave re-posting this story to Brad DeLong, but he appears to have gone all-in for Latin and skipped it this year. So, without further ado, Mark Evanier:
I arrived, headed for my favorite barbecue stand and, en route, noticed that Mel Torme was seated at one of the tables.
Mel Torme. My favorite singer. Just sitting there, sipping a cup of coffee, munching on an English Muffin, reading The New York Times. Mel Torme.
I had never met Mel Torme. Alas, I still haven’t and now I never will. He looked like he was engrossed in the paper that day so I didn’t stop and say, “Excuse me, I just wanted to tell you how much I’ve enjoyed all your records.” I wish I had….
I waved the leader of the chorale over and directed his attention to Mr. Torme, seated about twenty yards from me.
“That’s Mel Torme down there. Do you know who he is?”
The singer was about 25 so it didn’t horrify me that he said, “No.”
I asked, “Do you know ‘The Christmas Song?'”
Again, a “No.”
I said, “That’s the one that starts, ‘Chestnuts roasting on an open fire…'”
“Oh, yes,” the caroler chirped. “Is that what it’s called? ‘The Christmas Song?'”
“That’s the name,” I explained. “And that man wrote it.” The singer thanked me, returned to his group for a brief huddle…and then they strolled down towards Mel Torme. I ditched the rest of my sandwich and followed, a few steps behind. As they reached their quarry, they began singing, “Chestnuts roasting on an open fire…” directly to him.
A big smile formed on Mel Torme’s face — and it wasn’t the only one around. Most of those sitting at nearby tables knew who he was and many seemed aware of the significance of singing that song to him. For those who didn’t, there was a sudden flurry of whispers: “That’s Mel Torme…he wrote that…”
As the choir reached the last chorus or two of the song, Mel got to his feet and made a little gesture that meant, “Let me sing one chorus solo.” The carolers — all still apparently unaware they were in the presence of one of the world’s great singers — looked a bit uncomfortable. I’d bet at least a couple were thinking, “Oh, no…the little fat guy wants to sing.”
But they stopped and the little fat guy started to sing…and, of course, out came this beautiful, melodic, perfectly-on-pitch voice. The look on the face of the singer I’d briefed was amazed at first…then properly impressed.
On Mr. Torme’s signal, they all joined in on the final lines: “Although it’s been said, many times, many ways…Merry Christmas to you…” Big smiles all around.
And not just from them. I looked and at all the tables surrounding the impromptu performance, I saw huge grins of delight…which segued, as the song ended, into a huge burst of applause. The whole tune only lasted about two minutes but I doubt anyone who was there will ever forget it.
Go read the whole thing. The rest of us have to abide with this:
Poking a little bit of fun at his own traditions and perhaps a bit also at the ‘war on Christmas’ that is becoming a tradition in our politics, my minister offered this ‘sermonette’ to his congregation last Sunday. I thought to put it up in a more prose form to remind us also to remember our roots and the founding fathers, invoked so often to lay claim to authority. (Our church was really popular back then.) Dan
“How Unitarians Saved Christmas (and why we celebrate the Solstice)”
by Rev. Nathan Detering
We are going to begin by ask us a few questions. Are we ready? How many of us asked, or heard it asked – Do Unitarian Universalists celebrate Christmas? How many of us have been or will be here on Christmas Eve where we tell the story of the birth of Jesus, and the nativity, and there is the pageant and the familiar carols?
And, with those two questions in mind, do we ever wonder what happened to the good old days, when ‘the holidays’ were not a euphemism for Christmas and Hanukkah? When the Christmas tree was trimmed with simple homemade ornaments and we would exchange simple gifts and where there wasn’t all this commercialism and shopping, and the true spiritual meaning of these holidays was first and foremost?
If you wonder any of these things, then we’ve got news! This kind of Christmas – the true Christmas that was only about Jesus or only about spiritual matters – never really existed. I hope this is freeing news for us! You don’t have to feel guilty! Because in fact, Christmas over the centuries has always been a hodge-podge of celebration, merriment, giving presents, getting together with family and friends, buying frivolous decorations (anyone seen the giant inflatable Santa’s?), and religious story. And – this is probably not news – many of the Christmas traditions we celebrate have their origins in the celebrations of the winter solstice.
So, a few facts before we get to our solstice-centered story this morning: Long before lights and cell phones and t.v.’s and illuminated our homes, the darkness and cold and retreating sun made many people depressed and even rather scared. So, when the ancient people started to see the sun return – as it will on Friday, after the shortest day of the year – these people celebrated the event with big dinners and singing and even exchanging gifts (sound familiar?) Some of their symbols of revelry are still with us – holly and ivy and wreaths and decking the halls with greens (as we will in a moment). A tradition they also had is one we’ve maybe heard of: kissing under the mistle-toe.
Another fact: The early Christian church did not celebrate Jesus’ birth at all. In other words, there were no Christmas Eve services and no pageants and no ministers trying to make sense of it all! Only over centuries, and only after these solstice feasts turned really wild and really out of control, did Christians seek to offer an alternative, calling it “Christ’s Mass,” or Christmas.
Another fact: nobody was as hard on Christmas as the Puritans, the folks who built the pews you are sitting in, who thought that Christmas wasn’t biblical and Jesus wouldn’t have approved of any birthday celebrations. They ordered shops to stay open on Christmas, banned holiday cakes and candles, and also managed to have the Massachusetts Congress declare Christmas illegal from 1659-1681. Bah-Hum-Bug!
And last, some final facts to make us Unitarians feel good. Christmas as we know it didn’t really get going until the mid-1800’s, and that was largely because of one story – A Christmas Carol – written by Unitarian Charles Dickens.
Another fact: how many of us have Christmas trees at home? Well, for that you can thank Charles Follen, minister of our Unitarian congregation in Lexington, MA, who introduced the idea of the Christmas Tree to New England, a tradition that has German and pagan roots. And, best of all, Unitarian James Pierpont wrote “Jingle Bells.’ Did Unitarians save Christmas? I think so!
So why do we do tell the story of Solstice here in our UU church? Because, I think, it honors the traditions of our forbears, it helps us reclaim the past, it teaches us something about why and how we do things at this time of year. And, best of all, it allows to show how far we’ve come since the Puritan days.
and the rest of The AB Community
by Mike Kimel
A Random Observation About the 1970s… and the 1980s
People often point to the stagnation of the 1970s, and the Reagan administration that followed, as evidence that cutting taxes leads to faster economic growth. But the same folks rarely look at the flip-side of things, and when they do, they don’t reach consistent conclusions. Here’s an example of what I mean. Real GDP grew 14.5% from the first quarter of 2003 to the last quarter of 2007. That is a 20 quarter period. I started with 2003 because that’s the year that tax rates dropped to 35%, and it was also more than a full year after the 2001 recession. I picked the last quarter of 2007 as the end point because the economy peaked in that quarter.
What followed, of course, was the Great Recession. 2003 Q1 to 2007 Q4 were the years of the Greenspan Put, and the real estate bubble. If it isn’t clear, I am cherry-picking, purposely selecting a period that best showcases the the 35% top marginal income tax rate era.
Now, 14.5% growth over 20 quarters lacks context. So here’s context. Take any consecutive 20 quarters beginning no earlier than Q1 of 1970 and ending in Q4 of 1980. There are 25 such periods. Only seven of them, or 28% of those periods, saw real growth rates below 14.5%. 72% of those periods had real GDP growth rates above 14.5%. (It is worth noting that four of those seven periods began in 1970 or Q1 of 1971 and that Carter didn’t take office until Q1 of 1977.)
Now, the 1970s were the decade of the Oil Embargo, the Iranian Revolution, inflation, stagflation, polyester, the Bee Gees and big sideburns. Big sideburns for crying out loud. They were also an era with top marginal tax rates of 70%. And yet, they compare very favorably to the best years we’ve seen since tax rates fell to 35%.
Now… let us discuss a more recent period. Reagan famously cut taxes – top rates were at 70% when he took office, and by 1986 were down to 50%. In 1987 they were cut to 38.5%, and then to 28% in 1988. They rose slightly to 31% in 1991. Finally, under Clinton, in 1993, top marginal tax rates rose to 39.6%. So we’d expect exceptionally rapid growth from 1987, ending around 1993, right? Well, pick any quarter from 1986 Q1 to 1991 Q4 and consider the growth in real GDP over a twenty quarter period. Every single one comes in with growth in real GDP below 14.5%.
That is, every single one under-performs the period that under-performs the 1970s. (I guess we can say those periods were under-performing squared.) The conclusion is clear, but I’m sure it is different to folks on different ends of the political spectrum.