Economics Thread

[acesfull86]

https://www.econlib.org/should-paid-...ic-or-private/

The Wall Street Journal had a very good and rather comprehensive Review and Outlook piece yesterday about what’s wrong with the Democrats’ push to create a federal paid leave program.

…

Unfortunately, there are two crucial aspects to this issue which the WSJ doesn’t address. First, it doesn’t go to the root of the confusion by debunking the idea that there’s a “failure” in the labor market that is evidenced by the fact that when workers are asked if they would like to get paid leave benefits, without ever being told at what cost they would get it, most workers say they would love to. Yet not all workers receive paid leave. This reality is no more evidence of market failure than is pointing to poll that shows that most Americans would be happy to receive a Tesla for free if given to them and calling the reality that most of these Americans do not have a Tesla a market failure.

The market is a process of exchange through which order emerges, not a static snapshot or outcome of exchange. And so the market shouldn’t be judged by comparing the outcomes of exchange at a certain point in time to the outcomes desired by policy makers or pundits. The fact is in most cases, there is simply a gap between what people think the world should look like and what the world really looks like given the necessity of making tradeoffs.

The other point ignored by the WSJ is this: Whether the provision of paid leave is private or public, over time it will reduce the wages portion of workers’ total compensation. This tradeoff is one of the reasons why not everyone gets paid leave. This point is important to understand especially for those who claim that the main reason to require paid leave is to improve the lives of workers. The adoption of a paid leave policy will only improve the lives of workers during the time that these workers value the benefit more than the cost of taking home less money as a result. This tradeoff exists whether the benefit is public or private.

This is important to understand even for those conservatives who are trying to find “more market” solutions to the lack of paid leave benefits for lower income workers. The more total compensation is paid for in the form of fringe benefits, the more they invite the left to complain that wages aren’t growing fast enough. There is no way around that.

[Jaw]

http://gregmankiw.blogspot.com/2021/...mists.html?m=1



A magician tricks his audiences by distracting them. While people focus on something that is attractive but irrelevant (a shiny object, the magician's beautiful assistant in a skimpy outfit), the magician can more easily hide his deception.

In a new CEA blog post, the Biden economics team does something similar. It asks what the average tax rate of the 400 wealthiest families would be if unrealized capital gains were included in the measure of their income.

This is a mildly interesting question. But why is the Biden team taking the time from their busy schedules to ask it? Because they want to convince you that the rich aren't paying their fair share in taxes.

The problem is that this question has little connection to the policies now being discussed. As I understand it, the essence of the plan under consideration is not a tax on the unrealized capital gains of the 400 richest families. Instead, the plan aims to raise the corporate tax rate, which in turn is paid by the many shareholders, workers, and customers of the companies. (Economists debate the relative incidence.) In addition, the plan aims to raise the tax rates applied to the already-taxed income earned by people making more than $400,000 a year. I would guess that this latter group includes about 1.5 million taxpayers. Needless to say, 1.5 million is a much larger number than 400. And the finances of the 400 are in no way representative of the finances of the 1.5 million.

Don't get distracted by this shiny object.

Mankiw wrote the textbooks my college econ classes used. I disagree with him on a lot, but he's a smart guy who is able to explain complex topics in simple ways that are easily understood.

[nsacpi]

Mankiw wrote the textbooks my college econ classes used. I disagree with him on a lot, but he's a smart guy who is able to explain complex topics in simple ways that are easily understood.

He's one of the best economists of his generation. Maybe even a Nobel contender. He was a couple years ahead of me as a graduate student at MIT, and was already a legend as a grad student.

[acesfull86]

I think his book was, and might still be, a best seller among college econ textbooks. And his intro course at Harvard is usually the most popular at the school. For those two things to be true despite his political leanings, you know he’s bringing the goods.

I’d probably put him around #8-12 on my list of favorite economists

[acesfull86]

https://twitter.com/jasonrantz/statu...672581635?s=20

Leftist economics is just so off the rails

[sturg33]

https://twitter.com/jasonrantz/statu...672581635?s=20

Leftist economics is just so off the rails

I thought the press secretary lying everyday was unacceptable?

[thethe]

https://twitter.com/jasonrantz/statu...672581635?s=20

Leftist economics is just so off the rails

They have no clue that wealthy people and businesses can easily skirt new tax regulation.

In addition, their idea of taxing income for those earning greater than 100k is so misguided because the wealthy don't have ordinary income at all so all they are doing is damaging the ability to rise up in America which of course is their goal.

[acesfull86]

Why are they even wasting their time raising taxes? I’ve been reliably told by Modern Monetary Theorists and their loony followers that government debt doesn’t matter and we can print money into the next millennium without consequence. So why spend political capital on a tax hike?

[sturg33]

Why are they even wasting their time raising taxes? I’ve been reliably told by Modern Monetary Theorists and their loony followers that government debt doesn’t matter and we can print money into the next millennium without consequence. So why spend political capital on a tax hike?

But did you know that the spending bill doesn't ACTUALLY cost $3.5t bc they are raising taxes to pay for it?

[zitothebrave]

https://twitter.com/jasonrantz/statu...672581635?s=20

Leftist economics is just so off the rails

The always problem with corporate tax rates is the richest corporations find ways around it. It basically just becomes a SMB tax with decent revenue from the top end.

To me the only corporate tax that makes sense is a 5% gross revenue tax. You can even just collect it off the top like a sales tax. It makes a consumption based tax. which can get dicey. But it is clean and easy and effects Amazon at the same rate it effects the local book store. While I'd love for Amazon to pay more. They know how to hide behind loopholes. They can manipulate P&L in a way a small business cannot.

[thethe]

The always problem with corporate tax rates is the richest corporations find ways around it. It basically just becomes a SMB tax with decent revenue from the top end.

To me the only corporate tax that makes sense is a 5% gross revenue tax. You can even just collect it off the top like a sales tax. It makes a consumption based tax. which can get dicey. But it is clean and easy and effects Amazon at the same rate it effects the local book store. While I'd love for Amazon to pay more. They know how to hide behind loopholes. They can manipulate P&L in a way a small business cannot.

The amount of lobbying on what the definition of 'gross revenue' for this purpose would be unfathomable.

Big companies will be able to embed more and more costs using 606 as the basis.

Trust me - Amazon will be impacted much less than your gf families business.

[Tapate50]

https://twitter.com/jasonrantz/statu...672581635?s=20

Leftist economics is just so off the rails

Good Lord.

She'll circle back to that in 2 years.

[Tapate50]

But did you know that the spending bill doesn't ACTUALLY cost $3.5t bc they are raising taxes to pay for it?

The idiocy coming from the WH right now is on par with Trumps worst.

[acesfull86]

But did you know that the spending bill doesn't ACTUALLY cost $3.5t bc they are raising taxes to pay for it?

In a world where paid leave is infrastructure, the Centers for Disease Control sets housing policy, and men can have babies, that sounds pretty on brand.

[striker42]

The always problem with corporate tax rates is the richest corporations find ways around it. It basically just becomes a SMB tax with decent revenue from the top end.

To me the only corporate tax that makes sense is a 5% gross revenue tax. You can even just collect it off the top like a sales tax. It makes a consumption based tax. which can get dicey. But it is clean and easy and effects Amazon at the same rate it effects the local book store. While I'd love for Amazon to pay more. They know how to hide behind loopholes. They can manipulate P&L in a way a small business cannot.

It's the problem with the "tax the rich" mantra. I'd be 100% for a tax if it could be created that the rich (mostly corporations) have to shoulder the burden of. The problem is they're the most capable of passing that burden on. Either they avoid it like you mentioned, or they pass the costs down the line in the form of higher prices, lower wages, or forcing the costs on small vendors (the Walmart method). Because of this the burden gets passed down until it reaches people who can't pass it down any further, it tends to put the burden of these tax increases on the middle class.

So most measures to tax the rich end up just being hidden taxes on the middle class. I'm not really sure what the answer is, I just know it's not ill conceived measures that increase the burden of the middle class.

[Jaw]

It's the problem with the "tax the rich" mantra. I'd be 100% for a tax if it could be created that the rich (mostly corporations) have to shoulder the burden of. The problem is they're the most capable of passing that burden on. Either they avoid it like you mentioned, or they pass the costs down the line in the form of higher prices, lower wages, or forcing the costs on small vendors (the Walmart method). Because of this the burden gets passed down until it reaches people who can't pass it down any further, it tends to put the burden of these tax increases on the middle class.

So most measures to tax the rich end up just being hidden taxes on the middle class. I'm not really sure what the answer is, I just know it's not ill conceived measures that increase the burden of the middle class.

I don't think it's that difficult to do, in 1918 the tax rate was something like 75% on incomes equivalent to around $20,000,000 in today's money. The more limiting factor is that eliminating the loophole exemptions would also eliminate the power the government gains by enabling loophole exemptions.

Otherwise we could leave everything currently in place and place an additional 94% tax on all annual income above something like $3,000,000 (essentially what the highest rate was in 1944) that is exempt to any and all exemptions, write-offs, etc. The effort to get around the tax becomes unproductive at some point with a high enough rate.
Of course that brings up a question about secondary and tertiary effects of big money fleeing from investment markets, but that's a different discussion.

[thethe]

You aren't hurting rich people by taxing income.

You have to do a wealth tax to achieve the goal.

[striker42]

I don't think it's that difficult to do, in 1918 the tax rate was something like 75% on incomes equivalent to around $20,000,000 in today's money. The more limiting factor is that eliminating the loophole exemptions would also eliminate the power the government gains by enabling loophole exemptions.

Otherwise we could leave everything currently in place and place an additional 94% tax on all annual income above something like $3,000,000 (essentially what the highest rate was in 1944) that is exempt to any and all exemptions, write-offs, etc. The effort to get around the tax becomes unproductive at some point with a high enough rate.
Of course that brings up a question about secondary and tertiary effects of big money fleeing from investment markets, but that's a different discussion.

There are problems with super high tax rates on high incomes. First, it doesn't tap into a lot of wealth. If you build a company from the ground up and end up with an 80% stake in a $10 billion company, you haven't realized $10 billion in income yet. Your annual taxable income could be relatively modest. Then there's the fact that countries that have tried this have ended up driving wealthy people out of their country. When you get into those kind of tax rates you actually can start encountering Laffer Curve problems.

Also, individual income tax rate wouldn't change things all that much. The biggest sources of revenue out there would be corporations. However these present even more problems. If you increase the corporate tax rate too much you'll have corporations fleeing the country. But just as important is you'll see corporations do everything they can to pass the burden off. Companies will do what it takes to keep that bottom line intact. You see perfectly healthy companies lay people off or raise prices because they're not trending to hit expectations of profit growth. If taxes hit their profits, they'll try to squeeze the money from other areas.

It's a pretty difficult problem. Getting rich people and rich corporations to pay their fair share is a fine goal but they happen to be those with the most ability to do things to avoid taxes.

[sturg33]

Why don't we just cut spending drastically and let people, poor or rich, keep what they have earned?

Why do we constantly try to find ways to take from efficient people and give to horribly bloated inefficient bureaucracies?

[thethe]

Why don't we just cut spending drastically and let people, poor or rich, keep what they have earned?

Why do we constantly try to find ways to take from efficient people and give to horribly bloated inefficient bureaucracies?

Sturg - I'm with on principle but this is like espousing free trade while the CCP is destroying the world.

This is not a textbook.

The wealthy are actually conspiring to limit your freedoms and you have pushed that line for a while. I'm not sure why you want the wealthy to have a never ending supply of money to drastically change our way of life.