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Title: Atlas Won’t Shrug: Higher Taxes Won’t Discourage Wealthy From Working Harder
Source:
Bloomberg
URL Source: http://www.bloomberg.com/news/2012- ... althy-from-working-harder.html
Published: May 1, 2012
Author: Rich Miller
Post Date: 2012-05-01 11:44:13 by Brian S
Keywords: None
Views: 3812
Comments: 11
Atlas won’t shrug. That’s the view of economists Emmanuel Saez and Thomas Picketty: They argue higher taxes will not discourage the wealthy from working harder or slow the economy, unlike in Ayn Rand’s 1957 novel, “Atlas Shrugged.” Its hero, John Galt, led a strike by industrialists and others against the government, partly because they thought they were too highly taxed. “Top 1 percent earners now make 20 times the average, while they made only 10 times the average in the 1970s,” Saez, winner of the John Bates Clark young economist award in 2009, said in an e-mail. “If they worked hard then, they should continue working hard today, even if they are taxed at 50 percent.” The top federal tax rate is now 35 percent. The two economists’ work is of more than just academic interest. President Barack Obama’s former budget director, Peter Orszag, has said their research on income inequality “helped to point the way for the administration in its pledge to rebalance the tax code.” Senate Republicans last month blocked Obama’s plan to raise taxes on the rich via the so-called Buffett rule, arguing it would hurt the economy. “High marginal tax rates distort decisions to work, save, invest and start a business,” Glenn Hubbard, an economic adviser to Republican presidential candidate Mitt Romney, said in an e-mail. In France, Socialist presidential candidate Francois Hollande has called for a 75 percent tax on annual incomes of more than 1 million euros ($1.3 million), a proposal championed by Picketty, a professor at the Paris School of Economics. Polls show Hollande leading over incumbent President Nicolas Sarkozy in advance of May 6 elections. “The idea that we need to pay people many millions of euros per year to get them to work harder is just crazy,” Picketty said in a telephone interview. He and Saez, a professor of economics at the University of California-Berkeley, agreed in a November 2011 paper that the rich do behave differently when their taxes are raised. They pursue financial strategies to reduce their taxable incomes and bargain for higher compensation, instead of cutting back on how much they work and save or becoming less entrepreneurial. Peter Diamond, who won the 2010 Nobel Prize in economics, also sees little evidence that raising rates on the top 1 percent of income earners -- households making about $350,000 or more a year in 2010 -- would restrict growth. “The overwhelming likelihood is that the revenue- maximizing federal tax rate is somewhere in the 50 to 70 percent range,” said Diamond, a professor at the Massachusetts Institute of Technology in Cambridge. “If you are reluctant to overshoot, well okay, you can only go up to 50 percent, which I like to refer to as the Reagan tax rate.” Lionized by Republicans, the late Ronald Reagan championed an across-the-board tax cut soon after he became president in 1981 that lowered the top rate to 50 percent from 70 percent. He subsequently pushed it to 28 percent as part of an overhaul of the tax code in 1986. The economy actually grew faster in the 30 years before that tax cut than it did during the following three decades, according to Diamond and Saez. Gross domestic product per capita advanced at an average annual 2.2 percent rate between 1950 and 1980, compared with 1.7 percent between 1980 and 2010, their calculations show. Internationally, advanced economies that have reduced top tax rates the most since 1975 haven’t shown a tendency to grow faster than those that cut less, Picketty, Saez and Stefanie Stantcheva, an economist and Ph.D. student at MIT, found in the November 2011 paper. Their data ignore such emerging-market economies as Brazil and India, which have lowered top tax rates and enjoyed faster growth than developed nations, said Alan Reynolds, a senior fellow at the Cato Institute in Washington. Brazil’s economy has expanded at an average annual pace of 3.6 percent since 2000, more than double the 17-nation euro area’s 1.4 percent. The British government is worried enough about the economic impact of high taxes on the wealthy that it has said it will reduce its top rate to 45 percent next year from 50 percent now. No government “can justify a tax rate that damages our economy and raises next to nothing; it’s as simple as that,” Chancellor of the Exchequer George Osborne told Parliament in London on March 21. It’s not only through “reduced work effort” by the rich that higher tax rates can hurt the economy, Martin Feldstein, a professor at Harvard University in Cambridge, Massachusetts, said in an e-mail. Stepped-up tax avoidance also can impede economic efficiency by diverting money and attention away from more productive purposes, said Feldstein, president emeritus of the National Bureau of Economic Research, which determines when U.S. recessions begin and end. Such efforts -- which include taking more compensation in the form of tax-advantaged health-care benefits -- reduce revenue for the government and “increase deadweight losses” for the economy, he added. Very high top tax rates also may have long-run effects on growth that aren’t immediately discernible, said Joel Slemrod, chair of the economics department at the University of Michigan in Ann Arbor. “New people coming into the labor force might decide it’s not worth it” to try so hard to get ahead, he said. High taxes have depressed the labor supply in European economies, according to economist Edward C. Prescott, a Nobel laureate, who argues that Americans generally work more hours because U.S. tax rates are lower. The result: U.S. inflation- adjusted GDP per capita in 2010 was about 40 percent higher than the average for the euro area, according to data from the Organization for Economic Cooperation and Development in Paris. “This is nonsense,” said the Picketty, 40, a visiting professor at MIT in 2000-2001. “When people in Europe have five weeks of vacation, this is not in response to high tax rates.” Saez, 39, said increases in top rates should be coupled with steps to close loopholes and broaden the tax base to limit the avoidance efforts Feldstein worries about. Capital-gains taxes should be raised as well, said Saez, a French and U.S. citizen. That would discourage business leaders from trying to take more of their compensation in shares, rather than salary, to avoid paying higher income-tax rates. The top U.S. rate on long-term gains is 15 percent. Taxes on capital and labor income earned by the wealthy “don’t have to match, but they should move together and shouldn’t be too far apart,” Diamond said. An increase would hurt the stock market and the economy, argued Romney adviser Hubbard, who is also dean of the graduate business school at Columbia University in New York. “Because evidence suggests that higher dividend- and capital-gains taxes are capitalized in equity values, increasing those tax rates will reduce stock prices and the wealth of millions of Americans,” he said. A rise would discourage investment, “leading to lower productivity, wages and output.” Saez and Picketty also have faced criticism for their research on income inequality. Using tax returns, the two academic economists concluded that the top 1 percent of U.S. earners have more than doubled their share of income during the last half century, to about 20 percent in 2010 from less than 10 percent in the 1970s. The research says more about fluctuations in earnings reported for tax purposes in response to changes in the tax code than it does about inequality, Cato’s Reynolds said. Another critic, Scott Winship, said he has become less skeptical of Saez and Picketty’s work as other studies show income differences widening -- albeit perhaps not to the extent the academics do. “The general trend is still toward increasing inequality,” said Winship, a fellow at the Brookings Institution in Washington. The Congressional Budget Office said in an October report that the share of income received by the top 1 percent grew from about 8 percent in 1979 to over 17 percent in 2007. In its calculations, the Washington-based CBO takes account of government transfer payments, primarily from Social Security, and company-paid health-insurance benefits, neither of which Saez and Picketty consider. Even after those adjustments, the rapid growth of income for the top 1 percent remains “a major factor” contributing to growing inequality, the CBO report said. That’s reflected in the Occupy Wall Street protest movement’s motto, “We are the 99 percent,” and its calls for a more even distribution of wealth. Demonstrators plan marches worldwide today to call attention to what they say are abuses of power and wealth. Diamond and Saez contributed an essay about higher taxes on the rich to the “Occupy Handbook,” a compendium published last month as a guide to the movement. “I have no problem with the rich per se,” Picketty said. “But what we’re talking about is completely insane income in my view that people are just extracting from the economy which has nothing to do with their performance.”
‘Just Crazy’
‘Overwhelming Likelihood’
Faster Growth
Tax Avoidance
Depressed Labor Supply
Move Together
Fluctuations in Earnings
Growing Inequality
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#1. To: Brian S (#0)
Ooh, GOODY... From here, Emmanual Saez is an academic from UC Berkeley, and director of the "Center for Equitable Growth." In other words, he's got his Ph.D. in economics, yet he's a socialist. It would seem UC Berkley has lowered its standards. How can you get a Ph.D. in Economics, without understand something as basic as the Laffer Curve? I had a professor like that... she said (in the middle of an advanced econ class) that she was a Communist. So I asked her to show me a single country that has ever succeeded economically under REAL Communism, as well as socially, the standard of living, etc. She couldn't, of course. Every paper I wrote for her class, I shredded her lectures, and still aced the class- because I heavily documented everything I said. This guy is an idiot- you can't effectively teach a subject, when your underlying philosophy is the exact opposite of what you're supposed to teach. What a joke. From wiki, "Thomas Piketty (born May 7, 1971) is a French economist who specializes in the study of economic inequality." Oh goody, ANOTHER socialist. The conclusions of this "article" have absolutely bizarre. They are utterly bereft of common sense. Hard workers continue to work hard- it's just that they'll shift their methodologies when the parasite-class (that is, the government and the ~50 million people on the dole) demand too much. It WILL have a negative effect on the economy. QUESTION: What is the most fungible commodity there is? When the government confiscates what you earn, and you have the ability to shift your earnings to a place where the government can't get their greedy hands on it, you'll do it. They'll continue to work hard, they'll just shift their assets around to protect themselves- with a net loss to the economy. And the "1%" easily have the ability to move their funds beyond the reach of Big Brother. Oh, the problem is that the funds will no longer be available locally to invest in domestic markets. Thus, this will simply exacerbate the downward economic spiral of the American economy. If you can't understand this, than you're either stupid or insane. Look at France- how well are they doing these days? Oh, yeah, socialism is a wonderful thing... Feh. I'm not too surprised that you would post this crap... You're not exactly the brightest star in the sky, esp. when it comes to economics.
Sig of LoonyMing: Anyone claiming to be an expert is selling something. I brandish my ignorance like a crucifix at vampires. Aaron Bady What do you mean exactly? How will the asset shifting hurt the economy?
nj; What do you mean exactly? How will the asset shifting hurt the economy? A honest question nj, what is your highest level of education? I ask because you seem to be ignorant of many basic ideas and principles. Like the supply and demand curve, like the basic concepts of money supply and liquidity, like the physics of heat exchange and thermodynamics, like the difference between weather and climate, like the basic method of the scientific method, like ... What's YOUR malfunction? Or was slack jawed drooling useful idiot/ignorant tool your own career choice?
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
I ask because you seem to be ignorant of many basic ideas and principles. Like the supply and demand curve, like the basic concepts of money supply and liquidity, like the physics of heat exchange and thermodynamics, like the difference between weather and climate, like the basic method of the scientific method, like ... He's a typical leftist; he's utterly ignorant of the subject, yet he attempts to challenge others on the subject. He's walking into a gun-fight with a banana in his hand...
Sig of LoonyMing: Anyone claiming to be an expert is selling something. I brandish my ignorance like a crucifix at vampires. Aaron Bady lol Now I need to clean off my screen!
lol Stop, you guys are cracking me up! : ))))))
Atlas won't shrug. He is just going to move to Canada. Their top corporate tax rate is 16.5%, compared to 35% in the U.S. Their top personal tax rate is slightly lower than ours as well. Canada will also be the first G20 country to eliminate all tariffs on machinery, equipment, and goods imported for further manufacturing by 2015. They have the lowest R&D cost structure in the G7. The World Economic Forum has ranked the quality of Canada’s educational system as the best among G-7 countries and No. 5 in the world, compare that to the U.S. which has among the worst education systems in the developed world. Over the last twenty years, government spending at ALL levels in Canada fell from 53% of GDP to 40% of GDP. It's going to fall further. Government spending in the U.S. increased from 35% of GDP to 40% of GDP. It's going to increase further as Obamacare kicks in. What's the result? Over the last 10 years, Canada has grown faster than any G7 country. The Canadian government balanced their budget for 11 years start prior to the recession. Their budget was in balance again in February. Compare this to the U.S. government, which borrows 40% of every dollar it spends. The Canadian government's debt to GDP ratio is the lower of any G7 country -- less than half than the U.S. Their unemployment rate is a full point lower than the U.S. Lower tax rates, balanced budgets, higher economic growth How come they can figure it out, but the idiot big government politicians in the U.S. can't?
How come they can figure it out, but the idiot big government politicians in the U.S. can't? You can't be serious about politicians? It's a monkey SEE monkey DO sort of thing they cannot control themselves. Just like libTURDS trying to be TYRANTS, they can't help themselves. Ever seen an empty coconut used as a monkey trap? You drill three holes in an empty coconut shell, two small ones used to lash it down to a heavy object, and one bigger hole on the top. Then you drop a few shiny pebbles or such into the shell. You shake it a little and then walk away. Later a monkey will have the pebbles in his hand, and the fist that he makes will be too large to let him get away, UNLESS HE DROPS THOSE PEBBLES, but no monkey EVER drops those stones. You just walk up to them and bash their brains out, or if you like monkey brains you break it's neck. I have done this myself in my mis spent youth. Politicians are just big monkeys. They will NEVER let power and money go on their own. NEVER.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
Canada has politicians too, yet they have been on the right track for the last decade while the U.S. slips further into the abyss. That's the question -- why do their politicians seem to get it and ours don't?
He's walking into a gun-fight with a banana in his hand... Such has been my lifelong experience with these insane b@stards. They remind me of the Laputans in Swift's Gulliver's Travels who had to be wacked by servants with long sticks to keep their attentions on the matter at hand. "The Laputans: The Laputans are a people who are so engaged in abstract thought, particularly about mathematics and music, that they pay no attention to practical matters. They are unable to make clothes that fit or houses that stand. They are experts in astronomy, but the only result of their knowledge of the subject is a great fear of cosmic accidents. They are so inattentive to their environment that they are incapable of normal conversation. They are accompanied by servants with "flappers" with which the servants strike their ears and mouth to alert them to listen or speak. In his portrayal of the Laputans, Swift was satirizing the excesses of abstract and theoretical thought that flourished during the Enlightenment. The King of Laputa: The King of Laputa is preoccupied with mathematics and music. He is only interested in abstract thought, at the expense of practical matters." (Remind you of anybody in US politics today?) Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
There's your answer they just SEEM to. The difference is that they still honor their LAWS and institutions. Our politicians know and obey no LAW, and they have total contempt for the US CONSTITUTION and the people of the USA. Which the people, too busy trying to grab that brass ring, allow to happen through inattention and sloth. It's the same old HUMAN deal. Remember? -------------- "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. --That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security" archives.gov/exhibits /cha...claration_transcript.html ---------- Certainly this aspect of HUMAN nature is of no surprise to you?
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
Emmanuel Saez and Thomas Picketty: They argue higher taxes will not discourage the wealthy from working harder or slow the economy
“Top 1 percent earners now make 20 times the average, while they made only 10 times the average in the 1970s,” Saez, winner of the John Bates Clark young economist award in 2009, said in an e-mail. “If they worked hard then, they should continue working hard today, even if they are taxed at 50 percent.” The top federal tax rate is now 35 percent.
ANSWER: MONEY. 
The economy is wonderful!
Re-elect Obama, he'll pay your rent!
A chicken in every pot!
-- Baghdad Bri-bri --
Translation: IGNORANCE IS STRENGTH
#2. To: Capitalist Eric (#1)
They'll continue to work hard, they'll just shift their assets around to protect themselves- with a net loss to the economy.
#3. To: NewsJunky, Capitalist Eric (#2)
ce;They'll continue to work hard, they'll just shift their assets around to protect themselves- with a net loss to the economy.
#4. To: Mad Dog (#3)
A honest question nj, what is your highest level of education?
The economy is wonderful!
Re-elect Obama, he'll pay your rent!
A chicken in every pot!
-- Baghdad Bri-bri --
Translation: IGNORANCE IS STRENGTH
#5. To: Mad Dog (#3)
#6. To: Capitalist Eric (#4)
#7. To: Brian S, capitalist eric, SJN, NewsJunky (#0)
(Edited)
Their data ignore such emerging-market economies as Brazil and India, which have lowered top tax rates and enjoyed faster growth than developed nations, said Alan Reynolds, a senior fellow at the Cato Institute in Washington.
Iran’s main drive for acquiring atomic weapons is not for use against Israel but as a deterrent against U.S. intervention -- Major General Zeevi Farkash, head of the Israeli Military Intelligence Directorate
#8. To: jwpegler, capitalist eric, SJN (#7)
Lower tax rates, balanced budgets, higher economic growth
#9. To: Mad Dog (#8)
You can't be serious about politicians?
Iran’s main drive for acquiring atomic weapons is not for use against Israel but as a deterrent against U.S. intervention -- Major General Zeevi Farkash, head of the Israeli Military Intelligence Directorate
#10. To: Capitalist Eric (#4)
He's a typical leftist; he's utterly ignorant of the subject, yet he attempts to challenge others on the subject.
#11. To: jwpegler (#9)
That's the question -- why do their politicians seem to get it and ours don't?
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