Just looking at Danivon's graph, the numbers look a bit different if you use capital gain rates instead of ordinary income rates. Cap gain rates were particularly high in the 70's (low growth) and particularly low in the 80's (high growth), in the middle during the 50's, 60's, and 90's (high growth) and very low during the GWB years (low growth). http://www.ctj.org/pdf/regcg.pdf

Of course, as we all learned in introduction to statistics, running a regression analysis does not prove causation. We also learned that you have to tease apart all of the variables; tax rate vs. growth rate is just not going to cut it when you consider the complexity of the US economy. Political environment, inflation rate, world events, world economy, trade rates, technology growth rates, and other government policies all come to mind as equally important. You would also need to time lag because it is tax rate expectations that lead to business decisions, and not tax rates per se. For example, right now the business community anticipates higher tax rates in 2013 and acts more based on that as opposed to the current low tax rate.

I do agree that conservatives on these pages have not yet proven that low tax rates cause economic growth. I also do not see that those on the left have proven that high tax rates cause economic growth. I do think that the burden of proof is on conservatives. It certainly works in economic theory.

Ray, do you mean that conservatives' claims should be proven, or that they are by 'theory'? It isn't clear to me.

I do not claim that the graph proves a correlation, but it certainly suggests that the correlation that Steve claims is either wrong, or is being swamped by other factors. I grant that Capital Gains Tax is not included. A lot of things are missing, such as what the other rates were and the cohort sizes.

Also, I think Steve is misunderstanding the use of the word 'distribution'. In a statistical context, it's not about something beingn doled out, it's about where things are. A nounn, not a verb. Income distribution is just about comparing incomes across a group of people. It's no more a myth than age distribution.

geojanes wrote:

Doctor Fate wrote:Anyway, I love how George can start a thread called one thing, post an article that I shoot full of holes, and all of the sudden, I have to defend my opinion? Why? Why not have George explain why he posted a lame article?

I thought the article was interesting. There are many rich folk that are saying things like this and it's a perspective that needs to be heard, especially since so many of the political class like to talk about the "job creators," including, if I'm not mistaken, even yourself.

It's a perspective that is full of blarney. He talks about things that do not address the problem he's allegedly addressing. He says we have income inequality, so what's his solution? Tax the rich and give the money to . . . the government! How does that help income inequality? We know what the government does with money--spend it. They're spending money they DON'T have, so what would they do with additional money? Pay down the debt? Is there an emoticon for side-splitting laughter?

You addressed some of the article, but there were things that he wrote, and were repeated in these forums, that you have ignored. Here's the first two paragraphs:

It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.
Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.

My biggest complaint about Republican Orthodoxy is that appears to be faith-based. There are things that are just taken as truth on faith alone. I essentially repeated as a question what these two paragraphs state, and you told me to find my own evidence. But this assertion seems to be at the heart of any economic argument Republicans make, so why is it true? What's the empirical evidence that supports it? Sure you have economic theories, but what about hard data, examples? Or must Americans accept this argument on faith alone?

First, who said that job creation would "stop" if taxes were raised on the rich? I don't know that. I do suspect this is not a good idea, but even more disconcerting is what would the money go for? More Solyndras? More Medicare fraud? More "shovel-ready" projects that aren't shovel-ready but are union-friendly? In other words, I want some waste wrung out of the government before anyone sends one more dime to it.

Second, he does nothing in the article to disprove the idea. So, frankly, I have no interest in playing your game. He gets to make unsupported claims and that's fine (in your eyes), but I have to line up how many experts and how much data to disprove his unsupported claim?

No thanks.

Third, there is nothing more "faith-based" than the notion that the government can and should solve every problem. That is why we are at $15T in debt and counting (not even counting the unfunded liabilities of Social Security, Medicare, and Medicaid). Liberals and Democrats say the debt doesn't matter or that we can solve the problem by taxing the rich. There is no evidence to support that, yet you, apparently believe it. So, don't lecture me about "faith." You've got plenty of it--in government you trust.

danivon wrote:Ray, do you mean that conservatives' claims should be proven, or that they are by 'theory'? It isn't clear to me.

All claims (by conservative and others) should be proven as much as possible. Theory is helpful, but by no means is it proof.

Of course definitive proof is impossible in the social sciences ... for that reason, we can argue forever about anything and everything, and we do.

And, for all the whining folks do about sourcing, do you ever click on the links I provide? If you did, you'd do less whining. Several charts there debunking much of the mythology regarding income inequality.

I would like someone to prove if taxes on the rich are raised right now that would improve employment. You don't like my claims, Ray points out that the economy is more complex than a strict relationship between the two, etc. However, if taxes are raised on the wealthy, will that help the economy? If so, how?

Let's say for a moment that tax cuts for the wealthy do not directly impact hiring. What do the rich do with their money? If they spend it, it's good for the economy. If they invest it, it's good for the economy. If they save it, that means banks have capital to loan. The only "bad" thing they can do with their money is put it under a mattress. Do you know many wealthy who do that?

While we're playing economics, how does racking up $5T in debt in 3 years not impact the economy? What non-military cuts in spending has Obama proposed and pushed to get through Congress?

Doctor Fate wrote:And, for all the whining folks do about sourcing, do you ever click on the links I provide? If you did, you'd do less whining. Several charts there debunking much of the mythology regarding income inequality.

On this thread, I have noticed one link you posted. To the US census site to demonstrate the number of households.

Very thorough, but that doesn't help because I think you have now made two errors (I'm sure quite innocently) regarding statistics:

1) 'The Average Family' does not mean 'all households, by mean average'. It usually means 'The Median family', but is often wrongly taken to mean 'The Mean family'. Without clarification, your maths means nothing.

2) 'Income Distribution' is not some socialist plot or myth. It's a statistical term for demographics, meaning the numbers of people in each income bracket. It's no different from the age distribution, or geographical distribution.

So, I'm wary of any stats you may present, frankly.

I would like someone to prove if taxes on the rich are raised right now that would improve employment. You don't like my claims, Ray points out that the economy is more complex than a strict relationship between the two, etc. However, if taxes are raised on the wealthy, will that help the economy? If so, how?

I doubt it would help immediately and without anything else. However there are three possible things that could be done with increases taxes from the rich:

1) balance them out with tax cuts / tax credit increases for everyone else. This would help stimulate spending by ordinary Americans, which would be a good stimulus for growth, or
2) reduce the deficit. This would increase confidence in the US fiscal position, and provide a general boost for the medium term economy
3) spend them on infrastructure proejcts to create direct employment.

Let's say for a moment that tax cuts for the wealthy do not directly impact hiring. What do the rich do with their money? If they spend it, it's good for the economy. If they invest it, it's good for the economy. If they save it, that means banks have capital to loan. The only "bad" thing they can do with their money is put it under a mattress. Do you know many wealthy who do that?

They could spend it, but they may not spend it in the USA, or on US-made items. If they buy a Porsche, how much does that help the US? They could invest it, but what can they invest it in? Growth is stalling, so businesses are not that great a bet at the moment. Save it? Well, perhaps, but the wise money is not in US banks, because their interest rates are low.

Anyway, you may be ignoring me (to prove how mature you are, I suppose), but I will plug away at your misconceptions, nevertheless.

Ray Jay wrote:

danivon wrote:Ray, do you mean that conservatives' claims should be proven, or that they are by 'theory'? It isn't clear to me.

All claims (by conservative and others) should be proven as much as possible. Theory is helpful, but by no means is it proof.

Yes, but when you said 'the burden of proof on conservatives', did you mean in the usual legal sense, in that they have to supply evidence?

And when you said 'It certainly works in economic theory' what did you mean by 'It'?

Of course definitive proof is impossible in the social sciences ... for that reason, we can argue forever about anything and everything, and we do.

That is what statistics are for - to at least provide evidence if not definitive proof.

Dear Owen,

Thank you for your careful analysis. I really appreciate it. Sadly, you did miss a link. I can understand how. After all, it only said "Source" and was bolded, so it was easy to miss, since there's already more than one whole page here. Since "Source" is too difficult to spot, I'll just link it here: http://open.salon.com/blog/richard_ride ... gely_false

I wanted to cut and paste some charts at the bottom, but Redscape says they're too big. I could support something like this.

I am not ignoring you for any other reason than you have wronged me and refuse to acknowledge that. You got personal and I'm under no obligation to forget that, particularly as your "specialty" here seems to be framing questions and demanding that others research the answer.

Income distribution is a "socialist myth" in the sense that we (allegedly) have "income inequality" for which the government is the answer. That is at the heart of Mr. Hanauer's argument. Again, from the article:

It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again. Shifting the burden from the 99 percent to the 1 percent is the surest and best way to get our consumer-based economy rolling again.

I am in the middle class. I don't need to be "sustained." In fact, I would appreciate the government doing less "sustaining." I'm fine. I bought my house at the height of the bubble, yet I'm fine. Don't invest in me.

Democrats and liberals are playing a terrific short-term political game with the economy: propose tax cuts for the middle and working classes, creating even more debt, yet pretending like the GOP are evil because they want to offset the costs. It may even be popular. However, at some point, Democrats won't be able to print and borrow more money. Then what?

I'm still waiting for a plan from the President that involves some real reductions in non-defense spending. Will that come out during his third term?

Anyway, I don't choose to interact with you, frankly, because I owe you nothing and, until and unless you apologize, I am convinced you are a dishonest person.

I would also note, if we want to talk about whether raising taxes helps an economy, one might want to look at California. They keep spending and raising taxes. How is that working out? Is it such a success that we should make it national policy too?

Doctor Fate wrote:Dear Owen,

Thank you for your careful analysis. I really appreciate it. Sadly, you did miss a link. I can understand how. After all, it only said "Source" and was bolded, so it was easy to miss, since there's already more than one whole page here. Since "Source" is too difficult to spot, I'll just link it here: http://open.salon.com/blog/richard_ride ... gely_false

Thanks, I did miss it (and that's why I didn't claim to have found 'only' one link). It's interesting, and does suggest that the share of the growth in the US has been more equitable than others claim, and provides some technical arguments as to how an error may have crept in.

Of course, reading the original blog it was based upon, and the comments under it:
Super-Economy he does concede that growth between 1946 and 1970 was higher than after, and that the reduction in that growth for the 'lower 90%' is greater.

Still, there's lot there where he's saying that the measures he has selected are 'better' than those used by others, but not a lot of detail as to why.

Oh, and he does not at any point prove that increased taxes on the rich would cost jobs or disprove that there are ways to promote growth from higher rates for the top income levels.

I wanted to cut and paste some charts at the bottom, but Redscape says they're too big.

Here's a neat tip- if the pictures are on links of their own, cut and paste them and put 'img' tags around them. If you have to take the pictures off the screen as C&P, use MSpaint or something to save them into a less dense format than a bitmap and then upload the file.

I could support something like this.

Interesting. I note that it is pretty vague about what it means by tax reform. I mean, there's a lot that it says it should and should not be, but I don't see a concrete proposal for what a reformed tax system would look like. The nearest is:

JD Foster wrote:Congress should reduce the budget deficit by cutting spending, and should then turn to long-overdue tax reform in pursuit of a stronger economy, subject to a revenue-neutrality rule, and following the mantra of a broader, more economically neutral base and lower tax rates.

It develops theory, but I don't see much in the way of statistical analysis.

I am not ignoring you for any other reason than you have wronged me and refuse to acknowledge that. You got personal and I'm under no obligation to forget that, particularly as your "specialty" here seems to be framing questions and demanding that others research the answer.

I did offer an apology, but you clearly ignored it.

Income distribution is a "socialist myth" in the sense that it we have "income inequality" for which the government is the answer. That is at the heart of Mr. Hanauer's argument. Again, from the article:

No more than 'age distribution' is a myth used to suggest we should euthanise the elderly because there are too many. You are skipping straight from the methodology used to show information, through the output, to the opinions people might hold about it, and because you dislike some opinion, choose to deride the whole thing.

Income distribution statistics show that income inequality is growing in the USA. Studies also show that social mobility is low. These are not hallmarks of a meritocracy. Now, some may look at this and insist that we equalise income. Which is one caricature of communism or socialism.

But others may look and note that however hard some people work they don't get a slice of that growing pie that's as large as the one some others get, and that perhaps it's an indication of a problem.

You look at it, assume that everyone who isn't happy with it is a communist, and then try to shout down everyone else who has a view that does not accord with yours, and as you do, try to tell us that a statistical description is a 'myth' because socialists use it. Capitalists use it too - low income inequality is suggestive of an entrenched mercantile class - the very enemies of a libertarian capitalist.

I am in the middle class. I don't need to be "sustained." In fact, I would appreciate the government doing less "sustaining." I'm fine. I bought my house at the height of the bubble, yet I'm fine. Don't invest in me.

Ah, the "I'm allright, Jack" position. Fair enough.

Democrats and liberals are playing a terrific short-term political game with the economy: propose tax cuts for the middle and working classes, creating even more debt, yet pretending like the GOP are evil because they want to offset the costs. It may even be popular. However, at some point, Democrats won't be able to print and borrow more money. Then what?

I would argue that if they were to increase taxes for some (those who can afford it - the highest income levels) and at the same time reduce taxes for the middle and lower classes, the revenue impact could be close to neutral, and then the argument is about the economic effects. The liberals are asking to offset the costs of tax cut partly by other tax increases. They are saying that the GOP in Congress are being unreasonable because they refuse to consider it.

Doctor Fate wrote:I would also note, if we want to talk about whether raising taxes helps an economy, one might want to look at California. They keep spending and raising taxes. How is that working out? Is it such a success that we should make it national policy too?

I rather got the impression that what they actually did was what Orange County did some time before - they'd increase spending (and a referendum would be used to get consent) and freeze or reduce taxes (again, often following a referendum).

If you look at the US Federal budget over the past 30 years, the general trend has been for tax revenues to fall and spending to be more-or-less level.

Ha, I hadn't even seen this by VDH before I posted about CA:

Gov. Jerry Brown is now advocating a new 1–2 percent increase in the top income tax rates in California, which I think would put them at or over 12 percent. If it is true, as often reported, that 2,000–3,000 residents are leaving California per week, and that many of them are top earners, will the additional taxes entice them back, or do we simply wish them, and many of the jobs they create, good riddance?

This year there were all sorts of sensational news stories in California — some state workers earning over $500,000, mandates for schools to teach gay history, extension of state scholarship eligibility to illegal aliens, the presence of thousands of sinecures on state boards (which Schwarzenegger failed miserably to curtail). Whether insignificant or not, they all had one thing in common: State government dreams up an idea that sounds progressive and then simply passes it, without commensurate worry about how it is to be paid for

In Brown’s case, even though he is to be congratulated that government has shrunk back to pre-2008 funding levels under his watch, he still seems to have little clue that when a state creates a climate of more and more regulation on productive companies from Silicon Valley to Napa, idles thousands of acres of rich farm land, turns down leases for new gas and oil exploration, curtails the timber and mining industries, raises taxes on those most likely to hire, and turns the entire question of the consequences of illegal immigration into a taboo subject, then less revenue will enter state coffers and we end up repeating this doomed cycle of raising taxes on those who will either leave or curtail production.

I did use the img tags btw and it didn't work.

As for apologies, yeah, I think it was one of the "if . . . " sorts. No thanks.

Doctor Fate wrote:I did use the img tags btw and it didn't work.

well, that's how I got the graph I posted up. Perhaps I got lucky somehow.

Tax the rich and give the money to . . . the government! How does that help income inequality?

Well, from 1945 through to 1980 taxation rates were much higher and income distribution was much evener...So was the US a socialist plot then?
No. And, more importantly the government ran surpluses and the economy roared ahead.
Its amazing to me that conservatives who talk a low tax solution for everything have never addressed why, what by today's standards would be considered choking taxation, didn't hamper the growth of the US economy from 1950 through 1980....

Part of the reason that there is more even income distribution in some"socialist countries" is that certain services are delivered as part of the taxation load. Whereas in the US these services are often "private".
usually this has meant that US costs in these areas have sky rocketed past other countries. A portion of the secondary education (non-state) universities, and much of your health care system are private. And deliver services at a much greater cost (absolutely and as a percentage of a tax payers income).
Education is the great driver for social mobility. Which is why countries with free education systems right through university, have the greatest social mobility. (The great myth of american mobility Steve ... greatly promoted but no longer true in the year 2011. If you are born poor in the SU you have less chance than almost any oterh industrialized country, except the UK, to become wealthy )
Public financing of medicare in the US, delivers US medical costs lower than those in the private sector as well. And by eliminating largely unequal access to medicine for those in the population covered by the plan, also delivers greater cost efficiencies.
Those countries that have expanded this idea to the whole population deliver those efficiencies throught the entire populace and give their industries a labour cost advantage over US competitors.
So in these two things, taking money from the rich, would help fund situations that improved the achievement of a meritocracy where lack of money in one's birth family didn't so surely anchor one to that socio economic level as it does in the US.
And interestingly, that taking from the rich, would just be a return to the American norm.

rickyp wrote:

Tax the rich and give the money to . . . the government! How does that help income inequality?

Well, from 1945 through to 1980 taxation rates were much higher and income distribution was much evener...So was the US a socialist plot then?

Here you go again. It's easy to compare tax rates. So what?

Does that tell us the whole story? As but one example, how many deductions have been created since 1945? During the 50's, did the rich pay the higher rates? Were there any downturns? Apparently not, since you say it was "roaring."

And, yes, progressive taxation is, by its nature, a Marxist principle.

The rest of your diatribe is just that. Do you really propose, right now, the government spend more on education, particularly college? Do you really believe our government can give us cheaper healthcare? Based on what? Obamacare? The only way it got a positive CBO number was by double-including some savings and including a program they've just announced a month or so ago won't work.

Anyway, continue your socialist rants, but do try to actually prove something you're saying, won't you? If high taxes = economic success, then that ought to be easy to prove, right? If high rates = high revenues, that ought to be easy to prove, right?

The problem, or part of it, is you are talking apples and planets. The US government of 1945 does not really resemble that of 2011 in terms of size, scope, and cost.