Category Archives: Taxes and Spending

Mathematical Malpractice Watch: Marginal Taxes

I’ve noticed a little flaw in commentary lately. The Left Wing, in their push to raise taxes, are citing work like this, which claims the Laffer Curve peaks at 50-70% and therefore we could massively raise taxes on the wealthy.

Let’s put aside that you never want government taxation rates to be at the peak of the Laffer Curve (it leaves you zero fiscal room for emergencies and means you’re crippling the economy but not quite enough to depress tax revenue). The problem is that we already pretty close to that peak. For the very wealthy, the marginal income tax rate is 35%. Medicare tax is another 2.9% (employer+employee). We’ll ignore Social Security tax under the assumption we’re just dealing with millionaires. Then you have state income taxes, which range from 0% in states like Texas to a top marginal rate of 11% in Oregon and Hawaii. So marginal tax rates are currently at 38-49%, which is pretty much the lower bound of what the rather optimistic Diamond and Saez say is the peak of the Laffer Curve. And since it’s a Laffer Curve, not the Laffer Triangle, it starts bending before it rolls over, so we’re probably getting within shouting distance of peak revenue already.

I’m not saying whether we should or should not raise taxes (I’ve come out on the other blog in favor of raising them on everyone since I see little alternative given our present circumstances). But let’s at least debate honestly about where we are on marginal rates, huh?

Friday Linkorama

Non-political links:

  • Was Travels with Charley a sham? Seems so.
  • Well, I’m glad to see that someone wants to take football concussions seriously.
  • Yes.
  • This piece by O’Rourke hits my reaction to Atlas Shrugged pretty accurately. It’s good. As a philosophy, it has its flaws. But it exposes the true villainy of collectivism and the virtue of self-determination.
  • Political links:

  • This is how conservatives should do justice.
  • No, no, no, no, no no, no. TARP did not turn a profit. No way. No how. They just moved money around to make it seem like they did.
  • The latest from the Obama conspiracy nuts: his knee was in NY while he was in Kenya.
  • It’s a good week: free trade is moving forward.
  • My political view are libertarian-conservative, not Republican. So I’m more than happy to praise a Democrat, even a Cuomo, when he’s doing the right thing.
  • Monday All Politics Linkorama

    It’s not that there’s no non-political stuff to talk about; it’s that I get so back-logged with the political side.

  • The Nanny State strikes again.
  • Ah, Global Warming bad skepticism. Repeating elided quotes from Phil Jones shown long ago to be incorrect? Check. Quoting temperature records incorrectly? Check. Repeating long-debunked claims about recent cooling? Check. It’s like a broken record with these guys. No matter how often their talking points are debunked, they keep repeating them. Meanwhile, the Earth keeps warming.
  • The best weapon against radicalism? American TV. Neal Stephenson called this one.
  • Shit like this is why I sometimes want to throw up my hands and get my own survival bunker. Democrats have been bashing Republicans for not responding to a 9/11 First Responders bill. Turn out, it’s a dreadfully written bill. But we must do something!
  • Neal Boortz is really hopelessly insane these days. Now he’s going through the NSF budget, identifying grants that sounds ridiculous to him and slagging them. Never mind if it’s viable peer-reviewed research that has to perform to sustain funding. Dinosaur fossils! Apparently, scientists are now part of the “looter class”.
  • This is what I fear Tea Party candidates will do to the nation. With Michelle Bachmann Overdrive already backing down on the earmarks pledge and a budget-busting $900 billion Stimulus IV going into place, it’s already happening at the national level.
  • I’m with TNC. How can you not be cynical about politics when Peter Orzag leaves the White House and goes straight into an eight figure job with one of the companies he was regulating?
  • Stephen Breyer reminds me of Noam Chomsky. He sounds brilliant when you listen to him, but what he says is so totally wrong it beggars belief.
  • Election Day Linkorama

    Non-political link:

  • The haunting first photo of a person.
  • The City Paper owns NPR. I think.
  • Political links:

  • McArdle makes the case for eliminating the corporate income tax. She’s right, but there’s no chance it would happen while Democrats (and some Republicans) still exist. Too easy to demagogue.
  • You’re Full of It Watch: The once and future Governor Moonbeam.
  • Oh, come on.
  • Friday Linkorama

    Non-political links:

  • Yeah, I love archeology.
  • Really? What kind of busy body are you?
  • I love it when facts trump common wisdom. Freakonomics dismantles the idea that steroid testing is why run-scoring is down. One of the things I didn’t like about Ken Burns’ Tenth Inning was that it accepted as gospel the idea that steroids produced the recent offensive explosion.
  • “Safety” does not make us safe.
  • Political Links:

  • I’ve made it pretty clear that I don’t like Dick Blumenthal. Watch here as Linda McMahon — of the WWE — cleans his clock on how jobs are created. She says it better in ten seconds than he does in almost two minutes of burbling.
  • Seems like Lou Dobbs is every kind of hypocrite.
  • You’re Full of It Watch: the anti-Prop 19ers.
  • So what do you do when your Keynesian economic plan has failed? Blame foreigners.
  • Ah, redevelopment. What a scam.
  • You know, I remember when “binge drinking” actually meant binge drinking, not just drinking.
  • Labor Day Linkorama

  • Now this study must be 100% accurate.
  • While this is about politics, I mainly link to it for the inspiring story of Sam Meas, running for Congress three decades after his family was butcher by the Khmer Rouge.
  • Political Links:

  • Why do I like Anne Applebaum, apart from her amazing book Gulag? Because she’s admitting she was wrong on Iraq. I think half the problems in this country would go away if people could admit when they’re wrong.
  • You’re Full Of It Watch: Joe Biden.
  • Daily Kos has a fit because the deficit commission is likely to recommend “cuts” to Social Security (see previous postings on the nature of these “cuts”). The idea, here, however, is supposed to be compromise. If we get spending cuts, I’ll acquiesce to tax hikes.
  • How can illegal immigration be going down? Obama is turning this place into a welfare state and not enforcing the border, right? Shouldn’t that be drawing more of them in, complete with anchor babies?
  • more on the ridiculous CPSIA.
  • A double whammy from Lenore Skenazy. A horror story of Zero Tolerance stupidity; and why these measures are stupid to being with.
  • The dim bulb legislature in California condemns the FTA that would open markets to their products.
  • Russ Roberts tackles the myth that WW2 ended the Depression.
  • Long Form Linkorama

    Non-political links:

  • Holy crap!.
  • I should have a separate post about this. I was alerted, quite belatedly, to this outstanding article about the End of Men. I think some societal adjustment is going to have to happen. Precisely what this will be? Haven’t a clue. I will note in passing that I wish I was twenty years younger, given the now staggering gender ratios in college.
  • Political LInks:

  • Here is an epitaph: Arnold Schwarzeneggar, not quite as shitty as his predecessors. Occasionally, someone tries to convince me that Gray Davis got a raw deal in the recall election. But Davis is the one who laid the fiscal time bomb — in the form of massive pensions, huge increases in state payrolls and guaranteed giant salary hikes — that exploded in Arnie’s face. And at least Arnie tried to break the stranglehold Big Labor has on the state. Of course, the Democrats are busy trying to make things worse. This is one of the few times where I wonder if someone (the California Dems) is evil rather than stupid, misguided or wrong.
  • Ground Zero updates. More on the moderate Muslims people say don’t exist (although, it’s Turkey, which was our Priceless Ally until they supported blockade running into Gaza and therefore became Extremist Haven). And more on the Imam. I’m not quite sold on his moderation. And here’s Ron Paul showing again why I liked his Presidential bid and Gregg Easterbrook pointing out the moral equivalence. Also, Cathy Young breaks some myths, most notably the bullshit idea that this is a “victory mosque”. Apparently, it wasn’t even supposed to be near Ground Zero.
  • Yep. Education in this country is woefully underfunded.
  • The Nevada senate race is the reason I wish we had a viable third party in this country.
  • More statistical abuse, this time by the drug warriors. This is not unusual. The drug warriors frequently take a minor downward blip in, say, 30-day cocaine use among 17-year-old Geminis and proclaim it’s a result of their policies.
  • Wednesday Linkorama

    Finally, some non-political links! Three of em!

  • Sully’s readers wax rhapsodic about Doctor Who. It’s a joy to read for this Whovian. The wife unit and I used to watch it every Friday. We’re recently turned some friends onto it. And meeting someone who’s a fan creates an instant conversation. I agree with what he says about the show. As science fiction, it has it’s problems. But as drama, it’s wonderful. And yes, the Doctor is anti-matter to Jack Bauer (but hopefully not Amanda!).
  • Cool slow mo video. I particularly like the mouse traps.
  • I think (hope) I’m somewhere on the main sequence. I had to play with the metrics a bit (there are, apparently, lots of Mike Siegels out there and I have a lot of GCNs under my belt at ADS). But my calculation are mid main sequence.
  • Political Links:

  • Not sure if this is political or not. It’s about the pink sari gang that are bringing vigilante justice to India. I often think that true progress in things women’s right comes not from a benevolent kind government but from millions of people suddenly say, “Hey, why do we put up with his shit?” If this thing ever reaches the Islamic world, the Earth will shake.
  • And just when you thought the smear on Shirley Sherrod couldn’t get worse, it does. Ta-Nehisi and Balko take it on. Again, we see why Ta-Nehisi is one of my favorite liberal writers: “The more I think about this, the more I am faced with the kind of question I feel naive and stupid for asking–What kind of human being writes a 4,000 word article to prove that someone’s long-dead relative wasn’t lynched because he was beaten to death? Callousness is scary. Stupidity is scary. When you combine the two….I mean seriously, What the fuck? It’s the worst of everything.”
  • More “failure” from Obama on illegal immigration. Again, expect radio silence from the “amnesty!” shrieking Right Wing.
  • Peter Suderman runs down the sad sad legacy of Democratic budget trickeration.
  • FOIA was used to discover that the SEC was, among other things, warned that Bernie Madoff was a shyster. So the Dodd-Frank bill fixes this by … exempting the SEC from FOIA. It’s amazing how often, under the current Congress, progress has been defined by preventing anyone in power from ever having to take responsibility for anything.
  • You know … Dee Snider has a point.
  • Sunday Night All Politics Linkorama

  • Dear Mr. Williams. Just go the fuck away. Although I’ll note in passing that the supposedly racist Tea Partiers gave him the boot.
  • You too, mosque protesters.
  • Obama supports tax cuts … for trial lawyers.
  • Here’s the thing. You can provide “free” birth control if you want. I know it’s going to cost quite a bit. But I’m unconvinced it will prevent unwanted pregnancies. It’s not primarily a lack of access that causes them; free condoms are available just about everywhere. It’s a lack of responsibility. And providing birth control for free could even make things worse because people get more reckless when they get free stuff. What are we going to say when thousands of women get their “free” birth control, think they’re bulletproof, don’t use it right and get pregnant? To think we can prevent three million pregnancies by handing out pills at street corners is to indulge in the rankest sort of magical thinking about government.
  • Jesus Christ, are the schools trying to make girls anorexic?
  • Here is how states go off the fiscal rails.
  • Once again … do politicians not know about this internet thing where we can look up what they said just, like, a year ago.

    Congress recently passed the America COMPETES Act, a massive science and technology spending bill. Phil Plait has been beating the drum on this for some time. The bill has a lot of supporters in political and scientific circles.

    However, I’m going to be ornery here. I’m opposed to passing the Act as written. The COMPETES Act and the justifications for it are an encapsulation of everything that has gone wrong in our government and in the way people think about government.

    To be specific, my problems with the bill are:

    1) It mistakes spending for progress; and

    2) It adds to our massive deficit.

    First, the spending. COMPETES claims to support American science and technology. Supposedly, without this injection of funds, America is “eating its seed corn” and destroying its competitiveness.

    The problem is that this claim is made about every bill that comes through Congress, even when it involves boondoggles like bioethanol fuel, farm subsidies and highway funding. Every spending bill that ever sifts through Congress is covered with the most glowing prose imaginable about its supposed benefits. Even the infamous “Bridge to Nowhere” was touted as an economic stimulus to the region.

    While the bill (which I’ve skimmed) seems relatively pork free, the list of those who endorse the bill (see Phil’s post) is a who’s-who of special interest spending. Are we to believe that these pork leaches are suddenly principled and noble when it comes to science?

    Moreover, when the government funds something, that creates a crowd-out effect. Technology and science wind up getting funded for political reasons, not economic or scientific ones. This tends to be a net negative on the economy. Don’t believe me? A recent study at Harvard, designed to prove how wonderful government spending was, found the exact opposite:

    The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three committees. In the House, the average is around 20 percent. For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.

    It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the increase in spending. Indeed, the firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.

    I’m actually stunned myself to see how clearly they detected this. Libertarians have been saying this for so long, we’re actually slack-jawed to see that we were right.

    Most of COMPETES funding seems to be generalized. However, billions are targeted for government agencies whose function seems to be subsidizing big business. The fact is that much seems to have been attached to this bill that has little to do with advancing science.

    Now if that were the only problem with COMPETES, I wouldn’t object. That’s the way Washington works. A dollar in legitimate science funding usually comes with a dollar of bullshit. We accept that. But then there’s the second problem — the debt this bill creates.

    Some months ago, Congress passed PAYGO to much fanfare. This was supposed to get control of our exploding debt. Since then, Congress has completely ignored the bill, passing spending measure after spending measure without even paying lip service to PAYGO.

    This bill, whatever its merits may be, does not cut spending or raise taxes to pay for itself. If the bill is so wonderful, why not make sacrifices to pay for it? No pain, no gain appears to apply everywhere except Washington.

    We are on the brink of fiscal crisis. It will do no good to pass big spending bills now if we have a debt crisis later. All that spending will be paid for several times with economic ill. It’s no good to plant “seed corn” if a debt crisis burns out the field.

    Phil justifies this deficit spending by pointing out how much money we are spending in Iraq. But this is precisely the kind of bad thinking that has gotten us into this situation. It’s as if a family in debt went out to eat at an expensive restaurant and justified it because it was less than the car they spent a fortune on. It’s faulty logic because:

    1) two wrong don’t make a right;

    2) there is no moral equivalence store where we can trade the Iraq War for a big NASA program;

    3) PRECISELY this argument is used all the time to slash science funding, Apollo especially, and will be used in the future;

    4) saying we can cut war spending is not the same thing as actually cutting spending. There are no points in this game for hypotheticals.

    The last is perhaps the part that offends me the most. It’s like a morbidly obese man gobbling down a cupcake because he COULD get on the treadmill. We have not stopped the Iraq War and the Administration shows no inclination to do so. So we don’t have that money to spend. It is pure dishonesty to ramp up spending on one item and then pretend you could cut another when you have no intention of doing so.

    COMPETES is a paradigm of what’s wrong with politics. People want their goodies (more spending on science) without paying the price (more taxes; less spending on other things). It is an embodiment of the view that government is a great golden god, dispensing free goodies that never have to be paid for.

    If the people who support COMPETES love it so much, they should be willing to pay the price for it. They should be campaigning to cut spending or raise taxes and identify specific tax hikes and spending cuts. They should refuse to accept the funding from COMPETES until it is paid for. Until that point, we (and as a grant-funded scientist, I’m not exempt) are no better than the other 300 million children we have in this country demanding more and more government for no additional price.

    When I was in the UK last week, the new coalition government proposed over six billion pounds in spending cuts, with a warning that this was just the tip of the iceberg. The British are taking their debt seriously and taking steps to fix it. They are not passing massive unfunded programs to add to the problem. But here, everyone still thinks we’re in a free candy store and can spend whatever we like without ever paying the piper. And to even suggest that we should pay for what we spend is to be a Right Wing extremist and to suggest we eat our seed corn.

    Of course, these words are in vain. Both of the people who read this blog are likely supportive of COMPETES. But … at least these thoughts are out of my head now. I can go back to work.

    Weekend Linkorama

  • The states, desperate for revenue, now want to tax services. Now there’s a way to stimulate the economy!
  • Let it not be said that only the Right indulges in conspiracy theories on global warming. Greenpeace has listed Reason as a climate “denier” even thought their science correspond, Ronald Bailey, is no such thing. All he does is disagree with how severe AGW is likely to be and how we should solve it. But to Greenpeace, anything but panic-laden submission to grandiose institutional solutions is “denial”.
  • Rubber rooms for everyone! If this keeps up, the taxpayer is going to need a padded room.
  • The Institute for Justice has a great video on asset forfeiture. Hopefully, some big guns are coming onto this issue.
  • On the subject of videos, Reason takes on public employee unions.
  • Fumento on information cascades. I’m reminded of the shark attacks.
  • I’ve beaten the “tea partiers are Nazis” bullshit to death on the other site. Still, it’s worth reading Moynihan’s article. I think the best comparison is to the war protesters of the Bush era. Similar odious comparisons; similar anger; similar mis-spelled signs. It seems like the angry, like the poor, will always be with us.
  • English laws continue to get dumber and dumber. (Caveat: the English press is not the most accurate; I got burned earlier this week by bad reporting on a similar incident.)
  • Midweek Linkorama

  • I am always amazed by how close the human race has come to extinction in the past.
  • How stupid are people? This stupid.
  • The logic of Pac-Man. Cool.
  • Why am I not surprised that the ACORN-busting guy got pinched for breaking the law.
  • Balko on assert forfeiture. Scary stuff.
  • It’s rare that I link to American Progress, but their guide to identifying deficit “peacocks” is very interesting. There’s simply no way we’re going to balance the budget without raising taxes. But Republicans are too wedded to mindless tax cut ideology and Democrats are too scared.
  • How dare you discriminate against the unreliable!
  • Man, do I love me some photography.
  • VAT

    The more I think about it, the more I think:

    1) We’re going to have to raise taxes to balance the budget. Right now, the tax burden is lower than its historical average in the post-WW2 era. The money for Medicare, Social Security, Medicaid and defense — none of which will ever be cut — has to come from somewhere.

    2) A Value Added Tax is the least destructive way to get there. It’s much better than the stupid Fair Tax, which I’ve attacked here. And if it replaced much of our existing system, the capital and potential freed up would more than compensate for the deleterious effects of a tax increase.

    Of course, the GOP is not interested. They’re too busy screaming, “They’re raising taxes! Taxes! Taxes! Taxes! AIEEEEEEEE!” The question is not whether taxes are going up; the question is whether they can be raised in the least destructive way possible.