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Your Point Being?

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Upon hearing that Greg Mankiw will stop writing transparently illogical op-eds opposing Social Security and favoring upper-class tax cuts if the Bush tax cuts aren’t extended, all I can say is…who thought that the policies I already favor could have such salutary side benefits?

K-Drum:

Basically, the effect of letting the Bush cuts expire is so tiny that the only way to make it noticeable is to compound it over 30 years, which reduces his eventual payout from $2,000 to $1,700. (And even that’s probably overstated, since it assumes Mankiw pays all his taxes at their full statutory rate, which virtually no one does.) The rest of the reduction down to $1,000 comes solely from the estate tax. But even on the heroic assumption that you should take this year’s zero rate as the baseline for comparison, the estate tax has an exemption of several million dollars. Unless Mankiw leaves his kids a helluva lot more than they need for a down payment on a house, they won’t pay a dime of estate tax.

This is why the tax posse has such a habit of wildly overstating things. If they don’t, there’s no there there. It turns out that the effect of letting the Bush tax cuts on the rich expire is so minuscule that the only way to make it look sensational is to pick a scenario in which you (a) overstate effective tax rates, (b) compound those tax rates over 30 years, (c) slash the final number nearly in half by ignoring the estate tax exemption, and (d) use this year’s highly unusual zero rate as your baseline. It’s a virtuoso performance.

…see also DeLong.

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  • DrDick

    This is a bit like “is that a threat or a promise?”

    • ChristianPinko

      Ooh, maybe we can tax Larry Summers into retirement too! This is opening up great possibilities.

      • DrDick

        And little Timmeh Geithner as well.

  • Rob

    So instead he’ll just offer up redone blog posts like this op-ed?

  • NonyNony

    Mankiw’s article has me thinking that a 91% top bracket might not be a bad idea at all.

    • DrDick

      As long as you start it at about $500,000 (before this I would have said $1 million).

      • NonyNony

        Start it at whatever it takes to get Mankiw to decide to go do something else. Anything else.

      • NonyNony

        To add to myself – as DeLong points out, Mankiw was George W. Bush’s economic adviser. Given how the budget was when W arrived in office – running a surplus, scheduled to pay down the debt – and how it was when he left office – run into the ground, running a huge deficit due to a combination of putting two fucking wars on the credit card and creating the Medicare Part D handout to the insurance industry and PHARMA – Mankiw should be giving 91% of anything he earns over $100,000 as penance for the damage he enabled. Hell, he should be giving over 91% of anything he earns over the US median income of $45K, and he should be walking up to strangers in the street, explaining who he is, and begging for forgiveness.

        The fact that he is still writing opinion columns for the Times and his opinion is still valued by anyone is just another example of how fucked-up our culture is.

        • DrDick

          Mankiw is the epitome of a “value detracted” commodity.

  • James E. Powell

    The whole argument that people will not try to make more money if the tax rates go up, and particularly if they only go up to the Clinton era tax rates, is bullshit. It flies in the face of the fundamental tenet of capitalist ideology: no matter what, people will try to make more money.

    • Scott Lemieux

      OH, I dunno, remember all those actors and professional athletes who retired in their prime after the Clinton tax increases?

      • DrDick

        What about the vast hordes of innovators and entrepreneurs going Galt during the Eisenhower administration when the top marginal rate was 90%?

  • No offense to you Scott (or DrDick) but academics threatening to Go Galt doesn’t exactly chill me to the bone.

    Not being able to get a plumber or food not being delivered to grocery stores? Now we got trouble…

    • Scott Lemieux

      None taken! And in this case, it’s particularly funny since if every academic making 250K+ goes Galt…that will leave about 98% of us.

      • DrDick

        It will leave everyone at my university, with the possible exception of the football coach, untouched.

      • Rob

        Isn’t this really more an argument to do away with copyright? After all if Mankiw had to do more than just sit on his ass and collection millions from his textbook more would get done!

    • DrDick

      In the grand scale of things, you are quite right. Plumbers and car mechanics are much more valuable than academics, at least in most circumstances. They are more valuable than Mankiw in any and all circumstances.

    • hv

      ANYONE threatening to Go Galt doesn’t chill me to the bone. Seriously, go! Show us! A demonstration of how much FAIL this idea has would be salutary.

      Altas Shrugged was a science fiction* parable, not a field guide.

      * sf because of rhearden metal and the galt machine for free energy

  • R.Johnston

    It’s pretty firmly established that once people have basic necessities, moderate comfort, and a degree of security, making more money does not equate to higher utility. In other words, the motivation for the wealthy to make more money has pretty much nothing to do with making more money in and of itself, assuming even a modicum of rational utilitarian behavior at work. The whole point, rather is that people are status conscious and want to have the status of making more money than their neighbors, and that’s a motivation that is entirely unaffected by marginal tax rates.

    That’s why the 91% tax bracket worked so well when we had it. The wealthy attach little if any utility at all to the mere accumulation of more wealth; it’s all a game, and he who dies with the most wins, however much the most happens to be. The wealthy just want to be winners, and he who goes Galt [i]never[/i] wins.

  • KC45s

    I admit that at times I would consider letting the Bush cuts stand if we laid a 95% tax rate on any pundit named Goldberg.

  • Holden Pattern

    What I think is saddest / most telling about the whole “higher tax rates will reduce work from the best and brightest” is the built-in assumption that the current system actually sorts people correctly and rewards the best and brightest appropriately. And those “best and brightest” are of course special little snowflakes whose contribution is completely irreplaceable, unlike ordinary fungible work resource units.

    When paired with the fact that the people who make these “threats” are almost always talking about their own income, you get a pretty clear picture of where they think they stand in the system they’re trying to defend: the current market is a perfect market — after all, it selected ME. After which, they launch into a spirited rendition of “C’est Moi”.

    Never mind that if they want to go Galt over a small increase in their marginal tax rate, that just proves that they are overpaid, and not sufficiently ambitious. The market will provide a replacement for them, just as it provided a replacement for American software programmers, American factory workers, etc. etc. See, they don’t really believe in the market. They believe in their place in the nouveaux-bility, and in the rightness and properness of hierarchy.

  • RobW

    A commenter at Brad’s pointed out that Mankiw’s example of $1000 per column, if taxed at the highest marginal rate, yeilds $535 after taxes at the current rate. If the cuts are allowed to expire – as Mankiw and Bush’s other advisers swore it would – then that $1000 column yeilds $523 after taxes.

    So, he’s talking about quitting his job at the NYT because of a measly 12 bucks per column. 12 bucks. Apparently the priceless free advertising for his books, lectures, consultance that he gets from having his own column in the NYT Business section isn’t priceless after all. It’s worth less than 12 bucks to him.

    Leaving the prestige of the job aside and just looking at the money, which apparently is the ONLY thing worth working for in Mankiw’s mind, and assuming, say, 26 columns a year, Mankiw’s foregoing $13,598 in additional income because it’s not $13,910. This guy’s supposed to be an expert in economics, right?

    His stated intended goal for this money is to save it and pass it to his kids. Because, you know, at a million a year for lectures and royalties, he can’t put aside squat if the gubbermint takes an extra $312 in taxes from his side gig.

    He also never once explains why the federal government should prioritize his kids’ inheritance in 30 years over paying down the ginormous debt he helped create, let alone over health, education, infrastructure, etc.

    And yes, I’ve despised Mankiw ever since my Econ 101 class that required his useless book.

    Grrrrr….

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