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Down the Memory Hole

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One conservative strategy will be to pretend that George W. Bush never existed. I suspect that it’s only a matter of time before Bush becomes a tax-hiking Democrat. (Jonah Goldberg pointed the direction on this many moons ago.)

Relatedly, I would like to note this from the latest column of Mr. David Brooks:

Raising top tax rates may not be as cataclysmic for the economy as some have argued, but this is still one of the most growth-killing ways to raise revenue.

How the assumption that increases in the top marginal tax rates are “growth-killing” can be squared with the results of the last 20 years of American public policy is, oddly enough, unexplained. Apparently, it’s not just the Bush tax cuts but the Clinton budget deal that never happened.

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  • c u n d gulag

    Raising the top tax rate will have devastating consequences on the yachting industry, and new and used mansion real estate companies.
    Also too – garage elevator companies will surely feel a pinch.

    On the plus side, it does damage to the Soviets (sic), since they won’t be able to export as much caviar to our shores.

    • c u n d gulag

      Upon further reflection, those garage elevator companies futures won’t just feel a pinch – they’ll go down, and it’ll be a long time before they go up again.

      • Bart

        Which Mr Otis will regret.

        • Hogan

          The internet, she is all yours, sir.

          • Joseph Slater

            Yes, yes she is.

        • Pestilence

          oh perfect!

      • herr doktor bimler

        Garage elevator companies comprise the Schindler’s List of liberal fascism.

        • these puns will get no traction here, sir.

          • herr doktor bimler

            So much for my attempt to elevate the discourse.

        • ajay

          Schindler’s Lift, surely.

    • Jon H

      I’m inclined to give garage elevators a pass. I mean, they have a utilitarian purpose, and improve space-efficiency so the place doesn’t need to spread out horizontally to accommodate more cars. And while expensive, it’s not like there are cheap alternatives that serve the same function (other than expanding the garage laterally and taking up more space, which may be more expensive than making use of an existing basement and buying the elevator.)

      To me, it’s not as bad as the $6,000 shower curtains and $15,000 “dog umbrella stands” bought by Tyco’s Dennis Kozlowski, or the $1.22 million John Thain spent renovating his office at Merrill Lynch, including an $87,000 rug.

      http://consumerist.com/2009/01/22/merrill-lynch-ceo-spent-1220000-on-office-renovation-as-company-prepared-to-burn/

      • c u n d gulag

        So, we need to change that old slogan to, “A chicken in every pot, and a car elevator in every garage!” :-)

        • Jon H

          Let’s not get crazy, if we put car lifts in every garage it’d kill the auto repair industry.

  • Apparently, it’s not just the Bush tax cuts but the Clinton budget deal that never happened.

    And the Poppy Bush budget deal.

    • Warren Terra

      By the time the R’s have finished cleansing it for ideological purity, American history will fit in a pamphlet, and wiill consist mostly of “America Fnck Yeah”, plus an extended section on the greatness of Saint Ronnie that anyone who paid attention during the fortieth Presidency will in no way recognize.

      • DrDick

        They do create their own reality you know.

    • Sly

      And pretty much all of Ronald Reagan’s second term.

  • Warren Terra

    How can raising taxes on those most able to pay be “one of the most growth-killing ways to raise revenue.”? I mean, I suppose you could grant that not raising revenue might be friendly to growth (at a long-term structural cost), but once you’ve decided you are going to raise revenue, surely increasing income taxes on the wealthy a bit is pretty much the method with the least impact on growth, except perhaps for a wealth tax. What other methods is it competing against, in Bobo’s head? Marketing the tremendous curative properties of unicorn horn? Finding the leprechaun’s pot o’ gold at the end of the rainbow?

    • once you’ve decided you are going to raise revenue, surely increasing income taxes on the wealthy a bit is pretty much the method with the least impact on growth, except perhaps for a wealth tax.

      Not to David Brooks, who believes that economic growth is a function of the amount of money in the hands of “job creators.”

      What other methods is it competing against, in Bobo’s head?

      Cutting taxes on the “job creators,” so that the economy will grow so robustly that government revenues will increase.

      • Warren Terra

        Ah, so I was right about the pot o’ gold then.

        • Au contraire. Since the leprechaun has a pot of gold, he is therefore a job creator, and taking any of that gold would be “among the most job-killing ways to raise revenue.”

          • djanglermust

            leprechaun in the hood: a randian fairytale about the revenge of the productive classes?

      • tt

        Cutting taxes on the “job creators,” so that the economy will grow so robustly that government revenues will increase.

        Well, no, that’s not actually what Brooks suggests in this article. Not defending Brooks–the article is pretty silly–but by the “X-tax” he proposes, taxes on the rich would have to increase to meet the obligations Brooks claims to want to meet.

        • JKTHs

          No he is actually proposing that. The X tax has a progressive rate structure but it entirely exempts savings so the job creating people who live entirely off investment income would be tax-free. So yes, the top 1 percent and particularly the top 0.1 percent would benefit substantially.

    • Hogan

      If by “growth” he means “the growth of my income,” then it makes sense.

    • Jon H

      Hefty taxes on use of the Applebee’s salad bar.

    • tonycpsu

      but once you’ve decided you are going to raise revenue

      The answer, of course, is that Brooks and fellow “starve the beast” Republicans aren’t actually in favor of raising revenue. Saying it’s a bad way to raise revenue makes it sound better than what they really think, which is that the wealthy should keep all of their wealth because they earned it.

  • Derelict

    Conservative economics demands that tax cuts MUST increase both tax revenues and economic growth. They simply must do so.

    We now have more than 30 years of data (remember that Reagan started his first term with massive top-rate cuts) on the effects of tax cuts AND tax increases. The answer from reality is pretty definitive: Cutting top tax rates does nothing to boost growth AND significantly reduces tax revenues while ballooning the deficit.

    And a case can definitely be made that raising top tax rates leads to dramatic economic growth. The 80’s boom economy only began after Reagan started raising taxes. Similarly, the Bush I/Clinton tax increases also lead to dramatic economic growth. The Bush II tax cuts have produced nothing but deficit increases and no-growth economic performance.

    • Warren Terra

      The thing about the Laffer curve is that it’s not wrong – no one is going to bother to earn income taxable at 99% – but it’s really important to look at just where on the curve the inflection point is. Republicans talk as if were always above the inflection point, such that cutting taxes would increase revenue – but it’s my understanding that the best quantitative studies put this point at 70%, if not higher, or about twice our current top rate.

      • UberMitch

        PEDANTRY! Wouldn’t it be “stationary point” as opposed to “inflection point”?

        • Bill Murray

          or perhaps a maximum

      • Brandon

        Piketty and Saez put it just a hair about 70%, and they seem to be widely regarded as some of the top experts on this subject.

        • cpinva

          which, oddly enough, is approximately where it was, before reagan sliced it in half.

          Piketty and Saez put it just a hair about 70%, and they seem to be widely regarded as some of the top experts on this subject.

          this same “theory” was the basis for slicing the tax on long-term capital gains (short-term capital gains are taxed at ordinary rates, and always have been), which had a brief (roughly one year) spurt (as people unloaded assets), then quickly dropped like a stone, as the trading frenzy ceased, and it went back to normal. tax revenues took another siginificant hit, with no appreciable increase in investments or GDP.

          the bottom line: low tax rates, by definition, translate into low tax revenues, period.

          • JKTHs

            this same “theory” was the basis for slicing the tax on long-term capital gains (short-term capital gains are taxed at ordinary rates, and always have been), which had a brief (roughly one year) spurt (as people unloaded assets), then quickly dropped like a stone, as the trading frenzy ceased, and it went back to normal. tax revenues took another siginificant hit, with no appreciable increase in investments or GDP.

            The “cutting capital gains rates increases revenue” zombie is indeed a hard one to kill.

      • DrDick

        Actually, 70-80% is the optimal range for the top marginal rate and there is not a huge drop off at 90%.

        • PJR

          Historically, a top income tax rate of roughly 70 percent is optimal for both GDP growth and for government revenues. It also is an effective rate for reducing inequality, and it doesn’t raise unemployment levels or depress investment. Also, economic theory suggests it is good for maximizing overall utility. Say it over and over: trickle-down is a blatant lie. It always has been a lie, but the passage of time has proven it beyond reasonable doubt.

      • NonyNony

        The thing about the Laffer curve is that it’s not wrong – no one is going to bother to earn income taxable at 99%

        Ergh. Sorry but this trips my bullshit detector. If the Laffer curve were supposed to be describing the impact of marginal tax rates on an individual then the Laffer curve would be correct. If the Laffer curve were supposed to be describing the impact of real tax rates on the country, then it would also be correct (and stupid – because nobody would be arguing for a 99% real tax rate on income).

        But the Laffer curve is supposed to be describing the impact of marginal tax rates on government revenue. And that means that we need to take into account unemployment into the mix.

        Suppose we had a top marginal tax rate of 99% and it takes effect on every dollar you earn over $1 million in a year (just for illustrative purposes). Then suddenly you as an individual see no benefit for earning more than $1 million – you take yourself out of the workforce at the $1 million mark.

        But so what? Does that mean that there aren’t other people who aren’t willing to take that money? This only becomes a concern if we have full employment and everyone is at the point where they’re taking themselves out of the workforce because they’ve earned too much that year. Otherwise competition should ensure that if there’s a demand for those services someone else will step up and take it. Meaning that the government revenue never drops down to zero with that marginal tax rate – it just flattens out.

        There is no way that a top marginal rate of even 100% would mean that government revenues are $0. It’s nonsensical – we’re talking about marginal rates here so there would still be government revenue on money earned in lower brackets. It would just mean that no one would bother to earn anything taxed at that rate. But the work would still need to be done so SOMEONE would get paid to do it. It just wouldn’t be the guy who already has his million dollars.

        I’m not saying that a 100% bracket would be good for growth or anything like that – just that the Laffer curve is nonsense and relies on people not internalizing how marginal rates work and how the labor market works to be convincing at all. The sleight of hand about marginal rates vs. real rates is a consistent theme of Republican “policy” and so everyone should be very careful not to take even the most basic things that they say as true.

  • Sherm
  • Johnny Sack

    More than any other shill, Brooks’s consistent dumbassery/hackery hurts the most (because long ago I used to take him seriously).

    • Scott Lemieux

      See, you can’t just take his word. Not if you want him clipped over it.

  • Observer

    How the assumption that increases in the top marginal tax rates are “growth-killing” can be squared with the results of the last 20 years of American public policy is, oddly enough, unexplained.

    Yeah, you’re right.

    That’s why we should just tax our way into prosperity.

    • DrDick

      Worked for Eisenhower (R-Still Sane and
      occupying Planet Earth).

    • Johnny Sack

      The Talking Point Regurgitron is back!

    • howard

      there is no guarantee that higher taxes will result in higher growth, but there are two things we do know for sure:

      a. the track record of the last 30 years of tax rates and growth is not one that supports a notion that the lower tax rates are, the better we grow;

      b. the right-wing claim that high tax rates are inimical to growth is completely disproven by the historical record.

      for example, by right-wing dogma, the ’50s simply couldn’t have happened.

      more entertainingly, in that it’s more recent, we had the wall street journal and every right winger in this great land gnashing their teeth and rending their garments that the ’93 tax hike would lead directly to a recession, which, after the single best boom stretch of the post-war american economy, obligingly showed up 8 years later.

      • Observer

        Hey, I’m with you.

        I’d just as soon let the law expire.

        It was a bipartisan bill at the time and now it’s something terrible to be avoided.

        Want tax rate increases? Let it expire.

        done deal

        • The Dark Avenger

          You don’t live up to your monicker:

          A: The Bush tax cuts will expire, no matter what.

          B: The question is whether or not they should be extended for everyone under 250K in taxable income, or those making above 250K in TI.

          C: There is no data, as several people have noted above, that lower tax rates on the top earners has any meaningful negative effect on the economy.

          D: Your noble defense of the top earners is duly noted, even if you are probably some sort of moocher and taker yourself.

        • howard

          bipartisan bills are often something terrible to be avoided; putting that aside, this whole situation is a direct outgrowth of a policy misdiagnosis, that our big present problem is deficits.

          i’d be perfectly happy if the congress simply rescinded the “cliff” (or whatever it would have to do), let the bush tax cuts expire, and write a brand new bill in january.

          failing that, i’m happy to go over the cliff and then let republicans have happy votes to cut taxes and to increase defense spending.

          btw, observer: do you have an actual point you want to make? i’m trying to figure out what it could possibly be: conceivably you’re too embarrassed to try and justify an argument that higher marginal tax rates above $250K are harmful to the economy so you’re just trying to adopt an above-it-all tone, but who knows?

        • cpinva

          not just any tax increases, but specific ones.

          Want tax rate increases? Let it expire.

          the poor and middle-class tend to have less disposable income, therefore, any additional disposable income tends to get spent. this increased spending increases demand (the actual “job creator”), resulting in increased employment, as employers seek to meet the increased demand. it’s really a nifty little “circle o’ life” kinda thing, only no talking lions. plenty of sneaky hyenas though.

          wealthy people, having more than enough disposable income to begin with, tend to save/invest (what else are they going to do with it, put it in a mattress?) additional amounts, not spend it (how many houses/yachts/furs do you really need?). thus, they do not contribute to increasing demand (except for caymen islands bank accounts), which is why decreasing their marginal rates is generally a waste of time, if you’re trying to prime the economic pump.

          one big problem i see at the moment: there is currently an excess capacity available, at least in the manufacturing sector. demand will have to increase, such that it not only absorbs this excess available capacity, but exceeds it, before hiring in that sector starts to pick up. how much excess capacity exists, and how much demand would need to increase to absorb it, i have no clue, but i’m pretty certain those figures are available somewhere. if economics were my actual major, i would probably know this. i apologize profusely for my obvious inadequacies.

  • DrDick

    Over at Economist’s View, the libertarians and conservatives are already claiming that the Bush administration did not happen and that the deficits are all Obama’s fault.

  • howard

    because tax-cutting is so central to american right-wing politics, and because the empirical record on taxes quite simply and directly does not support right-wing dogma, i believe a lot of the rest of the right-wing science denial stems from having to deny empirical data about taxes and economic growth.

    • Bruce Baugh

      So a bunch of the rest is like the tobacco companies’ picking some targets more or less at random, just to feed a cultural smog of distrusting science? I’d buy that, seriously.

  • Major Kong

    The empirical record doesn’t matter one bit to them.

    Tax cuts have become like a religion over there. They just know this stuff has to work.

  • cpinva

    who be this bush, of which you speak? nothing existed, before jan. 20, 2009, on this great, part-continent of ours, to say otherwise is blasephemy!

    no major kong, it is beyond even religious belief, transcending even mere faith, in the power it holds over this small segment of our society.

    Tax cuts have become like a religion over there. They just know this stuff has to work.

    it is the glue that binds them together: tax cuts raise tax revenues. they have money and high incomes, therefore, tax cuts for them will raise tax revenues for them as a whole, though not on any of them as individuals, who will each actually pay less in taxes. if you close your eyes, and click your heels together three times, you will see this. it probably also helps to smoke some peyote, in a gold encrusted pipe.

    they must believe it to be true, because otherwise they would be forced to admit they’re full of shit, and just greedy fuckers, who want to keep everything, and pay nothing to help support the system that made their fortunes possible. adam smith recognized this 250 years ago, it’s called human nature. he put it to paper, calling for progressive taxation, as a means to provide sufficient funds to build/maintain the infrastructure that keeps the whole system from crashing down around our heads, and grinding to a halt.

    greedy fuckers, being greedy fuckers, would much rather someone else pay to keep that infrastructure built/maintained, so they can continue to use it cost free. coming out and saying that makes them look like, um, well…………greedy fuckers. people would say mean things about them, hurting their feelings. to avoid this, they pay people to come up with legitimate sounding (but no less ill-legitimate) “theories”, whose only purpose is to make their essential greedy fuckery seem reasonable. hence, the “Laffer Curve”, an aptly named diagram, if ever there was one, which purports to show that taxing greedy fucks at a reasonable rate is bad for the economy, somehow (closed eyes and three heel clicks).

    when the rates rise on 1-1-13, and the economy doesn’t collapse, the greedy fucks will simply hire more people, whose job will be the same: create theories to show this was just a close run thing, that additional 4.6% will ultimately doom the country. it’s what they do.

  • liberal

    Don’t forget that, if one could measure economic rents accurately, they can be taxed at 100% with no harm to the economy.

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