Take 2: Could Employing Tax Cuts Tax Employment?

Waaaaaay back in September I posted my first article at 538 Refugees. In it, I concluded that there was an inverse relationship between the top income tax rate and employment growth. Now that the President and Congress are discussing the future of income tax rates, it’s worth looking at this again, though with a more rigorous analysis, especially in light of today’s expected House vote on the expiration of the JGTRRA (commonly known as the “Bush Tax Cut”).

When analyzing the relationship between income taxes and unemployment, I approached this without preconceived notions. That’s not to say that I didn’t have an opinion; before I started this analysis, I wanted to let all of the tax cuts expire, as a means of reducing the deficit. But I really wanted to test the assertion that increasing income taxes will generate more unemployment than leaving the rates where they are.

This is an assertion we’ve seen and heard many times. Most recently, we saw it in response to Max’s article.

I collected effective income tax rates from the Congressional Budget Office dating back to 1979, which is as far back as they have published. Their rates are broken down by quintile, as well as a more focused subset of data on the top ten, top five, and top one percent of earners. I then got Bureau of Labor Statistics data covering the unemployment rate levels over the same period, and started running regression analyses against the two data sets.

To look for a causal relationship, I compared the effective income tax rate in a given year, by quintile, to the following year’s unemployment rate. I could find no statistically significant relationship between any of the lowest three quintiles and the unemployment rate.

But I did see a relationship between the top two quintiles (EITQ4 and EITQ5, the effective income tax rates for Quintiles 4 and 5) and the unemployment rate:

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 0.070693 0.023383 3.023278 0.005709 0.022535 0.118851
EITQ4 0.009484 0.001335 7.101827 1.92E-07 0.006734 0.012234
EITQ5 -0.00572 0.001642 -3.48406 0.001837 -0.0091 -0.00234

As you can see there is a positive relationship between income tax increases on Q4 and the unemployment rate. That is, increasing income taxes on Q4 households (currently between $62,000 and $100,000 per year, according to the Bureau of Labor Statistics) is associated with an increase in unemployment.

At the same time, there is a negative relationship between income tax increases on Q5 and the unemployment rate. That is, increasing income taxes on Q5 households (currently over $100,000 per year) is associated with a decrease in unemployment!

But we’re having hard economic times. So what about the impact of recessions? I added a null variable (R) to account for recessions, and reran the regression:

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 0.096913 0.01756 5.519058 1.12E-05 0.060671 0.133154
EITQ4 0.007439 0.001041 7.145012 2.2E-07 0.005291 0.009588
EITQ5 -0.00656 0.001188 -5.51984 1.12E-05 -0.00901 -0.00411
R 0.017284 0.003476 4.972376 4.46E-05 0.01011 0.024459

This is very interesting, indeed. Now that we can account for the impact of a recession itself, the size of the other two coefficients become even more apparent. Both coefficients maintain their basic shape. The R2 value also grows from 0.67 to 0.83, so these three coefficients together account for 83% of the variation.

At this point, I became especially interested in the subcategories of Quintile 5, so I ran some other regressions against the subcategories of that quintile. EITT5 represents the effective income tax on the top 5% of earners (over $180,000), and EITT1 (over $350,000) the effective income tax on the top 1% of earners.

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 0.104492 0.020176 5.179136 2.99E-05 0.062756 0.146229
EITQ5 0.021353 0.004651 4.591554 0.000129 0.011733 0.030973
EITT5 -0.03218 0.00609 -5.28393 2.31E-05 -0.04478 -0.01958
EITT1 0.010819 0.002899 3.731741 0.001092 0.004821 0.016816
R 0.020361 0.003933 5.177643 3.01E-05 0.012226 0.028496

This is a more complicated table to read, since the first three coefficients are pure subsets of each other. Some basic math is in order here. Basically, to look at the real coefficient of the top 5%, you add the EITQ5 and EITT5 coefficients, which produces a coefficient of about –0.01. For the top 1%, you add all three, giving a value of effectively zero.

In other words, for effective income tax rates within the ranges in effect since 1979, decreased unemployment is correlated with raising the income tax on households earning over $180,000, and with lowering the income tax on households earning between $62,000 and $180,000. Below $62,000, there’s no statistically significant correlation.

Similar results appeared with a two-year offset, though they were less statistically significant (i.e., the P-value was higher). Nonetheless, they were still within the bounds of the 95% confidence level. Things dropped off beyond that.

So, what can we conclude from this? At least for employment, the statistics point in the direction of the Democratic proposal for allowing the income tax cuts on households earning over $250,000 to expire, which was a surprise to me. The bottom line here: if our goal is improving the employment picture, the proposal to maintain the income tax cuts on all but those earning over $250,000 looks like the right way to go, though that threshold should perhaps be lowered.

What should the fallback position be, if it has to be an all-or-nothing affair? The answer is more complicated here. Assuming the rate increases were the same across the board, we’d be better off extending the tax cuts to everyone. But the rate cuts were 3% for people in Q4, and nearly 5% for those in Q5, which means that you’d have 60% more input to the Q5 coefficient than you would to the Q4 coefficient. The net result, then, is better if we let all the tax cuts expire than to extend them for everyone.

It’s nice that we have some real-world data with which to test these theories. But it sure would be nice to have an explanation for why these are the observed results. I have some ideas of my own, but I’d like to hear yours first.


About Michael Weiss

Michael is now located at http://www.logarchism.com, along with Monotreme, filistro, and dcpetterson. Please make note of the new location.
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143 Responses to Take 2: Could Employing Tax Cuts Tax Employment?

  1. dcpetterson says:

    In other words, for effective income tax rates within the ranges in effect since 1979, decreased unemployment is correlated with raising the income tax on households earning over $180,000, and with lowering the income tax on households earning between $62,000 and $180,000. Below $62,000, there’s no statistically significant correlation.

    This makes perfect sense.

    Below 62,000 the taxes paid are fairly small, so raising or lowering rates should have little effect either way.

    Between 62,000 and 180,000 the taxes paid are significant, but the majority of after-tax income is spent on consumer products. Lowering the tax rate on these people raises economic activity by increasing demand for consumer goods. This creates incentive for investment, and that creates employment.

    Over 180,000 the taxes paid are significant, but after-tax income is not spent on increasing economic activity. Rather, the taxes collected are spent by government on items that do increase ecnomic activity — because, after all, except for interest payments, all taxes collected by government are routed directly back into the economy either in the form of contracts give to businesses, or salaries to individuals (who are consumers of goods) or entitlement payments (which also go to individuals who are consumers).

    This means that increased taxes on people who earn over 180,000 turn into government expenditures which (except or interest payments) translate directly into increased demand for consumer goods (even the government contracts to businesses eventually turn primarily into salaries, which, again, creates consumers).

    So this is an entirely expected result. That it is opposite of the typical pro-elitist Republican rhetoric is unsurprising.

  2. Max aka Birdpilot says:

    Very good analysis Michael. Could you please provide a link to your raw data as used?

    Assuming no errors in your analysis, guess we’ll see if the supporters of kicking needy children in the tummy and giving borrowed money to the wealthy can produce a rational response or will they continue to scream their talking points with NO DATA to back it up?

  3. Max,

    I provided links to the source data in the article. I did the analysis using Excel, but the workbook is rather messy if you weren’t looking over my shoulder the entire time. I don’t know how readily it would all make sense to anyone without a roadmap.

    That said, anyone can take the data from the sources I linked to, run the regression analyses, and get the same results.

  4. Max aka Birdpilot says:

    Guess I was looking more towards that spreadsheet instead of reinventing the wheel.

  5. Max,

    OK, to save time for you (and others who want to play along with the home version), here’s an Excel workbook with the source data.

    In order to do regressions from this, you’ll need to enable the statistics add-in. Independent variables must be in adjacent columns, so you’ll probably find it easier to create a new sheet in the workbook that references the source data. Then you can move things around to your heart’s content, and start crunching numbers.

    I took out the reference sheets that I created, because that’s where things become cryptic for anyone else to read. And it’s trivial to create them for yourselves.

  6. mclever says:

    Yay, numbers! I love Michael’s posts that involve real math. But that’s just the geek in me. I like that you considered the impacts a year out rather than current year. Seems sound to me.

    You asked for speculation, which I’ll gladly provide. Pure, rampant speculation on my part, with no fancy statistics to back me up… I’ll make broad, sweeping generalizations that ignore the COLI, family size, and other extenuating circumstances. I’m aware of these variations, but I’ll keep it simple, so that it matches up (more or less) with your numbers.

    The people making below ~$60K are mostly living paycheck-to-paycheck. They spend their income on housing and food and other necessities. They buy new clothes, but mostly only to replace stuff that’s worn out. A few near the top end may have some spare cash, but that’s balanced by the many at the lower end who need food stamps to survive. So, while these folks are consumers, their level of consumption doesn’t vary as much as those a notch higher on the income scale. Basic needs are basic needs, regardless.

    The people making ~$60-$180K are the primary consumers who drive the economy. They’re the folks who make enough to have some disposable income to spend on discretionary items. They buy new cars every two years, they go on vacations, and they buy new clothes just to keep up with trends. They go to movies and eat out with friends. They have to get the new iPhone that they saw advertised on their HD cable/satellite TV. People on the lower end of this range will do this less than people on the higher end, but you get the idea. Raise their taxes, and you’re cutting directly into the spending engine of our economy. If these folks can’t afford to buy stuff, then the economy stalls and bosses have to lay people off.

    Over $180K, and folks start saving significant chunks of the extra income rather than spending it. There are only so many new must-have gadgets, and they can only eat out or go to movies so many times in a week. Sure, folks at the extreme top can buy more ridiculous big-ticket items than those just making enough to keep up with the Joneses next door, but there is a limit to personal consumption. Somewhere around $200K, the curve levels off. After a certain point, they just don’t need that much more stuff, so they save the rest. Saving is good, but it doesn’t create jobs. Raising taxes on these folks doesn’t impact their consumption as much as the lower-earners, but it has some other interesting effects.

    Let’s break that top quintile into further slices…

    You get a negative correlation between taxes and unemployment when looking at the top 5%, but zero correlation when looking at the top 1%. My guess is that’s because the lower portion of the top 5% are the ones still counting their pennies. A shift in the tax rates will affect their net income enough to modify their budget. Higher taxes cut into their savings and spending habits, so they have to *do* something to keep their income at their accustomed levels. Thankfully, perhaps, these people usually are economically and socially positioned to be able to do something about it. If they’re a boss or small business owner, then maybe they look for ways to expand their business, which means hiring folks in the lower, consumer income bracket.

    There’s no correlation with the top 1%, because the folks at the extreme top generally make so much money that the vagaries of the effective income tax rates don’t impact their day-to-day budgets. Oh, so the trust fund gets a little less this year? No biggie. As long as they can keep the Lamborghini running. Their estate manager will tweak their charitable contributions and shuffle some paper around until it all works out to their satisfaction. Yes, a 1% shift in tax rates can mean millions of dollars for some billionaires, but if most of their income is dividends, then that doesn’t even matter to them. If it’s all on paper anyway, it’s a little less real.

    OK, so those are my completely off-the-cuff guesses. Feel free to shoot me down, expand or expound!

    🙂

  7. mclever says:

    Yeah, what dcpetterson said, too.

  8. dcpetterson says:

    Oh and the timing of correlation —

    Raise taxes on people over 180K, and that money gets spent next year. Government spending directly creates jobs, whether that spending s buying an aircraft carrier or building a road. Government spending that goes to salaries of government employees also creates jobs (first, the employees themselves, secondarily because their salaries are spent on consumer goods, thus increasing demand for more consumer goods, thus providing incentive for companies to hire people to make those consumer goods). Government pending that goes to entitlements creates jobs (by putting spending money into the hands of consumers).

    All this happens primarily in the following year. In years after that, the effect is already in place, and further job growth is stablized rather than expanded.

    In reverse, when you raise taxes on 60k-180k households, again, the effect on jobs happens primarily the following year, as the lowered consumer spending in year X mostly affects hiring in year X+1. In reverse, lowering taxes on these people increases their consumption, which takes a few months to be reflected in corporate expansions, and this is primarily seen in year X+1.

    It all makes perfect sense.

  9. Bart DePalma says:

    To look for a causal relationship, I compared the effective income tax rate in a given year, by quintile, to the following year’s unemployment rate.

    May I suggest instead that you compare the year before and year after an effective tax rate increase (or decrease) to see the effect on GDP and employment growth.

    You appear to be comparing different one year economies over a thirty year period. The comparison needs to be of the same economy proximate to the actual tax change.

    Thanks

  10. Bart,

    You may suggest anything you like, but there are two things wrong with your suggestion.

    1) I wasn’t looking at GDP. The point was to test the specific allegation that a tax increase would have a negative impact on unemployment.

    2) Your suggestion regarding the year-prior and year-after tells me you don’t understand how regression analyses work. It’s not necessary to test the prior year separately because the regression analysis compares all years in the 30-year period by design. In other words, it’s already built in. The use of three decades of data, then, accounts for the different economic conditions of all of those years in that period, and is therefore more complete than the one you proposed.

    Now, I can certainly do the same sort of test on GDP, and am considering doing so. And it would be easy to run the same test against employment growth. But why would those be better representations of the impact than the unemployment rate? Both of them would have even more noise in them, and thus would likely have lower statistical significance.

  11. mclever says:

    Thanks for posting the spreadsheet, Michael.

    For those of us who like playing with numbers, it saves us the tedious effort of compiling the data ourselves. Aahh! I might be lost in Excel heaven for a while…

    😉

  12. Bart DePalma says:

    Michael:

    The use of three decades of data, then, accounts for the different economic conditions of all of those years in that period, and is therefore more complete than the one you proposed.

    Really? You originally stated that you accounted for two variables (1) effective income tax rate and (2) what I presume is the following year’s average unemployment.

    What other economic factors did you normalize for over 30 years?

    How did you normalize those factors?

    Just off the top of my head, I would note inflation, prime interest rate, long term interest rate, under employment rate, GDP increase/decrease, the subcomponents of GDP, trade deficit, position on the normal business cycle (Bush 89 was on the downslope and Clinton 92 was on the upslope), other types of taxes, work force changes (including the aging population, the IT boom, the manufacturing mechanization and immigration waves), financial crises (savings & loan and home mortgage busts), etc.

    Running a simple regression analysis on Excel with two out of dozens of variables over a 30 year period will not tell you squat, which is why your results are squirrelly and counter intuitive.

    By limiting the periods to just before and after a substantial tax increase or decrease as I suggested, you can minimize but not completely eliminate the effect of other variables. The only relatively clean before and after period I know of is the year before and after the Bush 2003 tax rate reductions because the economy was largely flat heading into the rate change and nothing else significantly changed.

  13. *sigh* Bart, before you ask me any more, I strongly advise you read up on regression analysis.

    The entire point of a regression analysis is to hold the other dozens of variables constant, and to collect enough data points that the noise of the other variables falls away, leaving the signal of the independent variables’ impact on the dependent variable.

  14. Max aka Birdpilot says:

    Bart, Serious question. No bullshit or equivocation or hidden agenda. Just an honest attempt to see inside your thought processes. Please answer in the same spirit, honestly and with no bullshit. If you’ll do so, I’ll reserve the right to ask one and only one follow up for possible clarification. Milk, tea or water: Make this as clear as water. Thanks

    Since you write a lot about the “will of the people”, particularly as it relates to the conservative/libertarian side of the spectrum, please relate to us your take on that same “will of the people” and their expectations, as it relates to the 2008 election wherein Obama was elected with the largest popular vote in numbers, a percentage vote wider than that of any Republican since Reagan, the election of a Democratic majority in the House of 255-178 and a Democratic majority in the Senate of 60-40?

    Again, serious question looking for a serious answer. No talking points. Thanks

  15. shiloh says:

    Bart should be quite familiar w/regression …

    solo estoy diciendo

  16. Monotreme says:

    But, but, but…

    Michael, your data run contrary to Bart’s cherished beliefs.

    Or, in neuroscience terms, the brainstem decides, and the cortex supplies the reasons.

    Since his brainstem has already decided:

    HULK SAY TAXES BAD! HULK SMASH!

    and your data say otherwise, now his cortex has to come up with new reasons. That’s a lot of work for a cortex that’s clearly not as plastic as it used to be.

  17. Bart DePalma says:

    Michael Weiss says: “*sigh* Bart, before you ask me any more, I strongly advise you read up on regression analysis.”

    Sigh all you want. I know what a regression analysis is. I asked you specifically how your analysis accounted for all the independent variables I mentioned as well as the multitude of others that influence a continent wide economy over a thirty year period.

    You answer makes it clear that your model did not account for any other variables apart from the two you mentioned.

    The econometric models professionals use are enormously complex and are still often wrong. What you are attempting is enormously complex.

  18. Monotreme says:

    @Max:

    OBAMA BAD! HULK SMASH!

    PELOSI BAD! HULK SMASH!

    REID BAD! HULK SMASH!

  19. Monotreme says:

    @Bart,

    I’m not Michael, but you’re wrong.

    As I see it, Michael’s model is simple because he’s not trying to establish a causal relationship, but merely to establish a correlation.

    Professional econometric models do, by definition, try to establish a causal relationship, which is a much more complicated thing.

    His data do put paid to the concept that lowering taxes automagically increases employment, for all years, for all economic conditions, in all tax brackets. If I’m not mistaken, that’s what you’re trying to sell us, and it’s wrong, R-O-N-G wrong.

  20. Bart DePalma says:

    Max: Since you write a lot about the “will of the people”, particularly as it relates to the conservative/libertarian side of the spectrum, please relate to us your take on that same “will of the people” and their expectations, as it relates to the 2008 election wherein Obama was elected with the largest popular vote in numbers, a percentage vote wider than that of any Republican since Reagan, the election of a Democratic majority in the House of 255-178 and a Democratic majority in the Senate of 60-40?

    Have you been following my couple dozen or so posts on this subject?

    In 2006 and 2008, Rahm Emanuel recruited Dem candidates to run campaigns to the right of GOP incumbents by promising to clean up GOP deficits and corruption. Bush had so badly destroyed the conservative GOP brand by this time that Emanuel’s plan worked famously.

    In 2008, Obama ran on tax cuts for nearly everyone, a health care plan which would not change your insurance and would lower your premiums, and an express promise during the debates that he would lower spending in existing programs more than he would spend on his new programs for a “net spending cut.” A very 1992 Clinton style Reagan-lite campaign.

    However, the swing Reagan Dems (white working class) properly did not trust Obama. They voted for Clinton, who actually received more Dem votes than did Obama. As of late August, Dem pollster Stan Greenberg was noting that the Reagan Dems were still not sold on Obama and the election was very much in the balance. See “Back to Macomb: Reagan Democrats and Barrack Obama,” Democracy Corps (August 25, 2008). http://www.greenbergresearch.com/index.php?ID=2234

    The election shifted decisively to Obama when Lehman Bros. declared bankruptcy, the market collapsed and McCain ran to Washington to very publicly push a very unpopular TARP bill while Obama stayed as far as he could from DC.

    In short, Obama and the Dems won on a neo-Reagan platform and economic panic.

    If Obama and the congressional Dems ran on raising taxes to close the deficit as did Mondale in 1984, you would be whining about President McCain and probably an ongoing GOP congressional majority.

    You need to understand something. I am not saying that there has been a center-right majority of voters through out our history. We were very much a center-left country between 1932 until the Dems so completely alienated the middle class during the 60s and 70s that voters were willing to give Reagan and his ideas a shot. Reagan passed his audition and the voters have been pretty reliably center-right since then. Someday this alignment will shift back again, but Obama’s radicalism and Jimmy Carter-esque impression of ineptness has actually reinforced the Reagan Coalition which Bush did so much to tear apart.

  21. Bart DePalma says:

    Mono:

    Michael was not looking for mere correlation. He claimed causation…

    “To look for a causal relationship, I compared the effective income tax rate in a given year, by quintile, to the following year’s unemployment rate.

  22. GROG says:

    MW,

    Since your analysis is in light of the extension of JGTRRA and your desire for the tax cuts to expire as a means to reduce the deficit, it seems that this is a mute point anyway.

    History shows over the past 60 years that no matter what the marginal tax rate is, revenues as a % of GDP remain constant between 18-20% anyway. Even when marginal rates were 91% in the 1950’s, revenues were still around 18-20%. When marginal rates in the 30%s in the 90’s, revenues were still around 18-20% of GDP.

    The way to reduce the deficit is to cut spending. It always humors me whenever the left is faced with a tax cut, they suddenly become deficit hawks. 🙂

  23. Bart,

    Sigh all you want. I know what a regression analysis is. …You answer makes it clear that your model did not account for any other variables apart from the two you mentioned.

    And if you undersood what regression analyses did, you’d understand that, by their very nature, they account for all other variables, both known and unknown. Their intent is to address ceteris paribus relationships. Clearly, if the only thing we’re changing is the tax rates, then we are, by definition, looking at a ceteris paribus situation.

    The econometric models professionals use are enormously complex and are still often wrong. What you are attempting is enormously complex.

    Yes, the economy is enormously complex. Even showing the degree of correlation that I showed does not guarantee a causal relationship. It is, however, highly suggestive.

    You are, of course, free to run your own quantitative analysis to produce evidence to the contrary, and show those results as counterevidence to my analysis.

  24. Max aka Birdpilot says:

    OK Bart, My one follow up question:

    You said “In short, Obama and the Dems won on a neo-Reagan platform and economic panic.” Please explain the following: when did Reagan promise health care reform during the 1980 campaign; how has Obama failed to meet his campaign promises for “no tax increases for people making less than $250k; for passing health care reform, both of these within the contest that in a legislative government, particularly when one political party refuses to act in a meaningfully cooperative manner, one VERY seldom is able to get legislation passed that 100% meets with campaign rhetoric; and that the economic collapse that occurred very late in the campaign season and after the elected required seismic shifts in commitments that had been made under much better economic conditions; and with these as givens, when the 29 million voters from 2008 (53+ % of the electorate) that did not vote in 2010 are considered, why has not the “will of the people” that did vote Dem in 2008 different from the same “will” of the 40% that you claim MUST be listened to?

  25. GROG,

    Since your analysis is in light of the extension of JGTRRA and your desire for the tax cuts to expire as a means to reduce the deficit, it seems that this is a mute point anyway.

    It is not moot in the least. I explained why prior to running this analysis I wanted the tax cuts to expire. Now, at least, I have reason to reconsider the House proposal, in terms of its impact on unemployment and thus future government revenues. This is pretty important in terms of a balanced budget as well.

    History shows over the past 60 years that no matter what the marginal tax rate is, revenues as a % of GDP remain constant between 18-20% anyway. Even when marginal rates were 91% in the 1950′s, revenues were still around 18-20%. When marginal rates in the 30%s in the 90′s, revenues were still around 18-20% of GDP.

    Valid point. It’s worth noting that, under JGTRRA, revenues dropped to 16% of GDP. That difference from the norm means between $236B and $472B per year. That’s a lot of deficit coverage, don’t you think?

    The way to reduce the deficit is to cut spending. It always humors me whenever the left is faced with a tax cut, they suddenly become deficit hawks.

    I could say the reverse about the right, but I won’t. Instead, I’ll point out that I don’t like the idea of running deficits at any time other than as a counter to recessions, with the proceeds to be covered by the next economic growth cycle. Deficits during times of economic growth are poison.

    But I was surprised to find that the impact of collecting more taxes from the top 5% of earners correlates to improved employment, as does collecting less from the 4th quintile. This is a new wrinkle in my own assumptions.

  26. Oh, for those of you playing along at home, I forgot to tell you where I got the values for the Recession null-variable. I pulled the years for the recession off of Wikipedia’s page on US recession history. Just put a 1 in the column for years with a recession, and a 0 in the column for years without. Where the recession happened over part of the year, I put the 1 in if the recession went for more than half of that year. It’s not perfect, of course, but it’s mighty good.

    I suppose you could fine-tune it by putting in the exact percentage of the year that was recessionary. That’d probably be a bit tighter.

  27. Bart DePalma says:

    Max:

    Max:

    You said “In short, Obama and the Dems won on a neo-Reagan platform and economic panic.” Please explain the following: when did Reagan promise health care reform during the 1980 campaign…

    Reagan did not, which is why I called the entire platform neo-Reagan.

    how has Obama failed to meet his campaign promises…

    Obama broke every key campaign promise over the past two years – Obamacare broke every promise for heathcare in his campaign website, no one’s tax rates were reduced, and, instead of a net spending cut, Obama gave us the largest deficits absolutely and as a percentage of GDP since WWII. He lied pathologically.

    why has not the “will of the people” that did vote Dem in 2008 different from the same “will” of the 40% that you claim MUST be listened to?

    I stated that the will of the people was to balance the budget by cutting spending without increasing taxes. Obama did not campaign on raising taxes and did campaign on a net spending cut, thus his election suggests that my statement was correct.

  28. shortchain says:

    Bart,

    Actually, Obama ran on letting the Bush tax vacation run out for those making over 250K, and extending them for people under that level. Since this, by your definition, would be a “tax increase” — as you have stated multiple times, you are incorrect when you say “Obama did not campaign on raising taxes”.

  29. dcpetterson says:

    Michael, this analysis of yours has been one of the most informative and even-handed I have seen. The correlation you have underlined between tax changes and the following year’s unemployment number certainly is suggestive and important.

    I think the correlation is “count-intuitive” only so far as the conservative trickle-down rhetoric has congealed into “common wisdom” (though I would be interested to hear your pre-analysis thought on the matter). This shows the power of advertising. For me, as I outlined in my comments above, the correlation you saw is precisely what I would have expected to see, for the reasons I suggested.

    I agree with your comment to GROG about deficits. The only time the economy should run deficits is as a counter-recession stimulus. I am opposed to deficits in periods other than recession. (Wartime is a special case; but unnecessary manufactured wars — see Iraq and Afghanistan — don’t count.)

    During the last 6 presidents (Carter, Reagan, Bush 1, Clinton, Bush2, Obama) the Republicans have invariably run deficits (and increased them) regardless of economic conditions. In contrast, the Democrats invariably have reduced the deficit left by their predecessors — again, regardless of economic conditions. (True, 3 Republicans and 3 Democrats is a very small sample.) Yet the Republican rhetoric is that Democrats “like” deficits and Republicans strive for balanced budgets. This, again, shows the power of advertising.

  30. dcpetterson says:

    @shortchain

    You are correct. Bart is wrong.

    Let’s also point out that Obama has already delivered on providing a middle class tax cut, one of the largest in history. He kept that promise.

    He campaigned on producing historic health reform. He delivered on that promise.

    He campaigned on withdrawing American combat troops from Iraq. He delivered on that promise.

    He campaigned on aggressively executing the war in Afghanistan (even though the left doesn’t like this). He has delivered on that promise.

    He campaigned on a number of other issues such as expanding SCHIP, the Lilly Ledbetter act, reducing the number of “signing statements,” major financial reform, a major stimulus bill. He delivered on all of these.

    He campaigned on a number of issues (such as closing GITMO and repealing DOMA) which the Republicans have obstructed. It is hard to hold him responsible for mindless Republican obstructionism — and it would be disingenuous for a right-winger such as Bart to criticize him for not delivering on things that Bart opposes anyway.

    Whether Obama will be able to deliver on repealing DADT and ratifying a major new START treaty will be a function, again, of mindless Republican obstructionism, and whether the Republicans are willing to, in true totalitarian fashion, ignore the will of We the People.

  31. dcpetterson says:

    I forgot to mention — Obama has also reduced the deficit from Bush’s last fiscal year. The deficit in the last two fiscal years have both been smaller than Bush’s record final 1.7 trillion deficit, and the second of the two was smaller than the first. Even in this time of recovery from the Republican Great Recession, Obama is reducing the deficit.

    He has been nothing short of brilliant in his stewardship of the economy, bringing us back from the worst crash in nearly a century. Perhaps he could have done better — had it not been for Republican obstructionism. But we’ll see how well the Republicans manage in the next two years.

  32. GROG says:

    MW said:

    Valid point. It’s worth noting that, under JGTRRA, revenues dropped to 16% of GDP.

    2006 and 2007 revenues were around 18.5% until the economy fell off the cliff in 2008. I would argue the reduction in revenue was a result of the economic conditions rather than the tax rate.

  33. dcpetterson says:

    @shortchain, in case you miss it, I left a comment for you on the “10,000 Recounts” thread. I will also thank you here for your update on the progress of the recount!

  34. Bart DePalma says:

    DC: “I think the correlation is “count-intuitive” only so far as the conservative trickle-down rhetoric has congealed into “common wisdom””

    There is no credible school of economics which believes that tax increases increase economic growth, esepecially during a recession when both Keyenes and Laffler would recommend tax cuts.

    Right, Michael?

  35. dcpetterson says:

    Well, Bart, since I was right and they were wrong, I guess I’m smarter than them, huh? 🙂

  36. GROG says:

    @MW,

    After the Bush tax cuts, receipts as a percentage of GDP went from 16.2% in 2003 to 18.5% in 2007.

    http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/hist01z2.xls

  37. dcpetterson says:

    Yes, GROG, by 2007 the economy had begun to recover some from the damage Bush (and his tax cuts) had done to it in the period 2002-2006. However, the underlying damage Republican policies had caused had not nearly been repaired, and resulted in the crash of 2008.

  38. GROG says:

    DC,

    I understand that’s the leftwing talking point, but I know even you don’t believe what you’re saying.

  39. Monotreme says:

    @Bart,

    Again, I would challenge your reading comprehension.

    It’s true that Michael said

    To look for a causal relationship…

    but the antecedent to “a causal relationship” is here:

    But I really wanted to test the assertion that increasing income taxes will generate more unemployment than leaving the rates where they are.

    That’s the causal relationship he tested.

  40. shortchain says:

    GROG,

    Yes, and they went from 20.6 percent in 2000 to 16.7 percent in 2003. Gosh, I wonder what happened to the deficit in that time period?

    Seriously, picking arbitrary endpoints like 2003 and 2007 is totally meaningless when dealing with inherently noisy data like GDP and receipts. Even you should know that, GROG.

  41. GROG says:

    shortchain,

    The Bush tax cuts went into effect in 2003. Gosh, how is that endpoint arbitrary?

  42. Bart DePalma says:

    Mono:

    You claimed that Michael was seeking a correlation and not causation. That was incorrect.

  43. Monotreme says:

    I love our little chats.

    Michael (as I interpret his words) was seeking a correlation to test the hypothesis that there is a causative relationship between raising income taxes and increased employment.

    If a causative relationship exists, then a correlation would exist.

  44. Monotreme says:

    Oh, and while I’m at it, nice way of diverting the argument by focusing on one word which may or may not be in dispute.

    I’ll repeat the gist of my earlier post, since you got so het up over correlation vs causality that you missed it.

    His data do put paid to the concept that lowering taxes automagically increases employment, for all years, for all economic conditions, in all tax brackets.

  45. Michael Weiss says:

    GROG,

    After the Bush tax cuts, receipts as a percentage of GDP went from 16.2% in 2003 to 18.5% in 2007.

    Indeed they did. So we can conclude that the entire period was about two percentage points below the historical norms. That’s about a quarter trillion dollars a year for four years, or a trillion dollars of additional debt, not counting the dramatic increases in expenses that arose from fighting two wars.

    Anyway, the bottom line is that there is quantitative evidence to suggest that increasing taxes on the wealthiest Americans will both reduce the deficit and decrease unemployment. Sounds good to me.

  46. Michael Weiss says:

    Bart,

    There is no credible school of economics which believes that tax increases increase economic growth, esepecially during a recession when both Keyenes and Laffler would recommend tax cuts.

    Right, Michael?

    What’s fascinating about this most recent analysis is that it is more granular than Keynes was able to do with the available data during his life. In broad brush strokes, tax cuts would be expected to improve the employment picture. But the notion that all tax cuts will behave in the same fashion at all times is naïve.

    I’ll point out that enough data to be able to test this hypothesis has only been available for a short time. It’s possible that we’re looking at the cutting edge here.

    Again, Bart, you have access to exactly the same data as me. You have access to exactly the same tools as me. Go ahead and dig.

  47. dcpetterson says:

    Michael
    But the notion that all tax cuts will behave in the same fashion at all times is naïve.

    It does indeed.

    A change in personal income taxes should be expected to have a different effect than a change in business income taxes. And both should be different than a change in property taxes, or capital gains taxes. And estate taxes should be different again.

    Taxes on people who spend all their money on consumer goods (thus genertaing demand) should have a different effect than taxes on people who put most of them money into the stock market or other long-term investments (most of which money generates no demand at all, and which mostly does not even furnish funds for business expansion).

    Raising (or lowering) any of these taxes during an inflationary period should be expected to have a different effect than during a time of contraction.

    We would not expect lowering (or raising) taxes to have a universally good economic effect in all possible situations, nor to work as a cure-all for all possible economic ills.

  48. dcpetterson says:

    … and then there is the question of the economic impact of what those taxes are spent on. Money collected as taxes does not disappear from the economy. Indeed, other than interest payments on government loans, the vast majority of money collected as taxes is pumped right back into the economy. Collacting taxes from a place where it is have little (or even harmful) economic impact, and spending it in a place where it has a positive impact, may indeed be the best possible course.

  49. GROG says:

    GROG said:
    After the Bush tax cuts, receipts as a percentage of GDP went from 16.2% in 2003 to 18.5% in 2007.

    MW said:
    Indeed they did. So we can conclude that the entire period was about two percentage points below the historical norms.

    According to whitehouse.gov, the average receipts since 1950 is 17.9% of GDP. Since 1940 it’s 17.4% of GDP. Bush raised it from 16.2% in 2003 to 18.5% in 2007. How is that two percentage points below the historicial norms?

    Wouldn’t you agree that ecnomic conditions have more to do with tax revenues than tax rates?

  50. shortchain says:

    It should be obvious that some tax collection does, in fact, have a positive effect on growth. While doctrinaire ideologues may argue that the money they make is, in fact, theirs, the fact is that the government prints the money, sustains the banks which facilitate moving it around, provides the infrastructure by which companies can operate — such as the backbone of this internet thingy that allows Bart to share his brilliant lack of analytical skills with all of us — and in a very real sense owns the money.

    Even Laffer, who is, in my view, not a serious contender for “serious economist” would have to agree that, at 0 taxes collected, things would not be better. So the question really is, at what point is the tax level optimal — and what tax rates are best? Michael’s analysis gives us some indication. If the goal is a healthy middle class, and lower unemployment, then the top tax rate should be higher.

    If, on the other hand, the goal is a feudal society, then — by all means, let’s just keep on going as we are.

    Oh, and GROG? I’ve got no argument with 2003 — but I notice you have no reason to arbitrarily pick 2007. Care to share a reason?

  51. GROG says:

    shortchain,

    Oh, and GROG? I’ve got no argument with 2003 — but I notice you have no reason to arbitrarily pick 2007. Care to share a reason?

    So you’ve altered your original statement and are now asking only about the 2007 endpoint? I picked 2007 because that was the last year before the “greatest economic collapse since the Great Depression”. The lost revenues in ’08 and ’09 were due economic conditions, not the Bush tax cuts.

  52. dcpetterson says:

    @GROG
    The lost revenues in ’08 and ’09 were due economic conditions, not the Bush tax cuts.

    Unless, of course, the economic conditions in ’08 and ’09 were wholly or partially due to the Bush tax cuts.

  53. shortchain_is_off_the_reservation says:

    GROG,

    I want you to concentrate now. An interval has two endpoints.

    Of course, it’s entirely accidental that Bush 43 took office in a recession, which had ended by 2003.

    The point of doing a statistical analysis, as opposed to picking two endpoints and comparing some noisy value at those two points, is to reduce, or, hopefully, eliminate, the effect of noise.

    It’s quite clear that, while Bart is “challenged” when it comes to regression, you have no clue whatsoever about simple statistics.

  54. GROG says:

    DC,

    Unless, of course, the economic conditions in ’08 and ’09 were wholly or partially due to the Bush tax cuts.

    Unless you have any evidence to support that claim, it continues to be another one of your unsupported leftwing talking points.

    Do you have any authority on the economy who would say that the banking crisis and the recession could have been averted by holding off on tax cuts in 2001 and 2003?

  55. Bart DePalma says:

    Michael:

    I am smart enough to know that I do not possess the reams of data, the computer, the programming skill set nor the theoretical knowledge to be able to construct a statistically accurate econometric model which can account for all the relevant independent variables of the last 30 years of the enormous and complex American economy. The models we possess today as at best uneven and often grossly wrong. See the CBO models dealing with tax rate changes and the econometric models which were the basis of the Obama stimulus plan. The Obama white paper in support of stimulus was perhaps the biggest bust since Bush’s “mission accomplished” speech.

    While I enjoy reading about your efforts in this area, I think you need to go into this acknowledging their inherent limitations. This is why I suggested far more modest experiments like comparing a year or maybe two before and after the tax event in question. Even those would be thumbnail sketches at most where you would have to go in looking for significant concurrent trends or changes.

    Regards

  56. Bart DePalma says:

    Shortchain:

    Taxes by definition harm the private sector economy. The question is whether the item upon which the government spends the money offsets that damage to any extent. This is why all spending and laws should undergo a cost benefit analysis.

  57. Monotreme says:

    TAXES BAD! HULK SMASH!

  58. Max aka Birdpilot says:

    Bart,
    Thank you for your responses.

    I had hoped that you would take the opportunity to demonstrate objectivity and to actually use factual analysis instead of ideological opinion. You did not, and empirically, can not. Having been away fro several months, I actually hoped you had evolved. You still use false assertions and half-truths. You avoid, as Michael challenged you to do, meaningful research and analysis of your own, just substituting ideology.

    If you submitted a brief to the court without proper citations, you’d be laughed out of the building and eventually disbarred. If you failed to follow civil procedure and disregarded the rules of discovery the same would happen.

    But you think you can pop up here and act in such a fashion. You insult the intelligence of all here and demonstrate your overwhelming arrogance.

    In spite of your assertion to the contrary, dc points out the fulfilled, and not, campaign promises by the President in 2008.

    Since you have NOT seen fit, or are unable, to evolve, I shall revert to the same tactics I felt the need to use against you months ago. You are no Buckley or Safire, just a burro.

    Bart said: “Taxes by definition harm the private sector economy.“. No, Bart, THAT is NOT true. As shortchain pointed out, taxes provide the infrastructure that allows the private sector to flourish. Roads, ATC, interstate regulation, even the armed forces that help maintain the security and integrity of the country. You are wrong again.

    Bart said: “I am smart enough to know . . .“. No, Bart, you are not.

    You are an ideological ass.

  59. Bart DePalma says:

    The Nov unemployment report came out today.

    The good news was that more folks are looking for work. Of course, this could either be confidence or a realization that the unemployment benefits may be coming to an end for the long term unemployed.

    The bad news is that the 50,000 private jobs created are about a third of that needed to keep up with young folks entering the job market.

    Time for a 180 degree change in government economic policy.

  60. Bart DePalma says:

    BD: Taxes by definition harm the private sector economy. The question is whether the item upon which the government spends the money offsets that damage to any extent. This is why all spending and laws should undergo a cost benefit analysis.

    Max: No, Bart, THAT is NOT true. As shortchain pointed out, taxes provide the infrastructure that allows the private sector to flourish. Roads, ATC, interstate regulation, even the armed forces that help maintain the security and integrity of the country.

    Which part of the second sentence of my post escaped you? Or did you simply stop reading at the first line?

    Max: You avoid, as Michael challenged you to do, meaningful research and analysis of your own, just substituting ideology.

    What ideology was I substituting by observing that Michael had not accounted for dozens of independent variables in his analysis and noting that neither he nor I have the wherewithal or knowledge to account for all the variables over the past 30 years of American economy?

  61. GROG says:

    @shortchain,

    You can insult me all you want, and that’s fine. But the facts remain.

    1.) There is no evidence that an increase in marginal tax rates led to an increase in revenue as a % of GDP over the past 60 years.
    2.) There is no evidence the Bush tax cuts led to a decrease in revenue as a % of GDP.
    3.) There is no evidence the Bush tax cuts caused the financial meltdown or the recession in 2008.

    You’re free to prove me wrong.

  62. GROG,

    According to whitehouse.gov, the average receipts since 1950 is 17.9% of GDP. Since 1940 it’s 17.4% of GDP. Bush raised it from 16.2% in 2003 to 18.5% in 2007. How is that two percentage points below the historicial norms?

    It’s, more accurately, two percentage points below the historical average, but of course recepits as a percent of GDP is but one part of the picture.

    Over that same period, income taxes as a percent of GDP ranged from a minimum of 8% to a maximum of 14%, with an average of 11%. Since 1944, except for 1950 and 1976, they never dropped below 10%…until Reagan. After Reagan’s change in the tax code, they never rose above 10% until Clinton. And they never were as low as 8% until W’s tax cut.

    This is very important. If the revenues aren’t coming from income tax, where are they coming from?

    Wouldn’t you agree that ecnomic conditions have more to do with tax revenues than tax rates?

    No, I wouldn’t. Revenues, rates, the particular individuals impacted by the tax collections, the particular individuals impacted by the expenditures, the amount spent relative to the amount collected, and the amount spent on debt service are all very important in different ways and to different parts of the economy.

    This, by the way, is what makes regression analyses such powerful tools. They allow you to tease those aspects apart.

  63. Max aka Birdpilot says:

    Hmmm. Something we seem to be NOT getting, even though it’s been pointed out on several occasions, is that government revenues have NOT, more than marginally, DECREASED as a result of so-called “tax cuts”. Decreases have a MUCH larger correlation with a down economy.

    Tax revenues thus remain a (relative) constant percent of the GDP.

    What IS CHANGING are the SOURCES of that revenue. What has actually been happening is a REDISTRIBUTION of the source of revenue DOWNWARD from upper incomes and corporation to the middle class in violation of the historical progressive tax system we’ve had since the passage of the 16th amendment.

    Any takers?

  64. Max aka Birdpilot says:

    Bart, I’m no longer wasting my time attempting to engage you as you prove incapable of pragmatic and honest debate. You had the opportunity and you failed to take advantage of it.

    I shall revert to pointing out your idiotic, ideological statements.

  65. Bart,

    While I enjoy reading about your efforts in this area, I think you need to go into this acknowledging their inherent limitations.

    I did. You just have problems with reading comprehension. I’m serious about this. I’ve never run across someone who so consistently will read something that someone writes and walk away believing he wrote something completely different.

    This is why I suggested far more modest experiments like comparing a year or maybe two before and after the tax event in question.

    The far more modest experiment tells us less than the one I did. While it would certainly make it easier for you to pick it apart, it would be far less meaningful. Why on earth would I want to do that?

    Even those would be thumbnail sketches at most where you would have to go in looking for significant concurrent trends or changes.

    Exactly. They’d be less useful.

    Seriously, Bart, you may understand the words “regression analysis,” but you clearly don’t have a clue what they mean or how they work. See Proverbs 17:28.

  66. Monotreme says:

    READING BAD! HULK SMASH!

  67. shiloh says:

    apologies to ideological asses …

  68. GROG,
    I’ll start with the easy one:

    2.) There is no evidence the Bush tax cuts led to a decrease in revenue as a % of GDP.

    Before the Bush cuts, income tax as a percent of GDP was 11%. After, it immediately dropped to 8%, the lowest since before WWII. Revenue as a percent of GDP immediately dropped by precisely the same number of percentage points, so it all came from the income tax receipts drop.

    That’s evidence.

  69. dcpetterson says:

    Me: Unless, of course, the economic conditions in ’08 and ’09 were wholly or partially due to the Bush tax cuts.
    GROG: Unless you have any evidence to support that claim, it continues to be another one of your unsupported leftwing talking points.

    I was theorizing, not making any dogmatic statement. You claimed that “economic conditions” were responsible for the change in tax revenues. I pointed out that tax rates (in this case, the Bush tax cuts) affect economic conditions. Would you deny that tax rates affect economic conditions? (If so, they you are denying the most basic underlying dogma of modern conservative thought. Or is “the economy is affected by tax rates” actually a “left wing talking point”?) If you agree that tax cuts affect the economy, then you must also agree that the “economic conditions” of ’08 and ’09 were, in part, due to the tax cuts put in place by Bush.

    Do you have any authority on the economy who would say that the banking crisis and the recession could have been averted by holding off on tax cuts in 2001 and 2003?

    I never made that claim, so I need no “authority” to support it.

  70. GROG says:

    @MW,

    Since 1946, the average income tax receipts as % of GDP has been 8%. How are you determining the drop was a result of the Bush tax cuts if histroy tell us the average is around 8% anyway?

    I’m curious as to why you’re discounting total revenues and concentrating on income tax revenues. As DC alluded to above, lower income taxes stimulate the economy and create revenues through other sources.

  71. Bart DePalma says:

    Michael:

    Spare me the reading comprehension jibe. I quoted your analysis to identify the independent and dependent variables you were using. I then noted several of the independent variables for which you did not account. You then claimed that your analysis accounted for everything with a citation to Wikipedia’s entry for regression analysis. However, your basic Excel model does not include any other independent variable part from the ones you disclosed.

    After scientists model a hypothesis and end up with nonsensical and internally contradictory results (as you did), they either attempt to explain the results or scrap the model and try again. You did neither. Instead, you rather arrogantly assumed the results were correct than then recommended a policy course of action based upon those results.

    Let’s take a closer look at what you posted:

    In other words, for effective income tax rates within the ranges in effect since 1979, decreased unemployment is correlated with raising the income tax on households earning over $180,000, and with lowering the income tax on households earning between $62,000 and $180,000. Below $62,000, there’s no statistically significant correlation…

    So, what can we conclude from this? At least for employment, the statistics point in the direction of the Democratic proposal for allowing the income tax cuts on households earning over $250,000 to expire, which was a surprise to me. The bottom line here: if our goal is improving the employment picture, the proposal to maintain the income tax cuts on all but those earning over $250,000 looks like the right way to go, though that threshold should perhaps be lowered.

    Before you mess up our tax code, what is your explanation for these self contradictory results? One would assume under all schools of economics and simple common sense that raising tax rates on groups more likely to own businesses and create jobs would also be more likely to depress job creation. Instead, your results suggest just the opposite – raising tax rates on middle class folks who do not hire employees increases unemployment, but raising tax rates on those who do hire employees somehow increases employment.

    A Keynesian demand analysis cannot explain these results because the government itself will spend every penny it takes from the middle class consumers in your model, including money the consumers would have otherwise saved.

    Tellingly, no other economist of which I am aware has published a peer reviewed paper with similar findings.

    Do you get the feeling yet that you are running down a rabbit hole rather than the road to an economic holy grail?

  72. Bart DePalma says:

    GROG says: “I’m curious as to why you’re discounting total revenues and concentrating on income tax revenues. As DC alluded to above, lower income taxes stimulate the economy and create revenues through other sources.”

    You hit upon a very important facts.

    Supply side theory generally argues that reducing marginal tax rates in the creation of wealth causes more wealth creation and thus more tax revenues.

    Arguments over this theory are blinkered and concentrate on only standard income tax revenues and forget that the government is financed through an array of income and excise taxes and fees whose revenues also rise with the economy.

    The insight of supply side is not to reduce all taxes, but rather to lower the marginal tax rates which punish wealth creation.

  73. GROG,

    Since 1946, the average income tax receipts as % of GDP has been 8%. How are you determining the drop was a result of the Bush tax cuts if histroy tell us the average is around 8% anyway?

    You claimed there was “no evidence” that the cuts caused the drop. I provided evidence. You are, of course, free to explain what else happened during that time that reduced tax receipts by a greater amount than simply the drop in economic activity. I went with the Occam’s razor approach.

    I’m curious as to why you’re discounting total revenues and concentrating on income tax revenues. As DC alluded to above, lower income taxes stimulate the economy and create revenues through other sources.

    I’m not going to speak for DC. However, while untargeted income tax cuts may stimulate the economy (did you happen to read the article above?), not all tax cuts have that effect. And, regardless, they don’t “create revenues through other sources.” To the extent that they increase tax revenues, they do so by having a smaller wedge being offset by a larger pie.

    This approach works fine if targeted well, but not so much if poorly targeted. A shotgun may be able to hit the target, but it wastes an awful lot of lead in the process. A good shot with a rifle is more elegant and uses less lead.

  74. Bart,

    Spare me the reading comprehension jibe.

    I’ll be happy to, as soon as you pay attention to the words on your screen.

    I then noted several of the independent variables for which you did not account. You then claimed that your analysis accounted for everything with a citation to Wikipedia’s entry for regression analysis. However, your basic Excel model does not include any other independent variable part from the ones you disclosed.

    Because REGRESSION ANALYSES INCLUDE EVERY INDEPENDENT VARIABLE IN THEM, BY DEFINITION. This is what proves that you do not understand regression analyses. Until you can show evidence that you do understand them, your counterarguments are truly idiodic.

    One would assume under all schools of economics and simple common sense that raising tax rates on groups more likely to own businesses and create jobs would also be more likely to depress job creation. Instead, your results suggest just the opposite – raising tax rates on middle class folks who do not hire employees increases unemployment, but raising tax rates on those who do hire employees somehow increases employment.

    If one were to make that assumption, one would be naïve. The fascinating thing about income tax is that it taxes income after business expenses. Therefore, if personal income is taxed at a higher rate, the wealthy business owner has a disincentive to take the money home, and thus an incentive to reinvest it in the business and grow it. The middle class, consisting of people who doesn’t own these businesses, do not have the same incentive. Instead, they simply have less money to spend themselves on goods and services.

    Tellingly, no other economist of which I am aware has published a peer reviewed paper with similar findings.

    I’m also unaware of such an analysis having been done before. But, first of all, that doesn’t mean it hasn’t happened. Second, even if it hasn’t, I pointed out that the ability to do this kind of analysis is pretty new. It may be underway elsewhere.

    But, finally, and most important, I encourage you to do your own analysis, and provide counterevidence. Thus far, all you’re doing is producing hand-waving, and removing doubt about your being a fool.

  75. GROG,

    1.) There is no evidence that an increase in marginal tax rates led to an increase in revenue as a % of GDP over the past 60 years.

    Now for the harder one. You are correct, that there isn’t evidence that an increase in marginal tax rates led to increases in revenue. But that’s because the rules for deductions have changed so significantly in the past half-century. So let’s look instead at effective tax rates. For those playing the home game, you can try this, too.

    We only have the effective rates since 1979, so this applies only for the past 30 years.

    Quintile 5 shows a substantially significant correlation, with a P-value of 2E-10. Its coefficient is 0.87. The R-square is 0.79. Increased effective tax rates on the top 20% of earners correspond to a higher value of revenues as a percent of GDP.

  76. Bart DePalma says:

    BD: One would assume under all schools of economics and simple common sense that raising tax rates on groups more likely to own businesses and create jobs would also be more likely to depress job creation. Instead, your results suggest just the opposite – raising tax rates on middle class folks who do not hire employees increases unemployment, but raising tax rates on those who do hire employees somehow increases employment.

    MW: If one were to make that assumption, one would be naïve. The fascinating thing about income tax is that it taxes income after business expenses. Therefore, if personal income is taxed at a higher rate, the wealthy business owner has a disincentive to take the money home, and thus an incentive to reinvest it in the business and grow it.

    Max and you completely ignore the profit motive which drives business and thus job creation. If as you postulate (and I agree) that increased marginal income tax rates make it less likely that the investor draws income out of the business as profit or a small business owner for her basic income, then the investor is more likely to sell or close existing businesses or decline to invest in new businesses in order to seek alternative investment opportunities not subject to the punitive tax with a better ROI. Old jobs get destroyed and new jobs are not created.

    Investors DO NOT invest for the joy of investing to grow the business and create jobs without any prospect of profit.

    MW: The middle class, consisting of people who doesn’t own these businesses, do not have the same incentive. Instead, they simply have less money to spend themselves on goods and services.

    As I noted above, the government itself will immediately spend middle class tax revenues that would otherwise have been spent or saved/invested. To the extent that the middle class would have saved/invested that money, increased taxes would actually increase aggregate demand, although admittedly often in nonsensical and economically unproductive ways.

  77. Max aka Birdpilot says:

    Michael said (concerning Bart): “But, finally, and most important, I encourage you to do your own analysis, and provide counterevidence. Thus far, all you’re doing is producing hand-waving, and removing doubt about your being a fool.

    Something I have called on Bart to do numerous times. Instead all he ever does is pejoratively hide behind his ideological blinders.

    As far as the last sentence: This is the one thing Bart is VERY god at doing on a consistent basis as he surely can’t produce original or even well cited research.

  78. Max aka Birdpilot says:

    Bart said: “Max and you completely ignore the profit motive which drives business and thus job creation.

    And you, with your ideological blinders restricting your cognitive ability, fail to realize that DEMAND DRIVE JOB CREATION, not JUST the profit motive.

    You also COMPLETELY IGNORE the opportunity costs of closing a business and starting a new one and what that would do to an entrepreneur’s cumulative profits over the time period.

    You also COMPLETELY IGNORE the knowledge and experience and “eureka” factors in a individual’s creation of a business. PARTICULARLY in the small business arena that you so lovingly endorse. Ie. If your profits in your law practice declined below your expectations due to the tax rate, it does NOT mean you will close it down and open up a statistical software company just because that’s where the profits seem to be better.

    Ideological ass.

  79. Bart,

    Max and you completely ignore the profit motive which drives business and thus job creation.

    I don’t. And I doubt Max does, either.

    If … increased marginal income tax rates make it less likely that the investor draws income out of the business as profit or a small business owner for her basic income, then the investor is more likely to sell or close existing businesses or decline to invest in new businesses in order to seek alternative investment opportunities not subject to the punitive tax with a better ROI.

    Except that those alternative investment opportunities have their own costs associated with them. I challenged you before on this, and you declined to answer. If the other investments provide a greater ROI, why wasn’t this person investing there before the tax change?

    What’s really silly about your argument is that declining to take the money out of the business often amounts to a form of deferred income, which is voluntarily taken by many for tax reasons. Unless the business owner has reason to believe the business will not survive (in which case it’s better to sell it now anyway), the deferred income model benefits the business owner as well as the business. Seems like a good investment model to me.

    And, by the way, the theory on my side of the argument is at least borne out by the correlative evidence of a statistical regression. What do you have?

  80. dcpetterson says:

    GROG
    As DC alluded to above, lower income taxes stimulate the economy and create revenues through other sources.

    My point was that “lower income tax rates” on some segments of the populace (i.e., those whose income goes primarily to consumption) can stimulate the economy, by increasing demand. I would disagree with a flat statement that “lower income taxes stimulate the economy,” because that is much too broad and sweeping a statement. In fact, depending on other economic conditions, higher income taxes on people in the top quintile could stimulate the economy more.

    Not even Laffer would agree that “lower income taxes stimulate the economy.” For Laffer, it would depend on where you are on the famous curve. (But then, Laffer is an idiot, so I probably shouldn’t be using him as support for my argument …)

  81. Max aka Birdpilot says:

    Michael,

    Bart, deep in his ideological silo, uses interchangeably the terms small business owner and investor. He cannot, empirically, see the difference in the first, who is heavily and personally invested in her business and thus would have tremendous opportunity costs detrimental to his bailing out meme. While the investor is only using capital which is highly liquid and thus can move that capital from one place to another easily.

    You WILL NOT see Bart answer a challenge to do his own research and provide proof and citation, counter to one of us here who does do so, as such effort is evidently beyond his capability or inclination. Or maybe he just hasn’t the time, so it’s just easier to spout threadbare talking points.

    Not to mention that, in most cases, such research would confirm, instead of contradict, the research done by folks as yourself.

  82. Max aka Birdpilot says:

    dc you reiterate my statement concerning Laffer and his curve(ball). Since Laffer himself cannot point to where on the curve tax rates are, I challenge ANYONE to empirically prove exactly where on the Laffer curve(ball) effective income tax rates currently sit AND the impact, again empirically, of any delta in marginal income tax rates.

    Come on, supply siders! Put up or shut up!

  83. Bart DePalma says:

    BD: If … increased marginal income tax rates make it less likely that the investor draws income out of the business as profit or a small business owner for her basic income, then the investor is more likely to sell or close existing businesses or decline to invest in new businesses in order to seek alternative investment opportunities not subject to the punitive tax with a better ROI.

    MW: Except that those alternative investment opportunities have their own costs associated with them. I challenged you before on this, and you declined to answer. If the other investments provide a greater ROI, why wasn’t this person investing there before the tax change?

    C’mon now, are you this unimaginative?

    As I noted previously, small business people will simply sell or shut down their businesses and take a job running someone else’s business, reducing their workload and income subject to the higher tax rates. Time has a value and if you punish people for working like dogs to gain more income, they will naturally work less.

    If the higher marginal tax rates are at the state level, businesses will simply vote with their feet and move to another state. You have been seeing this migration from high tax Blue States to lower tax Red States for decades now.

    Investors will simply sell off their interests in the business and shift to non-productive investments in things like commodities or non-taxed bonds or productive uses overseas in countries with less punitive taxes.

    Along the latter lines, our awful corporate tax code subjects foreign earnings brought back to the United States and invested in business expansion here to the full US sky high corporate tax rate after they have already been taxed once overseas. Other countries just add a couple percent surcharge or the difference between a lower overseas rate and the higher domestic one. As a result, international corporations do not bring their overseas earnings into the US if they can help it.

    NO AMOUNT of spin or wishful thinking is going to change these basic laws of economics.

  84. Max aka Birdpilot says:

    Bart said: “As I noted previously, small business people will simply sell or shut down their businesses and take a job running someone else’s business, reducing their workload and income subject to the higher tax rates.

    What “income subject to higher tax rates”? Unless their new income is less than it was when they ran their own business, their tax rate has not changed if the income is the same! THEY WERE NOT being taxed on gross receipts, but only on that income left AFTER all business costs were paid! So you ARE saying that they are will to live on LESS income?

    I challenge Bart to provide ANY citation that demonstrates empirically that more small business owners close down that business because of higher marginal tax rates instead of a lack of demand sufficient to maintain a reasonable profit. Or even a significant (>10%) minority that does so.

    If Bart cannot, we have proof he’s talking out his ass. And, by extension, the entire GOP meme.

    “Investors” DON’T count. Else, as Michael posited earlier, the question arises as to why they were so stupid or ignorant as to be investing there instead of at a higher ROI elsewhere.

    Ignorant ass.

  85. shortchain says:

    Bart,

    When you speak of “fundamental economic laws” — what they Hell are you talking about? Because all you spouted was a bunch of conservative pseudo-scientific garbage.

    Without any evidence to back it up. Talk about wishful thinking, you do nothing but wishful thinking — and yet you accuse others, who actually do analysis — with real data — of it.

    What a buffoon.

  86. dcpetterson says:

    If the higher marginal tax rates are at the state level, businesses will simply vote with their feet and move to another state. You have been seeing this migration from high tax Blue States to lower tax Red States for decades now.

    Data, please?

  87. Max aka Birdpilot says:

    Down in Bart’s silo world, if I’m making $350k running my own business and the marginal tax rate on the $100k I make ABOVE the $250k cutoff increases (what is it, 4%? So that’s $4000, right?) and now I’m mad as hell and ain’t gonna take it anymore, I going to shut the doors and close her down! Then I’ll take a job (that IS ASSUMING I can find one immediately in today’s market) running somebody else’s company for $250k since I don’t have to work as many hours. Also assuming the boss doesn’t expect me to work 60 hours a week for that money.

    I’ll take a $100k pay cut to avoid paying that $4000!

    Or maybe the boss WILL pay me $350k because I’m so damn good! Shit, I’m STILL on the hook for that $4000! AND the bastard wants me to work 70 hours a week!

    WTF!!!!!!!!!!!!!!!!!!!!!!!!??????????? SOMEBODY explain the logic to me, please? I’m just a stupid progressive.

  88. GROG says:

    Max said:
    What IS CHANGING are the SOURCES of that revenue. What has actually been happening is a REDISTRIBUTION of the source of revenue DOWNWARD from upper incomes and corporation to the middle class in violation of the historical progressive tax system we’ve had since the passage of the 16th amendment.

    These figures show the percentage of taxes paid and Adjusted Gross income of taxpayers for 2008:

    Top 1%
    Pay 38% of tax burden
    Rec 20% of AGI

    1-5%
    Pay 20% of tax burden
    Rec 14% of AGI

    Top 10%
    Pay 69% of tax burden
    Rec 45% of AGI

    25% to 50%
    Pay 11% of tax burden
    Rec 20% of AGI

    So the richest 1% pay 38% of federal income tax, but receive only 20% of AGI.
    The 25% to 50% pay 11% of federal income tax and receive 20% of AGI.

    What more progressive system do think would be fair so we do not violate the 16th ammendment?

  89. mclever says:

    GROG,

    AGI is not the only measure of the benefits and support that one receives from the government/economic system.

    There are the physical infrastructure that facilitates the exchange of goods and services, the economic infrastructure that facilitates the free and fair exchange of money, jurisprudence over contract law to ensure businesses fulfill obligations, jurisprudence over copyright law, jurisprudence over other forms of corporate law, and other government functions mostly benefiting corporations and wealthy investors. The biggest consumers of our judicial system are corporations with their teams of lawyers, not the average consumer who only calls a lawyer if he gets a divorce. The enforcement of property rights laws obviously provides greater benefit to those with greater property, right? Does the highway from Dallas to Los Angeles generate more economic benefit for the handful of vacationers who drive it or for the multitudinous businesses that ship truckloads goods along that route every day? Does it do more for the consumers who can buy a widget for a couple dollars cheaper, or for the business that can sell a million more widgets because they can reach a much broader consumer base?

    My examples aren’t meant to be inclusive; they are just meant to help you think of the various functions of government and how many of those disproportionately benefit those in the wealthier/business classes. Government does a lot of things that help the little guy, too, but the big ticket/big cost items have a way of bringing the most benefit in a trickle-up fashion. Even things like social security, welfare and medicare are means to keep lower-end economic players involved in the economy as consumers, which in turn multiplies the benefits to those who are on the provider side of the equation.

    Breaking things down into simple 1 vs. 2 ratios is rarely a good idea with something as complex as government and the economy.

  90. Bart DePalma says:

    BD: “As I noted previously, small business people will simply sell or shut down their businesses and take a job running someone else’s business, reducing their workload and income subject to the higher tax rates.”

    Max: What “income subject to higher tax rates”? Unless their new income is less than it was when they ran their own business…

    That was the assumption. You only go into business for yourself if you expect to be compensated for all the extra time you will spend administering the business. You get out of business if you are not earning that compensation.

    Solo attorneys like myself make this calculation all the time. Before I hung out my shingle, I spoke with multiple attorneys who hung shingles out in the past and then came back to work as an associate with a firm because what they earned was not worth the extra work.

    Marginal tax rate increases are like any other type of overhead which can reduce your earnings.

    Max: I challenge Bart to provide ANY citation that demonstrates empirically that more small business owners close down that business because of higher marginal tax rates instead of a lack of demand sufficient to maintain a reasonable profit.

    What does this have to do with the question of whether increasing marginal tax rates reduces the profit that makes it worthwhile to run a business? A loss of income from a drop in demand or a drop in take home pay are both still losses of income.

    Max: “Investors” DON’T count. Else, as Michael posited earlier, the question arises as to why they were so stupid or ignorant as to be investing there instead of at a higher ROI elsewhere.

    Investors cannot foresee unknown future tax increases when they calculate their prospective ROI on a business investment.

    If there are potential tax increases on the horizon, investors considering business opportunities with marginal ROIs will halt their investment until the tax situation clarifies the same way they would with any other uncertain overhead cost.

    If a ROI which was marginal when the original calculation was made is later lowered by higher marginal tax rates, the investor will sell off the investment if an alternative ROI unaffected by the higher taxes is available.

    As for your utterly insane opening statement, without investors, there is no capital to maintain current businesses or create new ones.

  91. dcpetterson says:

    GROG,

    Now show us the percentage of national wealth owned by the top 1% and the beginning and at the end of the last decade. You’ll find that even paying a higher percentage of their income as taxes than the rest of us, the amount of the country that they own increased immensely. In other words, that higher percentage of taxation is not preventing them from increasing (and very quickly, too) their wealth.

    Clearly, it also is not acting as any disincentive to increase their wealth still further, because they clearly are doing just that.

    Now, assuming that an individual needs some minimum amount just to pay their living necessities (what do you want to say — $20,000 / year?) tell us what percentage of each tax bracket goes to a person’s living costs. Do the people in the lower tax brackets, or the higher tax brackets, have more disposable income? Does a tax increase adversely impact the life of people more at the bottom end, or he high end?

    Yes, we know you conservatives really really really love those elite oligarchs. We know you feel sorry for people who make $10 million / year and only get to keep $6.5 million of it (yes, I know there are state taxes too, we’ll argue about those another day). You elitist snobs only care about the wealthy and how much they suffer. But some of us actually care about the common people.

    You are discussing what is called a progressive tax rate. You don’t like it. Move to Somalia. They don’t have one of those.

  92. Bart DePalma says:

    Max: Down in Bart’s silo world, if I’m making $350k running my own business and the marginal tax rate on the $100k I make ABOVE the $250k cutoff increases (what is it, 4%? So that’s $4000, right?) and now I’m mad as hell and ain’t gonna take it anymore, I going to shut the doors and close her down! Then I’ll take a job (that IS ASSUMING I can find one immediately in today’s market) running somebody else’s company for $250k since I don’t have to work as many hours. Also assuming the boss doesn’t expect me to work 60 hours a week for that money. I’ll take a $100k pay cut to avoid paying that $4000!

    Cute.

    Now a more realistic scenario.

    I work 100 hours a week in a medium business with a net of $350,000 a year.

    My alternative is to sell the business for $1 million and invest that into tax free bonds earning 4% per annum ($40,000), go to work for someone else managing their business for 65 hours a week and $250,000 per year and then have another 40 hours a week to actually see my family.

    The $100,000 of income I left with the business was taxed at 39% instead of the 28% for my current salary and the $1 million I dropped into non-job producing bonds is tax free. So I am actually only leaving behind a net of $20,000 and saving 35 hours per week.

    So, yes, increasing marginal tax rates can be the last straw in a decision to seek alternative sources of income.

  93. drfunguy says:

    @Bart
    Thanks for proving Max’s point: “You WILL NOT see Bart answer a challenge to do his own research and provide proof and citation, counter to one of us here who does do so, as such effort is evidently beyond his capability or inclination”

  94. Bart DePalma says:

    max/drfunguy:

    No one keeps stats on how many business owners seek alternative income because of rising marginal tax rates.

  95. Max aka Birdpilot says:

    Bart said “Max: I challenge Bart to provide ANY citation that demonstrates empirically that more small business owners close down that business because of higher marginal tax rates instead of a lack of demand sufficient to maintain a reasonable profit.

    What does this have to do with the question of whether increasing marginal tax rates reduces the profit that makes it worthwhile to run a business? A loss of income from a drop in demand or a drop in take home pay are both still losses of income.

    Wanna try to sell a business today? Wanna try to get a $250k job today? That aside . . .

    Bart, this was YOUR assertion: That a drop in income DUE TO AN INCREASE IN MARGINAL TAX RATES would cause a business owner to close!!!
    November 29, 2010 08:03am Bart DePalma “. . . You have taken profit out of the equation.
    Most business owners require some level of profit/income from the business to forego other opportunities. If taxes drive that profit below what the owner considers necessary, he or she is more likely to sell off or close that business

    Sad, that you cannot even stay with your own statements. Trying to conflate your earlier statements with other that may lessen the intent of the original doesn’t work.

    Go back and play the shyster somewhere else. Otherwise prove your allegation or continue to be made the fool.

  96. drfunguy says:

    Bart,
    First, as usual you deflect and distract rather than provide any data or analysis… again proving the point I repeated above.
    Second, as a partner in two small businesses (one in Canada, one in the U.S) I assure you that tax rates affect our decisions almost not at all, it is all about demand.
    I will also point out that if it were all about the money I would have stayed a federal employee with excellent pay and benefits rather that entering the low-paying, long-hours uncertainty of self-employment.

  97. GROG says:

    DC said:
    You elitist snobs only care about the wealthy and how much they suffer.

    We’ve actually had a pretty good, honest, and respectful discussion today and you have to end it on that ugly note. You want to play the insulting, generalization game? OK.

    The difference between conservatives and progressives is that conservatives want prosperity for everyone. Progressives are not concerned at all with prosperity for anyone. All you want is for everyone to be the same. If that means everyone lives in the ghetto, welfare state the left has created for the past 50 years, then so be it. Just so long as no one is any more prosperous than the next guy, that’s all that matters.

    You think it is the function of government to decide when a person is too wealthy.

    You think wealth is a zero-sum game. The only way for one person to get wealthier is for another person to get poorer.

    You think it is the function of government to redistribute wealth from those deemed “too wealthy” to those deemed “needy”.

    That’s why this whole idea that the left wants to end the Bush tax cuts in name of reducing the deficit is a complete sham. You suddenly become deficit hawks when faced with a tax cut (tax cuts that haven’t proved to generate any less total revenue to the federal government over the past 60 years). You are never deficit hawks when it comes to spending.

    You just want everyone to be the same even it means less for everyone.

    How’s that? At least I didn’t do any name calling.

  98. Bart,

    As I noted previously, small business people will simply sell or shut down their businesses and take a job running someone else’s business, reducing their workload and income subject to the higher tax rates.

    And you call me unimaginative?

    The opportunity costs of doing this are two-fold. First, they’ll take home less money. Secondly, they’ll have less control over how much they take home. As a rule, small business people value control more than they do money. Taking away that choice takes away value.

    If the higher marginal tax rates are at the state level, businesses will simply vote with their feet and move to another state.

    And if I were talking about local taxes, that would be relevant. But I’m not.

    Along the latter lines, our awful corporate tax code………

    And if I were talking about corporate tax, that would be relevant to this conversation. But, again, I’m not.

    The point of the article: statistical correlation between personal (federal) income tax and unemployment. No, I didn’t say “federal” in the article, but those are the numbers I used, so that’s what I’m talking about.

  99. Bart,

    You only go into business for yourself if you expect to be compensated for all the extra time you will spend administering the business. You get out of business if you are not earning that compensation.

    Of course. But money isn’t the only form of compensation. And you only get out of the business if the alternative gives you a better balance of compensation and work, based on your own needs and wants.

    Solo attorneys like myself make this calculation all the time.

    Yes. And people whose business is entirely about service have a different equation to look at than one whose business is about adding value to physical goods. In a service business such as yours, the only real input of significance is human labor. This allows the business to fine-tune the input down to the millisecond, if it wishes. In a physical-goods business, there are more inputs and many more complexities that enter into the equation.

    With a service business, therefore, the income tax implications are much greater, since there are far fewer expenses that are deductible, and far fewer opportunities to reinvest the proceeds into the business. This is especially true for law firms that are sole proprietorships or LLCs.

    But you take your personal experience as a lawyer and apply it to “business” as if they all behaved the same. Very few businesses are like that, though, whether small or large.

    However, I will happily bet that you wouldn’t stop being an attorney, even if your effective income tax rate went up by 5%. One reason I’ll bet this is you were an attorney when the effective rate of the top earners was 5% higher. And you most certainly had to plan for years to become an attorney. So you planned to do so when the tax rates were higher.

    Might you work less if the tax rates went back up? Perhaps. Frankly, that’d be a good thing. The demand for legal services wouldn’t decrease. Only your supply of services would. And that would help the unemployment rate (remember that part of the conversation?) go down, since that work would go to someone else who wanted the work more than you do.

  100. Max aka Birdpilot says:

    An unchallenged assertion may stand as fact.

    An assertion, once challenged, must be proven for it to be valid.

    An assertion, challenged but unable to be proven, not only is invalid but destroys the credibility of the person making the assertion.

    These are well known rules in debate and moot courts.

    Bart fails this test time after time after time. He gets enjoyment out of such bedevilment of others. I, on the other hand, get enjoyment out of exposing the lack of credibility Bart exhibits each time he performs this silly act.

    Since we both enjoy this dance, around and around we shall go.

    Too bad, Bart. MY credibility matters to me. It’s a shame yours means nothing.

  101. Bart,

    I work 100 hours a week in a medium business with a net of $350,000 a year.

    Interesting. So that leaves you 68 hours a week of not working. That’s 9 hours, 42 minutes, 51 seconds per day. I assume that you spend about 3 hours a day with eating and general grooming, which leaves you with 6:42:51. You seem to spend about two hours per day on this site, leaving you with just under 5 hours of sleep per day.

    Does your family appreciate that you choose to spend those two hours here instead of being with them? Serious question. Anyway, on to the rest of your comment.

    My alternative is to sell the business for $1 million and invest that into tax free bonds earning 4% per annum ($40,000)…

    If your business is worth that much, and you get all of the proceeds, I’d say go for it! Seriously. Anyway…

    …go to work for someone else managing their business for 65 hours a week and $250,000 per year and then have another 40 hours a week to actually see my family.

    So, wait a second…the $350k is all yours? Not bad, but if it were my family I’d be content to work fewer hours at the lower pay. Funny thing here…you’re getting less per hour working independently. Why do you do it? Serious question.

    So, yes, increasing marginal tax rates can be the last straw in a decision to seek alternative sources of income.

    Which I pointed out in my last comment might actually be better for the economy, and now I realize is also better for your family. I’m sold; we should raise your income tax.

    No need to thank me.

  102. mclever says:

    Somewhat related, a Yahoo news item regarding some of the fuzzy numbers being tossed around regarding the Bush Tax Cuts that are due to expire:

    http://news.yahoo.com/s/ap/20101203/ap_on_re_us/us_tax_cuts_fact_check

    Of note is the discussion on what constitutes a “small business” that seems to speak directly to Bart’s comments about his choices as a lawyer/business owner:


    For example, some hedge funds and law firms pay their taxes through the personal returns of their individual partners. While these are lumped in as “small businesses” and would pay higher taxes, they are far different from the retail stores and small manufacturers that most people associate with the term and which would not pay higher taxes.

    🙂

  103. Max aka Birdpilot says:

    Michael,

    The median annual salary of a solo attorney is on the close order of $100k. Given Bart’s field of practice, lots of upfront cash business and allowing for a fair amount of competition, Bart is probably not doing a whole lot more than that median, but let’s approximate him $150k for shits and giggles.

    He’s pissing down his own silo as the GOP in the House just yesterday voted to let his current tax rat increase! And the GOP in the Senate will do likewise.

    In order to circumvent a marginal increase only for incomes over $250K, Bart’s GOP/TeaPer representatives pissed in his ear. Remember, ALL the income under $250k would NOT get an increase under the Dem plan to extend the tax plan passed and sunseted by the GOP in 2001. A GOP Congress and a GOP President wrote the Law and signed the Law such that it would expire after 10 years. They did so because it COULDN’T BE PAID FOR and the Byrd Rule required the sunsetting. Now the Dems are willing to extend the Law for ALL INCOME UNDER $250k. But the GOP says “Screw them! Unless we can take care of the top 2% of taxpayers, only 3% of which are small business owners, they can ALL go to hell!”

    Poor Bart. But don’t feel sorry for him. He LIKES it!

  104. Bart DePalma says:

    Max:

    No one believes that the GOP is voting to raise anyone’s taxes. As soon to be Speaker Bohner correctly noted in slightly less colorful terms than I would have used, the House Dem game playing forcing through a tax increase bill without amendment or the ability to vote on an alternative GOP bill with no tax increase is “chicken poop.”

    If the GOP alternative was offered, it may have passed with a bipartisan majority.

    It will be fun to see Pelosi hand over the gavel to Bohner and with it see the end of her personal Supreme Soviet.

  105. dcpetterson says:

    Barted:
    No one keeps stats on how many business owners seek alternative income because of rising marginal tax rates.

    No in other words, you have no evidence whatever that ANYONE EVER does this.

  106. Max aka Birdpilot says:

    dc, that’s as close to a self-admission by Bart that he is, and most of his arguments are, totally full of shit.

    Hope that’s enough to satisfy you.

    Bart happily smells the party line/talking point roses, even when the House GOP is rubbing his nose in “chicken poop”!

  107. shortchain says:

    Datapoint: I gave up working for corporate America to run my own small business (consulting), not because I wanted more money, but because I was tired of working the long hours so that management could pay themselves and then drive the business into the ground.

    I accepted a cut in pay! Yes, Bart, a cut in pay! — so I would not have to put up with the BS that you have to put up with in corporations and work for some idiot who thought everything he didn’t have to do had to be easy.

  108. GROG says:

    @Bart,

    DC Pettered earlier this morning:

    I was theorizing, not making any dogmatic statement.

    And then DC Pettered later this afternoon:

    No in other words, you have no evidence whatever that ANYONE EVER does this.

    You see Bart, they can “theorize”. But you have to show evidence every time you give your opinion or theory on anything. It’s quite humorous to see you routinely beat these guys down on a daily basis. It’s one of the reasons I visit this site as often as I do.

  109. shiloh says:

    grog is Bartles groupie lol … how quaint!

  110. Monotreme says:

    @Shiloh,

    You misspelled “sock puppet”.

  111. dcpetterson says:

    I think GROG is displaying (perhaps intentionally?) a common conservative problem. (Or maybe it is some sub-set of conservative — the sort drawn to Palin? Whatever.) There seems to be an inability to distinguish between speculation, logical syllogisms, claims of fact, fantasies, and faith-based belief. These really quite different things easily slip from one to another for the Palin fetishist — both in their own statements, and in their inability to interpret the statements of others.

    For something another person clearly states as a simple opinion, or as a logical if-then statement, the Palinista will demand “proof.” In contrast, a statement that is actually potentially subject to review by data will be accepted (or rejected) by the Palinite simply as a matter of inherent and inerrant dogma. When questioned, the Palinist becomes flustered and confused.

    Sometimes syllogisms are presented — or at least, statements in the form of syllogism, but actually having no rational coherence (“If this is America, and some percentage of people vote, then taxes are bad”). The Palinoid sees no difficulty with the logic. What matters is the conclusion, which is proven regardless of the antecedents.

    This last phenomenon happens because an argument is sometimes presented by someone else, and is seen to be accepted as convincing by others. The Palinbot learns the outward form of the argument, but is unable to comprehend the semantic meanings or contextual importance of any of the terms used. In an effort to mimic the form, the Palinite merely displays inept flatulence.

    GROG, we are forever indebted to you for the demonstration. Thank you.

  112. Bart DePalma says:

    GROG says: “You see Bart, they can “theorize”. But you have to show evidence every time you give your opinion or theory on anything.”

    It’s a common double standard on the left. When I wrote for the college paper, my articles on the Sandanista dictatorship’s predations got the rest of the staff so upset that they demanded sources. I gladly obliged and they changed the subject – as is also usually the case here.

    This is why nearly every paragraph of my book is sourced. I figure I will have to make a sale a left of center editor cannot dismiss as polemic.

    It’s quite humorous to see you routinely beat these guys down on a daily basis.

    It’s amusing that they don’t even see it most of the time. I know when I have a loser of a case in court. These folks are either oblivious or have some of the better poker face posting talents I have run across.

    Tag. Your turn in the ring.

  113. Jean says:

    Bart,

    re: Along the latter lines, our awful corporate tax code subjects foreign earnings brought back to the United States and invested in business expansion here to the full US sky high corporate tax rate after they have already been taxed once overseas.

    Oh, cry me a river, Bart. Those same corporations are allowed, by current US tax law, to deduct their costs and expenses, even though their profits were not even earned nor are their businesses based in the USA,. Therefore these so-called American corporations are earning profits overseas (which they may or may not ever bring back here), but are able to dedut their costs on their US tax returns – resulting in minimal or no tax liability in the US. A clever variation of privatize the profits and socialize the losses.

  114. filistro says:

    Have I mentioned that Bart’s snowflake is completely unique… very dense and complex around the edges, and totally empty at center?

  115. filistro says:

    🙂

  116. Max aka Birdpilot says:

    “Great minds think alike.”

    At least that’s what Bart and GROG are whispering in one another’s ears in the throes of their circle jerk.

    (Notice: Send the children out of the room before reading on!)

    Good thing it’s mutual thang, GROG. All the demonstrated evidence is that Bart couldn’t beat (down) his own meat on a dark night with a flashlight and the latest in internet porn.

  117. Jean says:

    fili,

    re: Have I mentioned that Bart’s snowflake is completely unique… very dense and complex around the edges, and totally empty at center?

    A good point. I thought the powers-that-be at 538refugees assigned his snowflake very appropriately. And perhaps tongue-in-cheek. But it does fit Bart. And Bart must apparently thinks so too. You notice Bart hasn’t replaced his snowflake with something that he would consider more appropriate.

    To me, it looks like a buzzsaw. A buzzsaw snowflake.

  118. dcpetterson says:

    Amusingly, Bart shows up to reinforce, reiterate, and confirm the Palinhead points I described in regard to GROG.

    I want to stress that robert seems to not have these particular issues. I miss Walker from the old FiveThirtyEight, he also seemed to be uninfected.

  119. DC,

    It’s a shame we couldn’t get more of the conservatives to follow. I’d still like to have more of them around here.

  120. mclever says:

    Michael, I agree. It would be nice to have some additional perspectives around here. 🙂

  121. Max aka Birdpilot says:

    IN TODAY’S NEWS

    So today we’ll see if the Republican-designed tax increase for middle class families that is looming this January 1 will be avoided by Democratic action in the Senate. (New meme!)

    As we all know, the Republican-planned tax increase, made so by the required sunseting of the so-called Bush tax cuts of 03 and 01, is to be tuned back for Americans making less than $250k per year according to a bill passed in the US House of Representatives, with no assent by the GOP. It’s fate is dire in the Senate, as Republicans there insist that they will NOT allow taxes to remain at current levels for those Americans UNLESS the Dems agree to give tax cuts for the top 2% of income earners. The top 2% includes about 2% small business owners, but is made up primarily of CEO’s, hedge fund managers, professional athletes and the like.

    We shall see.

  122. shortchain says:

    Since the subject was brought up, here’s my take on “winner” versus “loser” of this debate.

    Michael brought data, described how he analyzed it, and showed his conclusions.

    Bart brought his preconceptions on how people behave, no data, and, when confronted by the fact that people, in fact, do not behave as he thinks they should, either ignored the facts or demonstrated that he does not understand how to do statistical analysis.

    Grog thought Bart “won”.

    I think it’s pretty obvious what went down here. But hey, Bart, you convinced an idiot who already shares your beliefs! That’s some serious argument technique.

  123. GROG says:

    DC said:
    I want to stress that robert seems to not have these particular issues.

    Nothing against Robert, but he doesn’t debate anybody on this forum. He gives his opinion from time to time, but he doesn’t engage in debate. I suspect that’s why you like him. He doesn’t challenge you in anyway.

  124. GROG says:

    shortchain said:

    But hey, Bart, you convinced an idiot who already shares your beliefs! That’s some serious argument technique.

    Wow shortchain. That’s some comment coming from a leftwinger on a leftwing blog, which has only leftwing contributors, which is run by a leftwinger, and is dominated by leftwing posters!

    And you’re mocking Bart for convincing someone who shares his beliefs? LMAO!

    That’s what you, Max, filistro, DC, Michael, mclever, monotreme, shiloh, Mr. Universe, and Mainer (I can’t think of any other posters) do here on a daily basis. You all tell each things you already believe and if Bart or myself challenge those things, you almost immediately resort to name calling. You’re a class act.

  125. shortchain says:

    GROG,

    So that’s what you think you are doing? “Challenging people in debate”? Perhaps you should watch the “Black Knight” scene from Monty Python and the Holy Grail” to get a sense of how others see you. Here’s a link to some videos to help you.

  126. shortchain says:

    GROG,

    My referring to you as an idiot was hardly “immediate”. I weighed the evidence, of which you have provided ample, and only after due deliberation determined what the right term to use was. I’m not trying to be classy, just honest.

  127. GROG says:

    shortchain said:

    My referring to you as an idiot was hardly “immediate”.

    This coming from someone who says:

    “Seriously, picking arbitrary endpoints like 2003 and 2007 is totally meaningless …”

    And then in a later comment says:

    “Oh, and GROG? I’ve got no argument with 2003…”

    Really? No argument with 2003? And I’m the idiot?

    My referring to you as an idiot was hardly “immediate”.

    I never said it was. Your insults started with only the fourth comment you made on this thread. You conitinue to contradict yourself and make comments that make no sense. You need to reevaluate who the idiot is here.

  128. Bart DePalma says:

    shortchain raises some interesting issues.

    First, only an idiot thinks that an internet argument can be “won” or comes to forums such as these seeking to “win” arguments. I enjoy jousting with generally intelligent people to test my arguments. I do not harbor any hope of converting committed ideologues, although lurkers occasionally email me to express appreciation for information they had not considered or even knew about.

    Next, the ignorant love to latch onto numbers. This is a constant issue with juries in technical cases with hired gun “experts” bandying around junk science numbers. If this thread were a trial and Michael was an opposing expert, I would have engaged a qualified economist to point out the substantial errors in his analysis. Jurors believe experts more than attorneys or average people even if they all make the same points.

    I have noticed this worship of credentialing is even more pronounced on the left, which unsurprisingly is dominated by a credentialed elite. They mistake their credentials with intelligence, common sense and knowledge. I have met too many willfully dumb professors (not to mention attorneys) to believe that a sheepskin means anything other than you have received training.

  129. drfunguy says:

    @Grog
    Serious question: can you tell me of a conservative blog with actual discussion of provocative and opposing ideas? I’d like to read one but those I used to go to such as realclearpolitics devolved to dittohead repetition of talking points, ad hominem attack and endless insult of Obama (not to mention birthirism, and so on). In other cases expression of opposing viewpoints is met with immediate banishment.
    I don’t know of any where opposing viewpoints are given as serious consideration as they are on this blog. But I gave up looking ’cause it seemed like a waste of time. I am open to suggestions.

  130. shiloh says:

    grog, you’ve been posting nonsense at 538 for over a year, more than enough time to determine your mental capacity or lack thereof …

    Bartles ~ First, only an idiot thinks that an internet argument can be “won” or comes to forums such as these seeking to “win” arguments. Which proves you’re an idiot, eh.

    solo estoy diciendo

    Next, the ignorant love to latch onto numbers.

    Indeed Bart, as you post meaningless political polls ad nauseam! 😀

    I have noticed this worship of credentialing

    You’re powers of observation are lacking to be sure as this is a progressive blog. One needs to expand their horizons and frequent a winger blog like redstate/freeperville and then get back to us on (((worship))). Eagerly awaiting your return when you escape from your myopic world view of internet debate and enjoy the journey! 🙂 As life is a learning process.

    And your meaningless anecdotal experiences are duly noted …

    Again Bartles, you are 538’s perfect winger troll. Thanx for the entertainment ~ really! 😀

    Bottom line, you need us more than we need you or you would have left long ago. The yin and yang of narcissistic conservatives yelling above the crowd at liberal blogs.

    take care

  131. shiloh says:

    Indeed, many conservatives have come and gone at 538 the past 2+ years, but Bart remains.

    ‘nuf said!

  132. GROG says:

    funguy,

    I personally don’t know of any. I don’t visit many conservative blogs.

    I read the old 538 blog because of Nate. Although Nate has a leftwing slant, he always stayed above the blatant partisan fray. He gave his opinions and analysis which I respected and appreciated.

    I have no problem with this site. You’re always going to have the likes of a shortchain. But for the most part I think everyone here geniunely wants to discuss issues and doesn’t have a problem with opposing viewpoints on those issues.

  133. GROG says:

    Sorry, you’re always going to have the likes of a shortchain and a shiloh.

    I didn’t mean to leave you out, shiloh.

  134. shiloh says:

    As long as you’re paying attention grog it’s a win/win ~ almost as much fun as Ohio State beating Michigan the last (7) years, but not quite!

  135. dcpetterson says:

    @GROG

    You’re always going to have the likes of a shortchain.

    I hope so! Isn’t shortchain freakin’ awesome???

    But for the most part I think everyone here geniunely wants to discuss issues and doesn’t have a problem with opposing viewpoints on those issues.

    Thanks very much. Indeed, intelligent discussion — or, as the masthead says, Reasonable Political Discourse — is the whole purpose of 538Refugees. We appreciate your endorsement!

  136. Who I really like is Jeff. While he was participating, he gave his opinion, engaged in debate, and actually put thought into the logic and data of the discussion.

    If you and Bart could follow in his shoes, this would be a far more interesting place.

  137. dcpetterson says:

    Michael, you have me in absolute agreement there. Jeff is another one I miss.

  138. Bart,

    …the ignorant love to latch onto numbers.

    Because, of course, everyone just knows the answer and doesn’t need any actual evidence. You, Bart, demonstrate exactly what I was talking about. Who needs someone to test theories when everyone already knows what the answer is? It’s common sense! Just as it was common sense that the planet was flat, and that the sun revolved around the earth, and that a photon can only be in one place at a time…

    This is why it is both fascinating and scary to watch as the right universally adds the word “junk” in front of any science that doesn’t match the way they wish the world was.

    If this thread were a trial and Michael was an opposing expert, I would have engaged a qualified economist to point out the substantial errors in his analysis.

    Because you, the economics junkie, are incapable. This isn’t a jury trial, in case you didn’t notice. I’d be happy to have a qualified economist point out the errors in my analysis. At least I’d have an opportunity to learn something, rather than have someone wave his hands around and pretend he knows what he’s talking about. Go get your qualified economist to come by and engage. At least then we might have a discussion of substance.

    They [people on the left] mistake their credentials with intelligence, common sense and knowledge.

    Speak for yourself. I spent a great deal of my time in postgraduate education challenging the claims of those with the credentials. Some of them hated it, because they, like you, had their beliefs and didn’t want reality to intrude upon them. Others enjoyed it, and I learned something from them, and they learned something from me. That is how science and education are supposed to work.

    I have met too many willfully dumb professors (not to mention attorneys) to believe that a sheepskin means anything other than you have received training.

    I have no doubt that you’ve met some of both. I’d imagine you wouldn’t have to look far to find a willfully dumb attorney. I’m basing this belief on intelligence, common sense, and knowledge, for what it’s worth.

  139. dcpetterson says:

    Why is it that so many people on the right (this is not universal, just all-too common) hold learning and knowledge in such contempt? One is reminded of Galileo and the Church; the right’s too-common blind obedience to doctrinal authority, even in the face of overwhelming evidence to the contrary, certainly has a long history.

    Perhaps it has to do with innate capacity. Those who can, do. Those who can’t, prosecute. If one doesn’t have the ability to comprehend the arguments, or doesn’t have the capacity for honest questioning of pre-accepted authority, then perhaps that one is reduced to merely denying the evidence and ridiculing things like “logic” and “learning.”

    Palin is a premiere embodiment of this syndrome, and her followers have elevated it to a religion. Perhaps there’s something in the tea. If indeed these people gain a political ascendancy, the consequences for our nation, the direct result of this unquestioning belief in provably false doctrine, will be dire. Their karma will run over their dogma.

    Unfortunately, we’ll all suffer as well.

  140. Jean says:

    DC,

    re: If one doesn’t have the ability to comprehend the arguments, or doesn’t have the capacity for honest questioning of pre-accepted authority, then perhaps that one is reduced to merely denying the evidence and ridiculing things like “logic” and “learning.”

    Or perhaps it’s no more complicated than willful disregard and disdain, because they are pursuing a very different agenda, so what others say or feel makes absolutely no difference to Palin and her ilk.

    Kathleen Kennedy Townsend states in her Washington Post article in response to Palin’s objections to JFK’s 1960 speech to the Greater Houston Ministerial Association, in which he challenged the ministers – and the country – to judge him, a Catholic presidential candidate, by his views rather than his faith:

    “Palin writes that when she was growing up, she was taught that Kennedy’s speech had “succeeded in the best possible way: It reconciled public service and religion without compromising either.” Now, however, she says she has revisited the speech and changed her mind. She finds it “defensive . . . in tone and content” and is upset that Kennedy, rather than presenting a reconciliation of his private faith and his public role, had instead offered an “unequivocal divorce of the two.”

    Palin’s argument seems to challenge a great American tradition, enshrined in the Constitution, stipulating that there be no religious test for public office. A careful reading of her book leads me to conclude that Palin wishes for precisely such a test. And she seems to think that she, and those who think like her, are qualified to judge who would pass and who would not.

    If there is no religious test, then there is no need for a candidate’s religious affiliation to be “reconciled.” My uncle urged that religion be private, removed from politics, because he feared that making faith an arena for public contention would lead American politics into ill-disguised religious warfare, with candidates tempted to use faith to manipulate voters and demean their opponents. ”

    ————————-

    Sarah Palin is wrong about John F. Kennedy, religion and politics
    By Kathleen Kennedy Townsend

    http://www.washingtonpost.com/wp-dyn/content/article/2010/12/03/AR2010120303209.html

  141. Monotreme says:

    This reminds me of someone…let me think…

    [from Twitter]
    @BadAstronomer Phil Plait
    I love it when someone who doesn’t understand science talks about the “arrogance of scientists”. They are a benchmark in irony.

  142. Pingback: Progressive at What Cost? | 538 Refugees

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