----- Original Message ----- From: "John D. Giorgis" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <[EMAIL PROTECTED]> Sent: Saturday, February 22, 2003 1:21 PM Subject: Re: Wealth trends and Bush's tax cuts
> At 10:02 AM 2/22/2003 -0600 Dan Minette wrote: > >On what basis do you state that he agrees with most ecconomists? Greenspan > >came out against his tax cut. > > > >Now, if his tax cut were offset with other tax increases that target the > >same income level, then there might be a point to this. > That's exactly what I meant. But, that's not what's going on. Its not just that Bush is cutting taxes. Its that he is focusing on those taxes that affect the wealthiest and calling them unfair and counterproductive. It is part of a general perception that I disagree with. Lets look at who the tax falls upon. While a quarter of Americans get dividends of some kind or other, the fraction of income from dividends is much higher for folks with higher incomes. Two thirds of the dividends go to households making > 100k/year. Overall, 40% of the income goes to these folks. For the highest income earners, its even more pronounced. About 30% of the dividends go to households with > 500k of income. The last cut I was able to obtain is that about 11% of total income goes to households with >250k of income...which is about 1.36% of the total households. With folks making >500k comprising about 0.5% of total households, I'd guess they'd make about 7% of total income. You see where its going. Even without taking tax rates into effect, a cut in taxes on dividends will affect the taxes of higher income Americans much more than it would effect lower income Americans. Charles Schwabb suggested this to Bush, and he'll personally save about 5 million in taxes. The idea of double taxes is an interesting one. What does and does not constitute double taxes. Obviously you don't think that SS tax and income tax on the exact same income is a double tax. It seems that it can only be two taxes on correlated but not identical income streams. The reason I say this is that corporate profits != dividends as you well know. Now, you might argue that taxes on business and investments are too high compared to taxes on earned income. However, if we review income sources for the federal government, we see a marked rise in taxes on earned income only, and a marked drop in corporate taxes, with both being expressed in terms of % of GDP. And, of course, all earned income about 75k (or so) for an individual is excluded from SS taxes. So, this further concentrates the tax. >Most economists, including Greenspan and just about every other economist I have been associated with, >believes that the double-taxation of dividends produces economic distortions that should > be corrected. It depends on exactly what they mean by that. What distortions would be eliminated? The one that I see is the one that encourages compaines to earn profits, but not pay dividends. Why would this be bad? In a sense, any progressive tax scheme is going to "distort" the ecconomy. Business taxes distort the ecconomy in another sense. So do taxes that are applied only to incomes under X. Government spending also distorts the ecconomy from what it would be in a pure market ecconomy. What one doesn't want is to give people incentive to do things that are harmful to others. > Granted on the question as to whether or not the US government should be > running a deficit at this junction in history, there is still a great deal > of division among economists. On the first point, however, there > definitely exists a consensus, and thus, the logical conclusion is that > Bush is following this consensus - combined with his own personal > preference for a deficit at this time. And his strong belief that it is the euentrerprenure class that creates wealth and gives jobs to everyone else. > >Trickle down economics has been the basis of Republican thought for a long > >time. I thought 1920 was a very reasonable starting point for analyzing > >data. TR was a trust buster, so the clear lines between Democrats and > >Republicans on trickle down wasn't clear that far back. > > You betray the biases you are bringing to your analysis by using the phrase > "trickle-down." > > Secondly, I don't see the correlation is between Teddy Roosevelt's views > on monopolies and his views on tax policy. > > Additionally, I am surprised that you consider Republican tax policy to be > consistent across Hoover, Eisenhower, Nixon/Ford, Reagan, and both Bushes. > Indeed, shouldn't the enormous differences in fiscal policy between > Hoover and Reagan be accounted for in your policy? Moreover, the theory > that there was a consistent view of what you consider to be "trickle-down" > economics from Reagan to Bush is demonstrably false. The fact that you > would propose such a theory, test it, and then claim validation of it > seriously calls into question the accuracy of the results of your work. Are you suggesting that there is consistancy in general Republican philosophy over the last 80 years? If you want to exclude data from before 1950, arguing that Harding, Cooledge and Hoover represent an view that is considered extreme by modern Republicans, then that's fine. If you would even point out that Nixon was closer to Johnson than Reagan, that's also reasonable. But, there has been an ongoing debate on the role of government and the validity of various degrees of progressive tax systems for at least as long as I've been aware of politics....which goes back into the '60s. Your arguement is akin to saying that, since some Repubicans are more conservative than others, it is mistaken to call the Republican party the more conservative party during the 20th century. In addition, your arguements appear to be immune from falsification. Experimental tests are not refuted with other data, they are refuted on a retorical/theoretical level. That is not how things are done in my field. > >My view is that, given the data, trickle down economics is suspect. Do you > >accept trickle down as valid economics? Let me ask you again: do you think > >it is best that virtually all of the benefits in a rising economy apply > >only to a small minority of the citizens? Should the rest of the people > >accept the fact that they don't deserve to do any better? > > I think that it is reasonable to conclude that the benefits in a rising > economy accrue in large parts to those who invested the capital at the > start of the growth and thus reaped many of the returns on that capital. > This is because almost by definition, modern economic growth occurs by > producing increasing returns to the same inputs of labor and capital. > Given that everyone is allocated a certain and essentially equal amount of > labor inputs to invest, it should not be surprising that those who are able > to inest more capital than others are able to accrue more returns. If you are arguing that a market ecconomy tends to focus wealth, then that is certainly a true statement. But, that is an unstable situation, since wealthy peole have I understand the theory, but I prefer to concentrate on data. I can use one of a number of measures to look at income distribution. The Gina ratio is a good measure. It was '47 0.376 '52 0.368 '60 0.364 '68 0.348 '76 0.358 '80 0.365 '92 0.404 '93 0.429** '00 0.430 '02 0.435 ** the very significant shift between '92 and '93 represents a change in methodology, according to the footnotes at http://www.census.gov/hhes/income/histinc/histinctb.html which is where I obtained my data. Without the change in methodology, we should expect '02 to be about 0.410. The point is that the continued concentration of income is not inherent part of ecconomic growth. Indeed, mechanisms that foster the distribution of income can help facilitate ecconomic growth. That debate, whether ecconomic growth is best achieved by tax policies that benefit the holders of wealth vs. policies that benefit the average consumer/worker. Indeed, one could even argue whether policies that facilitate the concentration of wealth vs. the spread of wealth are most helpful. Most government expendiatures tend to help broad ranges of people. The wealty, typically, 0.376 in '47, 0. 0.368 in ''60, 0.348 in > I think that in a longitudnal study, families across all incomes should > become better off over time in a rising economy, but I would not expect > this increase to occur at equal rates across all groups. > > >Bush has another double taxation he could have eliminated: taxes on the > >money which pays the Social Security tax. Is the fact that that mainly > >benefits individuals who make <75k/year and that he doesn't favor this a > >coincidence? > > Because it does not produce economic distortions, and because Democrats > would viciously oppose any tinkering with Social Security, including > attempts to roll the SS tax into the general tax code and to means-test > benefits? Actually, both Democrats and Republicans have favored adressing this double taxation. The present Attorney General > >You talked about being fair to the top wage earners before. Is any attempt > >to modify the natural distribution of income that results from a free > >market inherently unfair? > > I think that you have far from demonstrated the "natural distribution" of > income from a free market. Do you believe in limit value as an analytical tool? Are there any data that can falsify your beliefs, or are things so complicated that differences of opinion on topics like these cannot be resolved by appeal to data? Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
