Free Markets, Free People

Kristof–America needs higher taxes

Needs?  America needs higher taxes?   Really?  According to Nicholas Kristof, that’s exactly right:

President Obama in his speech on Wednesday confronted a topic that is harder to address seriously in public than sex or flatulence: America needs higher taxes.

Maybe I get hung up on the meaning of words to darn much but “needs” isn’t one I’d link with “more taxes”. 

What America needs is a profligate government to cut spending – dramatically.  That’s its primary need right now.

Oh, and check out this bit of lazy and fallacious “correlation is causation” nonsense Kristof runs at those ignorant enough to buy it:

There is no single reason for today’s budget mess, but it’s worth remembering that the last time our budget was in the black was in the Clinton administration. That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton. That single step would solve three-quarters of the deficit for the next five years or so.

The last time our budget was in balance was because a Republican Congress put some budgets together that actually ended up giving us a surplus.  What Clinton did was sign the bill.  Secondly – it wasn’t because he had high tax rates that the surplus happened.  It was because revenue was up from a booming economy.

Kristof goes off into some pretty bizarre thinking out  loud in his piece .  And he tries to address three “fallacies” used in the discussion today, thinking he bolsters his claim that America needs tax increases (he uses the discredited “Medicare is cheaper to administer than private insurance”.  Yeah?  And it also has waste, fraud and abuse in the $60 billion range each year – so how cheap is it really?). 

My favorite:

Low tax rates are essential to create incentives for economic growth: a tax increase would stifle the economy.

It’s true that, in general, higher taxes tend to reduce incentives. But this seems a weak effect, often overwhelmed by other factors.

Were Americans really lazier in the 1950s, when marginal tax rates peaked at more than 90 percent? Are people in high-tax states like Massachusetts more lackadaisical than folks in a state like Florida that has no personal income tax at all?

Tax increases can also send a message of prudence that stimulates economic growth. The Clinton tax increase of 1993 was followed by a golden period of high growth, while the Bush tax cuts were followed by an anemic economy.

Back to correlation is causation.  High taxes = high growth, low taxes = low growth just because the economic cycles happened to coincide with those particular policies?  Of course there are any number of instances when the opposite is true.   Again, the Clinton tax hikes were in the middle of a booming economy, so people succeeded despite the government raising taxes.   We also know that we were spiraling down economically when the Bush tax rates were enacted.  But in neither case did the increase or decrease in taxes have much to do with the overall economy.

As for the “lackadaisical” riff, you’ll have to ask Kristof about that, but here’s a guess – if someone was looking at establishing a business in either MA or FL, given the tax rates, which state do you suppose would find favor (among other considerations) on the pro side of “taxes?”

You have to love the waive off of his initial “it’s true that … higher taxes tend to reduce incentives”.  Well, duh!  And if taxes are too high people do what?  Look elsewhere where the incentives are more positive.  So given that which is “true”, tell me again why America “needs” more taxes?

~McQ

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23 Responses to Kristof–America needs higher taxes

  • Kind of an odd thing to say that people who find it not worth expending extra effort for no reward under punishing taxes (1950s America apparently) are “lazy”. The term “rational” seems more applicable. Or perhaps “sane”.

  • To Mr Kristoff I say this

    The total revenue to the federal govt for 2010 from private income taxes was $1.4 trillion. If you doubled the amount EVERY INDIVIDUAL paid in 2010 and gave it to the govt it still wouldnt pay for the deficit for this year.
    It is obvious that taxes being too low is NOT the problem.
    SPENDING TOO MUCH IS OBVIOUSLY THE PROBLEM.
    Govt has proved time and time again that they will spend every damn cent they can get their hands on and then borrow more.
    WHen was the last year that the budget was balanced without counting Social security as part of the budget? (You know that social security that is supposed to be sitting in a trust fund and be there when we retire but is nothing but a bunch of “I hope I can pay you when the time comes”.
    WHEN???
    If Congress could actually spend less than it takes in than I might now have as much of a problem with raising taxes as I do.
    In addition, it has been proven that dollars in the PRIVATE HANDS generate more GDP via the multiplier effect that dollars in GOVT hands.

  • I dimly recall the republican congress arguing that we could balance the budget and the Clinton administration saying “no we can’t”.

    That said, the POTUS submits a budget request. Any links to the facts on Clinton’s budget request and what the Republican Congress actually sent to his desk?

  • Again, the Clinton tax hikes were in the middle of a booming economy, so people succeeded despite the government raising taxes. 

    My view is that the Clinton boom was mostly enabled by Reagan’s defeat of the USSR and Reagan’s oil deregulation.  Clinton was largely in the right place at the right time.

    The best things Clinton did was losing the Hillarycare fight and getting the Democrats in Congress kicked out.

    • Clintoon also benefited from the S&L bailout (RTC) turning positive in 1992 after three years deeply in the red.
      He benefited from the Republicans revamping the welfare system (to which Clit-toom had to be dragged kicking and screaming).
      He benefited from the “Peace Dividend” of the USSR collapsing in 1991 (by, were Americans grateful for that; they then elected as prez a slimeball who ran off to the USSR during college…)
      He also benefited from the tech revolution and the Y2K run-up (and Algore’s Internet, before it became the dot.com bubble, of course!)

  • Why is it I suspect most of these people so in favor of higher taxation are in the $250K threshold, and are currently, and consistently, failing to take this sterling opportunity to send MORE of their income than they are required to to the Department of the Treasury on or before April 15th every year.

    • Supposedly that number is about the amount two fairly successful journalists could pull in.

  • 1. Americans disagree.

    Should taxes be raised to eat into huge federal deficits? Among the public, 62 percent say they favor cutting government services to sop up the red ink. Just 29 percent say raise taxes. –from AP today

    2. Put your flucking money where YOUR mouth is, Mr. Kristof.  No need to wait on a law.  Hand it over.
    3. Approximately HALF of us DO need higher…meaning ANY…income tax. OR a consumption tax.  That way, they are paying SOME DAMN thing for their government.
    4. NOBODY “in the 1950s, when marginal tax rates peaked at more than 90 percent” who was not STUPID AND/OR UNLUCKY paid in the 90% bracket.  This was the apex of the era of loop-holes, and for obvious reasons.
    GAWD, I am tired of lying idiots who are paid SCADS of money to write TWADDLE!!!

  • I’m not a big fan of raising taxes, especially with spending being out of control, but it may have to happen.  Revenue is running $2.0 trillion to $2.2 trillion.  I’ll be nice and go with $2.2 trillion.  Interest on the debt is around $200 billion and it probably won’t stay that low.  But I’ll be nice as that leaves $2.0 trillion left.  Now, let’s say you want to pay off the debt in 20 years.  That comes to $700 billion a year.  You’re now down to $1.3 trillion per year for everything else.  As you can see, that won’t come close to cutting it.  Even without paying off the debt which gets you back to $2.0 trillion then you’re still talking about a 33% cut in spending.
    There is no way the DNC will stand for that and I seriously doubt the GOP would part with that much spending power either.  So the only other alternatives are to raise taxes or keep deficit spending at unsustainable levels.
    It sucks, but that is how bad it is.

  • The USA is a two party state with three competing elected bodies. To do austerity means bipartisanism – spending cuts and tax increases.

    • That sounds fine in theory (even though I’ve never agreed with the philosophy). But even if it’s stipulated as a good principle, somehow real spending cuts never come.

      Therefore anyone who tries to do the bipartisanship routine expecting to give in on tax increases to get spending cuts is inevitably screwed over in the end. That trade never, ever works. The cuts somehow miraculously disappear, or materialize as mere accounting gimmicks, or are restored in previous years, or whatever.

      Therefore, even if you think it’s a good idea in principle, reality tells us that it’s a failing strategy.

    • Remember Reagan’s agreement with Congress: for each one dollar of tax increases, they’d cut spending by TWO dollars?
      Guess which side didn’t materialize.

  • Perhaps they could end the “War on Poverty” … it has a worse track record than Bush had in Iraq, maybe even worse than VietNam.

  • I feel certain people will contemplate starting a business close to home.  The question is whether the regulatory and economic climate will be permissive enough to push some to make that decisions while others feel it futile, and whether the same factors will allow the business to flourish.  At that point, it becomes a question of where the labor is and/or to where it will travel.  Taxes are admittedly only one part of that equation, but undoubtedly the most important one.

  • Oil was $10 a barrel under Clinton. Now its over $100.  Hmmmm, I wonder if that could affect growth rates?

  • Notice: I don’t read Nick and the others; I don’t waste my time. That said, I did click over to PJTV and listened to a segment wherein Eric Singer (http://en.wikipedia.org/wiki/The_Congressional_Effect#Congressional_Effect_Fund_.28CEFFX.29) was interviewed about his views on the interplay between Congressional activity and the market place.
     
    I recommend you follow the links and listen to what he has to say. The short answer is that according to his research, when Congress is in session, the market is more volatile. When Congress goes home, the market settles and heats up.
    Said another way, every time Congress contemplates an “intervention” (and does or does not intervene) in a particular sector of the market (to “help” it along), that particular sector suffers an immediate downturn because those already in the sector or others contemplating investment in that particular sector must wait until an independent re-evaluation can be performed to determine the effect of the legislative (in/)activity with regard to the possible future worth of standing pat or moving into or away from that sector.
     
    I don’t think I have ever seen a more succinct evidentiary argument for laissez-faire economics.
     
    I gotta find that guy’s phone number.
     
     

  • http://www.investors.com/NewsAndAnalysis/Article/569150/201104141826/Congress-Bogus-38-Bil-In-Cuts.aspx
    /excerpt
    Washington’s $38 Bil In ‘Cuts’ Are Bogus
    Posted 04/14/2011 06:26 PM ET

    Fiscal Policy: In the bizarro world of Washington budgeting, Congress has managed to boost 2011 spending by $17 billion while claiming to be making a “historic” $38 billion spending cut.
    If you want to know why it’s so hard to make meaningful cuts in the federal budget, just look at what’s happened with the deal Congress passed Thursday that sets spending levels for the rest of the 2011 fiscal year.
    When the budget agreement was announced last week, Democrats complained that it cut spending too deeply, and some conservatives said the $38 billion in cuts didn’t go far enough. But what everyone in Washington agreed on was that the deal cut federal spending.
    Turns out, it didn’t. At least not in any normal sense of the term.
    According to a Congressional Budget Office report released late Tuesday, the agreement will result in the federal government spending a total of $1.365 trillion on discretionary programs in 2011. That’s $17 billion more than the government spent on these programs last year (and $230 billion more than they spent in 2008.)
    Worse still, the CBO’s most recent “baseline” budget — which assumes that spending simply keeps pace with inflation — put 2011 outlays at $1.361 trillion.
    /end excerpt
    I won’t even bother with the /sarc.
     

  • Were Americans really lazier in the 1950s, when marginal tax rates peaked more than 90 percent?

    Hmmm…. I’m not an expert on the history of US federal tax policy, but I seem to recall reading that there were many, many more tax EXEMPTIONS back then than their are now.  I suspect that state and local rates were also much lower.  Anyway, as Ragspierre points out, only an idiot pays the full rate.  Hell, I believe Warrent Buffet has stated publicly that he doesn’t pay anywhere near the CURRENT high rates.  Simply put, rich people can afford the best accountants and tax lawyers to tell them how to hide their income.  Oh, and pet members of Congress to see to it that there’s a nice loophole just for them.

    I would also like to point out to Nickle-ass that the 1950s were just a teeeeensy built different than our time.  Quite aside from the fact that the US was the only major industrial power that had not been damaged or destroyed by the minor unpleasantness during the ’40s called World War II, the regulatory regime was much looser: there was no EPA, for example.  I also don’t recall Truman or Ike informing power companies that he’d bankrupt them if they tried to build a coal-fired power plant, or extorting huge sums from oil companies if they had an accidental spill.

    Billy Hollis[A]nyone who tries to do the bipartisanship routine expecting to give in on tax increases to get spending cuts is inevitably screwed over in the end. That trade never, ever works. The cuts somehow miraculously disappear, or materialize as mere accounting gimmicks, or are restored in previous years, or whatever.

    I think (hope?) that a majority of Americans are wise to this.  Idiots and liars like Nickle-ass call for higher taxes to “reduce the deficit” or “close the budget gap” or “fully fund this program”, but the extra money ALWAYS seems to be spent on other things and we wind up even deeper in a fiscal hole.  I suspect that people would not mind paying SOME extra taxes if they had real confidence that Congress and the regime wouldn’t just take the extra revenue and blow it on some new boondoggle.

  • TKC is close but no one sees the gorilla hiding behind that plastic fern in the corner. Tax rates do need to be raised but we shouldn’t start at the top of the income pile. It should begin with all the people “we” pay to file taxes. Kill the EITC. Kill the effectively negative tax rates for “heads of household” with $30,000 – $50,000 of income who are refunded more than they have withheld.

    Then we can go to work on those with effective 0% tax rates. Everyone needs some skin in this game.