Economics Questions

Re: High Taxes=More Growth, says ThinkProgress

archon — Thu, 23 Jun 2011 01:41:50 GMT

Suppose it's true... why not raise taxes to 100%? Heck, why stop at the top marginal rates? Why not tax the middle class at 95%, and the poor at 90%? After all, if increasing top rates creates growth, then why shouldn't the government just take it all, and why only the top marginal rates?

Schiff is right, btw, when the top rates were higher, there were more loopholes, so the top earners didn't ever pay the top rate.

Re: High Taxes=More Growth, says ThinkProgress

Phaedros — Wed, 22 Jun 2011 18:25:25 GMT

Let's ask a simple question, How do higher taxes encourage business?

Re: High Taxes=More Growth, says ThinkProgress

Jack Roberts — Wed, 22 Jun 2011 18:19:29 GMT

high taxes=growth of government.

The higher taxes are the bigger government will grow. The economy will not be positively influenced by higher taxes. The higher taxes are the less disposable income people have. This effects the private sector negatively, well the private sector that does not see any government money.

Re: High Taxes=More Growth, says ThinkProgress

Smiling Dave — Wed, 22 Jun 2011 17:22:21 GMT

1. Peter Schiff points out that when the tax rate was 90%, nobody paid 90%, because there were so many loopholes.

But those loopholes have since been closed.

He adds that a rich person truly taxed at 90% would most likely just retire, ending whatever he was contributing to the economy.

2. The thing about statistics, there has to be a reason they make sense. otherwise you are obviously missing a piece of the puzzle. What sense does it make that higher taxes means more growth?

Let us pretend that in Mexico there is some area where the drug lords have gotten rid of the govt, and extort money from the inhabitants. Would the people be better off if the drug lords extorted 90%, or if they extorted less?

Re: High Taxes=More Growth, says ThinkProgress

Autolykos — Wed, 22 Jun 2011 13:41:25 GMT

Sam29, I don't think Daniel Muffinberg, or anyone else participating in this thread, is expecting to actually convince anyone at ThinkProgress. In fact, I find it doubtful that ThinkProgress is even concerned with factual accuracy. What they're concerned with is "truthiness" - does the notion that higher taxes = more growth seem true to enough people? The people running ThinkProgress hope it does, so that taxes can be raised and subsequently spent on their pet projects.

But anyways, the reason why using GDP is flawed is because of the broken-window fallacy. 'Nuff said. :P

Re: High Taxes=More Growth, says ThinkProgress

Esuric — Wed, 22 Jun 2011 10:18:58 GMT

1) They are using GDP.

/thread

GDP = C (consumption) + I (investment) + G (government spending) +Nx (net exports)

This means that, in order to increase total gross domestic product, one of the variables must rise while either (a) holding the other variables constant, (b) increasing the value of other variables, or (c) not allowing the other variables to fall by a wider margin than the gain in the targeted variable. Government can increase GDP by increasing its spending while simultaneously engaging in reckless monetary expansion which, guess what, increases all other variables in the equation (consumption, investment, and even exports).

If the government did not simultaneously engage in inflationism, then the increase in government expenditure (G) would be greatly outweighed by the reduction in private consumption and investment (the crowding-out effect). But GDP is an inherently flawed measure for another reason, primarily because it does not distinguish between investment, on the one hand, and malinvestment on the other.

In other words, government spending + inflationism = higher GDP (in almost all situations), but this does not constitute sustainable or even real economic growth (it's also why nations like China, and the former Soviet Union had very high GDP figures while their populations live(d) in misery).

Re: High Taxes=More Growth, says ThinkProgress

Sam29 — Wed, 22 Jun 2011 10:01:13 GMT

And your alternate explanation?

Re: High Taxes=More Growth, says ThinkProgress

Scrooge McDuck — Wed, 22 Jun 2011 09:53:09 GMT

Correlation /= causation

Re: High Taxes=More Growth, says ThinkProgress

Sam29 — Wed, 22 Jun 2011 09:07:59 GMT

Care to go any further with that? Haha I know they are, but a good response requires more than simply pointing that out, don't you think?

Re: High Taxes=More Growth, says ThinkProgress

DanielMuff — Wed, 22 Jun 2011 09:05:11 GMT

1) They are using GDP.

High Taxes=More Growth, says ThinkProgress

Sam29 — Wed, 22 Jun 2011 09:00:53 GMT

The chart is a bit bothersome...anybody wanna tackle it?

http://thinkprogress.org/economy/2011/06/20/249061/chart-taxes-economic-growth/