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Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

nytimes.com

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Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#31

Post by hammerdr »

tptacek wrote: post #20
fennecfoxen wrote: post #14

Earlier quoted context omitted.

I like the implied reasoning saying that "Other governments are willing to take a bigger slice of the fruits of your labor, so you have no grounds to complain." Except I don't, actually.

That's not the logic I'm employing, though I see why you think it is. I'd rather point out that those 26 other countries do not appear to suffer a deficit of academics like Mankiw, despite a much stronger incentive for them not to take similar speaking engagements. Of course, the bigger flaw with Mankiw's argument is that it evades the point of those taxes, which is that they buy things that our society has deemed wo…

I'm not a tax expert but how are you sure that the tax burden for this income bracket is not _more_ in the United States? Sweden may have ~60% income tax but how much of the back-end tax finagling occurs in Sweden compared to the United States?

Again, it may very well be more than the claimed 90% tax rate. I also realize the professor has a vested interest (for several reasons) in knocking the tax cut expiration. But the United States tax system is complex beyond belief and I think any comparison with other countries is never simple.

Edit: Or higher than the 'real' tax rate if the professor is pushing the numbers in his favor (likely).

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#32

Post by CoreDumpling »

toddh wrote: post #3
tptacek wrote: post #2

Long story short: Mankiw could take a $1k speaking engagement and, after 30 years of compounding 8% (please pass on stock tips, Mankiw) growth, pass on $10,000 to his children. But because of a battery of taxes, it will only come to $1700. And because he will likely be dead after 30 years, the estate tax will chew up another $700. Therefore, he won't do the speaking engagement. "In effect, once the entire tax system…

A lot of dreaming and fantasy reasoning going on there. A compounding rate of 8% is a false premise to start from. Ask anyone who has figured the lat 20 years into their retirement calculations. A more rational take would be to assume you can't project rates in the future, but if you do the talk you will get money now, which has value now. A bird in the hand. And if he is concerned about what happens to his money aft…

Not just dreaming and fantasy, there's some actual numerical sleight-of-hand going on here. He's taking advantage of people's misunderstanding of compound interest.

Exponential growth will ultimately trump all other linear factors, even if the exponent is small. And that's also what makes small differences in that exponent so important (hence why computer scientists go through great pains to reduce complexity of matrix operations from O(2^2.51) to O(2^2.36)). Even if the investment only earned 1% per year, he can just sock it away in a 100-year trust fund:

    >>> 1000 * (1.01 ** 100)
    2704.8138294215287
    >>> 523 * (1.005 ** 100) * .45
    387.54342961962465
BAM - 85% "marginal" tax rate.

Plus, he has deliberately framed his scenario to take the maximum hit from taxes at every step. Corporate tax eats into his dividends? OK - invest in a growth stock instead of an income stock, and pay capital gains taxes when realizing the profits instead. Estate taxes steal most of the money from his heirs? How about he write a check to the university on behalf of his grandkids -- Uncle Sam won't see a dime of that.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#33

Post by edderly »

If you treat this as a statement of fact, the economic consequence of this is clearly a matter of interpretation. The fact that Mr Mankiw might not be providing labor may mean that others will simply do the task and pay money on their earnings instead.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#34

Post by tptacek »

hammerdr wrote: post #31
tptacek wrote: post #20

Earlier quoted context omitted.

That's not the logic I'm employing, though I see why you think it is. I'd rather point out that those 26 other countries do not appear to suffer a deficit of academics like Mankiw, despite a much stronger incentive for them not to take similar speaking engagements. Of course, the bigger flaw with Mankiw's argument is that it evades the point of those taxes, which is that they buy things that our society has deemed wo…

I'm not a tax expert but how are you sure that the tax burden for this income bracket is not _more_ in the United States? Sweden may have ~60% income tax but how much of the back-end tax finagling occurs in Sweden compared to the United States? Again, it may very well be more than the claimed 90% tax rate. I also realize the professor has a vested interest (for several reasons) in knocking the tax cut expiration. But…

Without doing the research to prove it, I'm going to go out on a limb and suggest that the tax burden on the top 1% of earners in the 26 countries I cited with higher average tax burdens is more onerous than the tax burden on the top 1% of earners in the US, because most (all?) of them have more steeply progressive tax systems.

The "complexity" of the US tax system is orthogonal to the issue we're discussing.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#35

Post by yummyfajitas »

tptacek wrote: post #20
fennecfoxen wrote: post #14

Earlier quoted context omitted.

I like the implied reasoning saying that "Other governments are willing to take a bigger slice of the fruits of your labor, so you have no grounds to complain." Except I don't, actually.

That's not the logic I'm employing, though I see why you think it is. I'd rather point out that those 26 other countries do not appear to suffer a deficit of academics like Mankiw, despite a much stronger incentive for them not to take similar speaking engagements. Of course, the bigger flaw with Mankiw's argument is that it evades the point of those taxes, which is that they buy things that our society has deemed wo…

At some point, the goal of having the "Happiest Possible Greg Mankiw" will have to give way to something like Wildland Fire Management.

It is less than honest to suggest that the tax increases we are discussing will be used for things like fire protection. The vast majority of government spending these days is not providing public goods. Police, fire, defense, the CDC and other public goods make up a relatively small portion of the budget.

For the most part, the extra money Mankiw pays will simply be redistributed to people less productive than him (federal bureaucrats, people capable of working but who don't wish to, corporations less productive than competitors/alternatives). If you wish to argue that those are useful purposes, be my guest.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#36

Post by zdw »

The unstated fundamental assertion of this is that people only work because of money, and to amass huge sums of it to pass on to their heirs.

Personally, I work because I enjoy it and am passionate about what I do. If I come out ahead and have money to survive and buy a few modest luxuries, then I'm happy.

If you don't like what you do and work is a pain, but you're addicted to the money stream, something is very wrong.

Similarly, having a society where people don't have the opportunity to better themselves is also wrong - and that's where government can and should attempt to improve the system.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#37

Post by lkrubner »

From what I've seen, some people have an in-born desire to work hard, and some don't. Taxes do not change this. The emphasis on taxes strikes me as a bit of posturing, and a ridiculous one at that. I've never had a single acquaintance say to me, "Yes, I've worked 70 hours a week these last few years, but they are raising nominal rates on my top brackets this year, so I will only work 50 hours a week from now on." Humans just don't work like that.

In my head, when I'm dealing with people, and especially when I'm hiring people, I slot them into 1 of 4 groups:

1.) ambitious - will do whatever it takes

2.) guilt ridden - aims to please, will make sacrifices for the job, though they can slip into burn out or depression

3.) multiple agendas, balances family and a job, stable but not extraordinary, will sometimes work extra in emergencies.

4.) unmotivated - their interests are away from work - hobbies, romantic partner, children, drug addiction, travel, art, writing, health problems - whatever, the issues are legion, but the point is the same - work is a low priority for them, they give it the minimal effort needed.

None of these categories change based on taxes.

For my part, I enjoy working, and that enjoyment wouldn't change if my taxes went up or down.

Possibly there are a few people, at the margin, who really are influenced by the tax rate, but I suspect this is a rare taste, like people who like yak butter. After all, you have to be willing to spend an inordinate amount of time studying the tax code before you can figure out how changes in work habits will effect your total tax bill over the long term, and few people are willing to make that effort. Hell, most people are not even willing to study their own investments, and leave all investment decisions to some advisor, or simply go with an index mutual fund, so that portion of their lives can function on auto-pilot.

I do not think I've ever known anyone who changed their work habits due to changes in the tax code.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#38

Post by jamesaguilar »

subwindow wrote: post #21
jamesaguilar wrote: post #9

Earlier quoted context omitted.

A few problems with your analysis. - Money that is "socked away" in savings accounts or investment portfolios reenters the economy through lending or through decreasing cost of capital for businesses. - It is inherently better for Mankiw to write articles than it is for starving writers to do so. If anyone derived value from what the starving writer was writing, they would be getting paid for it and therefore not be…

The problem with the economy right now is not that there isn't enough money to fund corporations, it's that the average person isn't making enough regular income.

Look, I see what you are trying to say. But I don't think anyone knows exactly what the problem with the economy is, and if they did, I would not expect to hear about it for the first time in a comment on hacker news. The average person not making enough income is a symptom of almost every kind of problem that can occur in a free economy, but it is not a cause.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#39

Post by tptacek »

pandafood wrote: post #29
tptacek wrote: post #20

Earlier quoted context omitted.

That's not the logic I'm employing, though I see why you think it is. I'd rather point out that those 26 other countries do not appear to suffer a deficit of academics like Mankiw, despite a much stronger incentive for them not to take similar speaking engagements. Of course, the bigger flaw with Mankiw's argument is that it evades the point of those taxes, which is that they buy things that our society has deemed wo…

Most of those other countries have pretty dismal mathematical output. Not only that, but the country with the best mathematical output of the ones you listed is the UK, which I think has the most "American" tax code. Whenever anyone produces a good mathematician, that mathematician seems to always come to the US. There's a reason Terrence Tao didn't stay in Australia. I'm not actually saying that this is because of o…

Mankiw isn't a mathematician; he's an economist. Ranked by impact factor, Europe's universities are indeed outclassed by those of the US (attempt to control that by population and by the radically different systems those institutions operate under). I don't think you can really defend the claim that Europe's academic output is "dismal" compared to, like, the Earth, though.

Re: Greg Mankiw: I Can Afford Higher Taxes. But They’ll Make Me Work Less.

#40

Post by tptacek »

yummyfajitas wrote: post #35
tptacek wrote: post #20

Earlier quoted context omitted.

That's not the logic I'm employing, though I see why you think it is. I'd rather point out that those 26 other countries do not appear to suffer a deficit of academics like Mankiw, despite a much stronger incentive for them not to take similar speaking engagements. Of course, the bigger flaw with Mankiw's argument is that it evades the point of those taxes, which is that they buy things that our society has deemed wo…

At some point, the goal of having the "Happiest Possible Greg Mankiw" will have to give way to something like Wildland Fire Management. It is less than honest to suggest that the tax increases we are discussing will be used for things like fire protection. The vast majority of government spending these days is not providing public goods. Police, fire, defense, the CDC and other public goods make up a relatively small…

You're right, I was being cute.

However, the dominant component of "people capable of working but who don't wish to" is --- by my casual analysis (please correct me) --- retirees on social security. It's also dubious to suggest that if we drastically cut back on the social safety net that the entire entrepreneurial class would necessarily fare better; many of us[1] would have to redirect our efforts and risk tolerances to fund our parents retirement.

We probably agree more than we disagree on the subject of civil servant pensions.

I am willing to accept that there is no tax/spend scheme that is ever going to make me entirely comfortable (a single trip to the DMV illustrates this nicely) without rejecting entirely the idea that we should trade off some personal incentives for our collective well being.

[1] Not me, though.

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