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Posts Tagged ‘Class warfare’

When I wrote back in 2012 that France was committing fiscal suicide, I should have guessed that President Hollande would get impatient and push for even more statism.

Sure enough, the BBC reports that France’s President has a new plan. The ostensible goal is to reduce unemployment, but the practical effect is to expand the size and scope of government.

President Francois Hollande has set out a €2bn (£1.5bn) job creation plan in an attempt to lift France out of what he called a state of “economic emergency”. Under a two-year scheme, firms with fewer than 250 staff will get subsidies if they take on a young or unemployed person for six months or more. In addition, about 500,000 vocational training schemes will be created.

Needless to say, if subsidies and handouts were the key to job creation, France already would have full employment.

In reality, real jobs are created when employers think that new employees will produce profits. But that’s a difficult hurdle in a country like France.

Though, in the interest of fairness, I should acknowledge that Hollande claims this plan will not involve a net increase in the burden of government spending.

Mr Hollande said money for the plan would come from savings in other areas of public spending. “These €2bn will be financed without any new taxes of any kind,” said President Hollande, who announced the details during an annual speech to business leaders.

Though I suspect that this claim is about as believable as Obama’s laughable assertion that government-run healthcare would lower premiums and allow people to keep their health plans.

But the strangest part of the BBC story involves Hollande’s contortions on labor market policy. See if you can decipher this passage.

The president also addressed the issue of labour market flexibility. “Regarding the rules for hiring and laying off, we need to guarantee stability and predictability to both employers and employees. There is room for simplification,” he said. “The goal is also more security for the company to hire, to adapt its workforce when economic circumstances require, but also more security for the employee in the face of change and mobility”.

I gather Hollande wants people to believe he has some sort of magic wand that will magically give companies flexibility while also guaranteeing workers stability.

Put me in the skeptical column. I would be stunned if France actually liberalized its calcified labor markets. The unions are too powerful and too shortsighted to realize that employers will always be reluctant to hire unless they know they have the ability to fire.

Besides, why would unemployed people, particularly those with low skill levels, want jobs when redistribution programs make idleness comparatively attractive?

Meanwhile, those with high skills will continue to escape the country.

So the bottom line is that France’s slow-motion economic suicide will continue. Hollande’s foolish policies simply mean the day of reckoning will come a bit sooner.

Let’s close with something that’s both revealing and amusing. One of America’s movie stars, Will Smith, had a very interesting wake-up moment on French TV.

I wonder what Mr. Smith would say if he knew that some French taxpayers actually have faced tax burdens of more than 100 percent (though Hollande, with his infinite mercy, then decided that the upper limit should be 80 percent).

P.S. My friend Veronique de Rugy (an escapee from France) warns Americans about the dangers of adopting the policies of her former country in this video.

P.P.S. Sadly, American statists have been urging European-type statism in the United States for decades. To see where that leads, check out these cartoons from Michael Ramirez, Glenn Foden, Eric Allie and Chip Bok.

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Whenever I pontificate about the health of the American economy, I feel like Goldilocks. Instead of arguing that the economic porridge is too hot or too cold, or that the economic bed is too hard or too soft, I conclude that we’re stuck in the middle.

We generally outperform Europe’s high-tax welfare states, but we usually lag behind the small-government tiger economies of Asia.

But while Goldilocks always liked the middle option, I obviously think we should be more like Hong Kong and Singapore.

With this bit a background, let’s look at some supposedly really bad news that actually is modestly good news.

The folks at the Pew Research Center just issued a major report on income trends over the past 40-plus years. Based on their headline, you would think it’s filled with horrible news. Sort of like saying the economic porridge is way too cold.

So is it true that the middle class is “losing ground” and “falling behind”?

Michael Fletcher, writing for the Washington Post, seems to accept that spin. He opened his column by portraying the report’s findings as a sign of dystopian inequality.

After more than four decades of economic realignment and creeping inequality, the U.S. middle class is no longer the nation’s majority.

Yet even he was forced to acknowledge that this supposed “tipping point” is primarily the result of more households earning more money.

The nation has arrived at this tipping point in part because more Americans are moving up the income ladder. In 1971, just 14 percent of Americans were in the upper income tier, which Pew defined as more than double the nation’s median income. Now, 21 percent of American households are in that upper earning category — at least $126,000 a year for a three-person household.

Though he does his best to find a dark lining to this silver cloud, using loaded language to imply that those with modest incomes are disadvantaged because income is being “captured” by the rich.

…at the same time, many Americans are falling behind…. In 1971, a quarter of American households fell into the bottom earning tier, which Pew defined as less than two-thirds of the nation’s median income. By 2015, 29 percent of American households fell into that category. …The decline of the middle class has been accompanied by growing inequality, as a growing share of the nation’s income has been captured by those at the top.

But the Pew Report confirmed that the economy is not a fixed pie. Yes, the rich have become richer, but even Mr. Fletcher concedes that their income gains are not at the expense of the less fortunate. This is because the rest of us are becoming richer as well.

…Americans of all income levels have grown more prosperous, Pew found. Middle class families have seen their income grow by 34 percent in inflation-adjusted dollars since 1970, while lower-income Americans have experienced income growth of 28 percent.

He also reports that African-Americans have enjoyed above-average income growth.

…black Americans have made more economic gains than others in recent decades. Between 1971 and 2015, for example, the share of black Americans in the upper income tier more than doubled to 12 percent.

Here’s a chart from the Pew report. Note that these numbers are not based on changes in actual income, but instead measure how each group is faring relative to other slices of the population.

Maybe I’m just a naive Pollyanna, but the numbers in the Pew Report, even as characterized by the Washington Post, don’t seem like a damning indictment of American society.

Indeed, they sort of validate my view that things are getting better over time, albeit not as quickly as they would be improving if we followed the right recipe and had smaller government and less intervention.

In other words, we may not have hot, Hong Kong-style porridge, but it’s at least room temperature.

But Scott Winship of the Manhattan Institute is the real expert on these issues, so I was happy to see that he wrote an article on the Pew study for National Review.

Here are some of his key observations, starting with the essential insight that it’s much better to focus on income trends rather than income distribution.

Pew’s definition of “middle income” isn’t anchored to any fixed standard of living. In fact, it represents a rising standard of living over time. Imagine that the incomes of the poor, middle, and rich all increase by 50 percent over time. The Pew measure would indicate that the share of adults who are “middle income” would be no higher than it was initially. It is not obvious why we should care that the middle class, in this example, is no larger over time.

Amen. This is the same point I make when criticizing dishonest poverty analysis.

We should care about whether living standards for ordinary people are increasing, not whether rich people are getting richer.

Scott then looks at those income trends and finds good news.

…between 1969 and 2007, the household income of the median adult rose by 52 percent. …the 25th percentile (the income of the person poorer than 75 percent of adults) rose by 40 percent from 1969 to 2007. …While middle-income adults, by Pew’s definition, have shrunk by 11 percentage points as a share of the population since 1970, 7 points of that decline is due to more Americans’ being in the upper-income group. …Using the Pew measure of household income, the middle fifth grew richer by 53 percent from 1969 to 2007. My preferred measures showed a rise between 54 percent and 64 percent, depending on whether one adjusts for declining household size. …poor and middle-class Americans are both substantially better off than 45 years ago.

Now let’s shift to what really matters.

The left very much wants to focus on the distribution of income as part of their “inequality” campaign.

If they can convince people that the economy is a fixed pie, and combine that falsehood with rhetoric about higher incomes earned by the rich, that bolsters their case for ostensibly saving the middle class with soak-the-rich tax policies and greater levels of redistribution.

And that probably explains why the folks at Pew (along with certain journalists) decided to imply that the glass is 90 percent empty when it’s actually 60 percent full.

Winship hits the nail on the head in his conclusion.

A policy agenda designed with a crumbling middle class in mind is not only inappropriate, but it could actually hurt the living standards of the middle class in the process.

He’s exactly right.

Nations such as Greece and France have pursued the policies favored by American leftists and the net result – at best – is anemic growth and stagnant living standards.

To conclude, here’s a video that I saw on Ted Frank’s Twitter feed. I couldn’t figure out how to embed it, but was able to download it and put it on YouTube.

You’ll notice a big jump over time in the amount of households earning above $200,000 per year. Call me crazy, but I want there to be more rich people, so this is a good development.

But if you play close attention, the other big takeaway from this data (and the one that merits some celebration) is that more and more people are earning higher and higher levels of income over time. And remember, these are inflation-adjusted dollars.

So let’s be happy that ordinary people in America are climbing the economic ladder. But let’s recommit ourselves to fight harder for pro-growth policies such as tax reform and entitlement reform so their ascent up the ladder will be faster.

P.S. Here are some examples of how statist policies increase inequality.

P.P.S. The comparative data on income trends and inequality in the United States and Scandinavia is worth perusing.

P.P.P.S. And I never get tired of sharing this Margaret Thatcher video because she succinctly explains that many leftists would rather hurt the rich than help the poor.

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I don’t like the inequality debate because it’s a distraction from the far more important issue of how to generate more growth.

Nonetheless, I feel compelled to once again address the topic. Let’s start with a moral observation: There’s nothing wrong with the kind of inequality that results from honest exchange.

Bill Gates earns far more money than me, but his earnings and wealth are the result of voluntary exchange (at least as far as I know). Consumers voluntarily give him money because they value the goods and services produced by Microsoft.

So it would be nothing but self-destructive envy for me to grouse and complain. And it would be immoral for me to steal his money, either acting on my own or using the coercive power of government.

Dennis Prager elaborated on this principle in National Review.

…what most matters…is whether the wealthiest class has attained its wealth honestly or corruptly. If the wealthy have attained their wealth morally and legally, then the income gap is not a moral problem. In a free society, wealth is not a pie — meaning that when a slice of pie is removed, there is less of the pie remaining.

For what it’s worth, I don’t even think it’s wrong that leftists like Michael Bloomberg and Barbara Streisand earn more money in a year than I could earn in 10 lifetimes. So long as they earn their money honestly (i.e., not via government favoritism like some statists), their financial success is admirable.

But I do have the right to complain about the way some leftists spend their money. That’s because they promote and support policies that make it hard for lower-income people to climb the economic ladder.

But I’m not just talking about left-wing support for statist policies that dampen growth and hurt all income classes. In some cases their preferred policies result in the transfer of income and wealth from the poor to the rich.

And that creates the wrong kind of inequality. Not just wrong. Grotesquely unethical.

Let’s look at some examples.

Andrew Lundeen of the Tax Foundation found that the poor are hurt and some rich folks benefit when reviewing the impact of class-warfare taxes.

When fewer people are willing to invest, two things happen. First, the capital stock (i.e. the amount of computers, factories, equipment) shrinks over time, which makes workers less productive and decreases future wages. Second, because there is less capital available the available capital is more valuable, which causes the return to capital to rise. The effect of this over time is that wage earners make less and capital owners make more. Our current tax code exacerbates this problem significantly through its non-neutral bias towards consumption over future consumption (i.e. saving).

Amen. This is why I keep sharing this chart showing that double taxation hurts workers.

Now let’s look at what Professor Jeffrey Dorfman wrote about the Federal Reserve’s easy-money policy for Forbes.

…the Fed’s low interest rates have been responsible for inflating stock market values. By reducing the returns to savings accounts, certificates of deposit and bonds, the Fed has intentionally driven ordinary investors to increase their investment allocation to the stock market, thereby boosting stock returns. Because people with more wealth tend to own more stock, those higher stock prices have led the rich to gain much more than the poor and middle class. Low interest rates have meant low borrowing costs for large corporations with direct access to capital markets. This low-cost borrowing has boosted corporate profits which also flow mostly to the wealthy.

He’s right. The rich disproportionately benefit from rising asset values, while the rest of us suffer because of low interest rates on our savings accounts (though the rich may regret such policies if the result is a bubble that eventually bursts).

Dorfman also points out that statist policies, broadly speaking, penalize labor relative to capital. And this is not good for workers in general, but it’s especially harmful for low-income workers.

…the low interest rates set by the Fed combined with the additional labor costs thanks to the Obama Administration (Obamacare and its associated taxes) are changing the relative prices of labor and capital. …This also increases economic inequality because the poor and middle class earn most (or all) of their money from labor income, while the rich collect a significant share of their income in various forms of returns to capital (dividends, interest, capital gains and business profits). Purposely tilting the economy in favor of capital and against labor is pretty close to taking from the poor and giving to the rich, the exact reverse of normal government attempts to redistribute income.

Even the left-leaning Urban Institute recognizes the big government sometimes helps the rich at the expense of the poor. Here’s some of what Leigh Franke wrote about land-use restrictions.

Restrictive land-use regulations, including zoning laws, are partially to blame for the stagnant growth… Land-use regulations may be intended to protect the environment or people’s health and safety, and even to enhance the supply of affordable housing, but in excess, they restrict housing supply, drive up home prices, and limit mobility. …More and more zoning restrictions meant less construction, fewer permits, and a restricted housing supply that drove up prices even further. …cities often have stringent zoning laws, a restricted housing supply, and high prices, making it nearly impossible for lower-income residents and newcomers, who would likely benefit most from the opportunities available, to find affordable housing.

The minimum wage is another example of a left-wing policy that causes the wrong type of inequality, as explained by Robert Graboyes of the Mercatus Center.

The $15-an-hour minimum wage is a superb tool if your goal is increasing inequality. To the least-advantaged Americans, its logic is simple: “You lose your jobs and access to jobs so your wealthier neighbors might enjoy small wage increases and greater protection from competitors like you.” …Other than wealthier employees, who benefits from a $15 minimum wage? Income is likely to soar for a CEO whose company builds robots to replace low-wage workers. …instigators and beneficiaries of minimum wages are often labor unions who benefit from eliminating potential competitors…harsh restrictions on job-seekers can do damage that lasts a lifetime. A teenager shut out of employment by an exorbitant minimum wage will fail to learn job skills and establish a track record that impresses future prospective employers. And the effects will not fall evenly: Children of wealth and privilege have many routes to circumvent such restrictions. The inner-city teen, striving for a better life, has no such good fortune.

Spot on. Here’s a must-watch video on the topic.

In the interest of space, that’s enough examples, though I’ll at least mention that the Export-Import Bank is another example of a government policy that transfer money from the poor to the rich, as are agriculture subsidies.

The left’s support for a government monopoly instead of school choice also should be on this list, since the main result is to hurt kids from poor families in order to provide undeserved goodies for unionized teachers.

And don’t forget bailouts. And favors in the tax code. As well as licensing. And the green energy scam.

I could keep adding to that list, but let’s got to today’s lesson: Our friends on the left say they want to help the poor and reduce inequality. But their policies often target the kind of inequality that we shouldn’t worry about while exacerbating the form or inequality that is a problem.

John Goodman explained the consequences in a recent column.

The worst housing shortages, the most homelessness and the worst inequality exist in the cities that are the most Democratic and the most liberal.

The same relationship exists at the state level. Bigger government is correlated with more inequality.

P.S. Our leftist friends fail to appreciate that the real goal should be more economic growth, which is what’s really necessary to make life better for the less fortunate.

Actually, to be fair, they want economic growth. They just don’t support the recipe that produces that outcome. I’m not sure why, but maybe Margaret Thatcher was right and they want bad outcomes for the rich (other than their cronies) more than they want good outcomes for the poor.

December 17 Addendum: Let’s add regulation to our list of statist policies that cause inequality by unjustly lining the pockets of higher-income people.

A. Barton Hinkle explains for Reason. Here are a few excerpts from his column.

…doctors, who make up a good part of America’s richest 1 percent, extract rents from the public through other government policies. One of those is licensure: “The law specifies tasks that only licensed doctors can perform, even though nurses are capable of performing them.” …Health care is an extreme example, but upward redistribution of wealth through government action affects nearly every sector of the economy. In most states, direct sales of new automobiles to consumers are forbidden–you have to buy through a dealership. Roughly a third of all occupations now require a government license–up from only 5 percent of all occupations a few decades ago.

We already knew that regulation hurts poor people, so the fact that some regulations help rich people is a very perverse form of symmetry.

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The Organization for Economic Cooperation and Development is a Paris-based international bureaucracy. It used to engage in relatively benign activities such as data collection, but now focuses on promoting policies to expand the size and scope of government.

That’s troubling, particularly since the biggest share of the OECD’s budget comes from American taxpayers. So we’re subsidizing a bureaucracy that uses our money to advocate policies that will result in even more of our money being redistributed by governments.

Adding insult to injury, the OECD’s shift to left-wing advocacy has been accompanied by a lowering of intellectual standards. Here are some recent examples of the bureaucracy’s sloppy and/or dishonest output.

Deceptively manipulating data to make preposterous claims that differing income levels somehow dampen economic growth.

Falsely asserting that there is more poverty in the United States than in poor nations such as Greece, Portugal, Turkey, and Hungary.

Cooperating with leftist ideologues from the AFL-CIO and Occupy movement to advance Obama’s ideologically driven fiscal policies.

Peddling dishonest gender wage data, numbers so misleading that they’ve been disavowed by a member of Obama’s Council of Economic Advisers.

Given this list of embarrassing errors, you probably won’t be surprised by the OECD’s latest foray into ideology-over-accuracy analysis.

As part of its project to impose higher taxes on companies, here’s what the OECD is claiming in a recent release.

Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers… “Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. “The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added taxes and income taxes. This underlines the urgency of  efforts to ensure that corporations pay their fair share.” These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

And what evidence does the OECD have to justify this assertion?

Here’s what the bureaucracy wrote.

Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.

Those are relatively small shifts in tax receipts as a share of GDP, so one certainly could say that the OECD bureaucrats are trying to make a mountain out of a molehill.

But that would mean that they’re merely guilty of exaggeration.

The much bigger problem is that the OECD is disingenuously cherry-picking data, the kind of methodological mendacity you might expect from an intern in the basement of the White House, but not from supposed professionals.

If you go to the OECD’s website and click on the page where the corporate tax data is found, you’ll actually discover that corporate tax receipts have been slowly climbing as a share of GDP.

Yes, receipts are slightly lower than they were at the peak of the financial bubble.

However, honest analysts would never claim that those numbers were either sustainable or appropriate to use as a bennchmark.

Sadly, “honest” and “OECD” are words that don’t really belong together any more.

The bureaucrats in Paris also are being mendacious in their portrayal of what’s happening with individual income tax revenues.

Monsieur Saint-Amans wants us to think that falling corporate tax receipts are being offset by a rising burden on individuals, but check out this table from the OECD’s Revenue Statistics. As you can see, he wants us to look at one tree (what’s happened in the past few years) and ignore the forest (the fact that the burden of the personal income tax today is lower than it was in 1980, 1990, or 2000).

By the way, the real story is that the OECD wants higher tax burdens, period. Anytime, anywhere, and on everybody.

It’s attack on low-tax jurisdictions is designed to enable higher income tax burdens on individuals.

Its “base erosion and profit shifting” project is designed to facilitate higher income tax burdens on companies.

And the bureaucrats reflexively advocate higher value-added tax burdens.

All of what you might expect from an organization filled with overpaid officials who realize their cosseted lifestyle is dependent on producing output that will generate continuing subsidies from statist politicians such as Obama and Hollande.

P.S. If you want an amazing example of the OECD’s ideology-over-analysis approach, here’s what the bureaucrats recently wrote about achieving more growth in Asia.

Increasing tax revenues and ensuring sustainable domestic resource mobilisation will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards. …Comparable and consistent tax statistics facilitate transparent policy dialogue and provide policy makers with an important tool to assess alternative tax reforms. …Continued reforms will be necessary to help these tax administrations raise additional tax revenues in the future.

Yup, you read correctly (at least if you understand that “domestic resource mobilisation” is OECD-speak for higher taxes). The bureaucrats think generating more tax revenue to finance bigger government actually is a recipe for more prosperity.

For all intents and purposes, they’re advising nations in the region to copy France and Italy instead of seeking to be more like Hong Kong and Singapore.

Though, to be fair, the OECD isn’t just trying to impose bad policy on Asia. The bureaucrats in Paris have an equal-opportunity mindset when advocating statism since that’s the exact same prescription the OECD gave for Latin America.

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Whatever happened to Elizabeth Warren?

A couple of years ago, she was the pin-up girl for the crazy left thanks to fatuous statements about “you didn’t build that.”

But now she’s faded into the background and other politicians are getting more attention for their absurd statements (yes, I’m thinking of Hillary and Bernie).

So what accounts for Warren’s decline? Is that because even statists are embarrassed by her use of fake claims of Indian ancestry to climb the career ladder? Is it because the self-styled fighter against corporate fat cats revealed herself to be a hypocritical fraud after choosing to support the corrupt dispenser of subsidies that is otherwise known as the Export-Import Bank?

I don’t know the answer to those questions, but I suspect Senator Warren wants to get back in the spotlight. After all, that’s the only logical explanation for her recent upside-down comments about corporate taxation.

And “upside-down” doesn’t even begin to capture the absurdity of what she said, which revealed she has no clue that there’s not a linear relationship between tax rates and tax revenue. Here are some excerpts from a remarkable report in The Hill.

Sen. Elizabeth Warren (D-Mass.) says the big issue with the U.S. corporate tax code is not that taxes are too high — it’s that the revenue generated from the taxes is too low. …“Only one problem with the over-taxation story: It’s not true,” Warren said at the National Press Club on Wednesday. …Warren laid out…principles for corporate tax reform: Permanently increase the share of long-term revenues paid by large corporations.

Wow.

When I read this story, something seemed very familiar.

And then I realized that I read a very similar statement a few years ago in the Washington Post. Writing about fiscal woes in Detroit, a reporter apparently thought it was a mystery that “tax collections are down 20 percent and income tax collections are down by more than a third…despite some of the highest tax rates in the state.”

What Senator Warren and some journalists fail to understand is that there are cases when tax revenues are very low because tax rates are high.

That’s clearly the case with the corporate tax. The United States has the second-highest corporate tax rate in the entire world.

And to add icing on this distasteful cake, we also have arguably the world’s worst worldwide tax system, combined with one of the world’s worst corporate tax structures.

Which makes this statement from Senator Warren particularly laughable.

“Our tax code should protect jobs and investments at home, period,” she said.

I’m almost speechless. Our tax treatment of business already is punitive and Warren wants to make it even worse (who does she think she is, an OECD bureaucrat?), yet she has the gall to pontificate about promoting jobs and investment in the United States?!?

Sort of like murdering your parents and then asking a judge for mercy because you’re an orphan.

In any event, here’s a video that Senator Warren should watch if she actually wants to understand corporate taxation (though I won’t hold my breath).

P.S. Switching to a completely different topic, I’m the first to admit that economists are easy to mock, especially the ones who think they know enough to fine tune the economy.

But it turns out that we’re not total dorks. If a report from the New York Times is accurate (a risky assumption, to be sure), we actually have pretty good social skills.

But I don’t think this means I suddenly have the ability to go into a bar and successfully chat up some ladies (which would be an untenably risky proposition, anyhow, because the PotL has a fiery temper).

What this actually means is that we economists supposedly have decent verbal and communications skills.

P.P.S. Let’s return to the original topic. I don’t claim to be overly clever or creative when it comes to economic humor, but I think I modified this famous sarcastic statement in a very accurate fashion.

Not as good as my Uncle Fester/sequestration cartoon, but it does capture Sen. Warren’s mindset.

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During last night’s Democratic debate, Senator Bernie Sanders said he would not raise tax rates as high as they were in the 1950s. And if Twitter data is accurate, his comment about being “not that much of a socialist compared to [President] Eisenhower” was one of the evening’s most memorable moments.

But a clever line is not the same as smart policy. Promising not to raise top tax rates to 90 percent or above is hardly a sign of moderation from the Vermont politician.

Fortunately, not all Democrats are infatuated with punitive tax rates.

Or at least they didn’t used to be. When President John F. Kennedy took office, he understood that the Eisenhower tax rates (in fairness to Ike, he’s merely guilty of not trying to reduce confiscatory tax rates imposed by FDR) were harming the economy and JFK argued for across-the-board tax rate reductions.

…an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions and any new recession would break all deficit records. In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

Here’s a video featuring some of President Kennedy’s wisdom on lower tax rates.

If that wasn’t enough, here’s another video featuring JFK’s wisdom on taxation.

By the way, if Senator Sanders really wants the rich to pay more, one of the lessons reasonable people learned from the Kennedy tax cuts is that upper-income taxpayers respond to lower tax rates by earning and reporting more income. Here’s a chart from a study I wrote almost 20 years ago.

Last but not least, let’s preemptively address a likely argument from Senator Sanders. He might be tempted to say that he doesn’t want the 90-percent tax rate of the Eisenhower years, but that he’s perfectly content with the 70-percent top tax rate that existed after the Kennedy tax cuts.

But if that’s the case, instead of teaching Sanders a lesson from JFK, then he needs to learn a lesson from Ronald Reagan.

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More than two years ago, I cited some solid research from the Tax Foundation to debunk some misguided analysis from the New York Times about the taxation of multinational companies.

Well, it’s déjà vu all over again, as the late Yogi Berra might say. That’s because we once again find something in the New York Times that cries out for correction.

Here’s some of what Patricia Cohen recently wrote about ostensibly generating lots of tax revenue by pillaging America’s top-1 percent taxpayers.

…what could a tax-the-rich plan actually achieve? As it turns out, quite a lot…the government could raise large amounts of revenue exclusively from this small group, while still allowing them to take home a majority of their income.

Oh, how generous of her for deciding that the awful, evil rich people can keep perhaps keep 50.1 percent of what they earn. Sounds like she should join the other cranks advising Jeremy Corbyn in the United Kingdom.

But I’m getting distracted. Let’s focus on the more important topic, which is her claim that it’s easy to generate a lot of tax revenue by soaking the rich.

The top 1 percent on average already pay roughly a third of their incomes to the federal government, according to a Treasury Department analysishow much more revenue could be generated by asking the rich to pay a larger share of their income in taxes?

Interestingly, Ms. Cohen shares some data showing that the rich already are paying far higher tax rates than the rest of us. Here’s the table that accompanied her article.

Normal people would look at those numbers, or at similar data produced by the IRS, and conclude that we’re already selectively over-penalizing upper-income taxpayers.

But statists see income in the private sector as belonging to the state, so there’s no such thing as too much money for government.

And Ms. Cohen seems to have this attitude. She engages in some simplistic calculations to estimate how much loot could be seized.

Raising their total tax burden to, say, 40 percent would generate about $157 billion in revenue the first year. Increasing it to 45 percent brings in a whopping $276 billion. Move a rung down the ladder and expand the contribution of those in the 95th to 99th percentile — who earn on average $405,000. Raising their total tax rate to 30 percent from a quarter of their total yearly income would generate an additional $86 billion. …A 35 percent share produces $176 billion.

Gee, how easy, at least on paper. If the politicians can figure out how to raise average tax rates to 45 percent for the rich (and 35 percent for the upper-middle class), then they get about $450 billion of additional tax revenue every year.

And you can buy a lot of votes with that much of other people’s money.

But sometimes things that are simple on paper are not so simple in reality.

It turns out that raising someone’s average tax rate (total tax payments/total income) requires some very big (and very bad) decisions on marginal tax rates (tax paid on the last dollar of income/last dollar of income).

Scott Greenberg of the Tax Foundation does that heavy lifting and his analysis makes mincemeat out of Ms. Cohen’s argument.

…how exactly would Congress go about raising the effective tax rate of the 1% from 33.4 percent to 45 percent? The article is not specific about this point. In fact, the article acknowledges that it is “sidestepping… the messy question of just which taxes would be increased.” This is irresponsible policy analysis… When one examines exactly which taxes would have to be increased to raise the effective tax rate of the 1% from 33.4 percent to 45 percent, the endeavor begins to appear much more difficult than the New York Times portrays.

For instance.

…the top tax bracket on ordinary income is 39.6%. How high would Congress have to raise this rate, in order to raise the effective tax rate of the 1% to 45 percent? According to our estimates, Congress would have to raise the top rate on ordinary income to 74 percent, in order to raise the effective rate of the 1% from 33.4 percent to 45 percent.What if Congress decided to increase, not only the top rate on ordinary income, but also the top rate on capital gains and dividends? …According to our estimates, Congress would have to raise the top rate on ordinary income, capital gains, and dividends to 56 percent, in order to increase the effective rate of the 1% to 45 percent.

In other words, if you target the rich with higher income tax rates, you’d have to have a rate higher than the confiscatory structure that existed before any of the Reagan tax cuts.

Or you could boost the top rate “only” to 56 percent, but only by also dramatically increasing the double taxation of dividends and capital gains.

And that might not be very smart, at least if you care about economic performance. Scott explains.

The high rates that would need to be in place to tax the 1% at a 45 percent effective rate would almost certainly have negative economic consequences. According to our Taxes and Growth model, raising the top rate on ordinary income to 74 percent would shrink the size of the U.S. economy by 3.5 percent in the long run, by discouraging labor and pass-through business. While this tax increase would raise $3.49 trillion over 10 years under conventional scoring, after taking its economic effects into account, it would only raise $2.37 trillion. This is a significantly smaller figure than that cited by the New York Times. Furthermore, raising the top rate on ordinary income, capital gains, and dividends to 56 percent would lead to an even larger decline in GDP, of 4.9 percent. This is because taxes on investment income are especially harmful to long-term economic growth. After taking economic effects into account, this proposal would only raise $1.96 trillion over 10 years.

So the politicians would still have some extra revenue, but they would destroy several dollars of private economic activity for every one dollar of revenue they would collect.

In what world would that be a good trade?

Oh, and by the way, those revenue estimates overstate how much money the politicians would collect. In the real world, higher tax rates also would increase tax avoidance and tax evasion.

…none of these figures take into account the effects of increased tax evasion and profit shifting by wealthy Americans that would surely occur in response to such high rates. After all, when taxes rise, taxpayers have more incentives to avoid them. And it is well-documented that, when rates on capital gains rise, shareholders simply defer their realizations, making it difficult to raise much revenue from tax increases on capital gains income.

So here’s the bottom line.

…the New York Times claims that the federal government could raise large amounts of revenue by taxing the rich just a little bit more. In fact, taxes on the rich would have to go up enormously in order to bring in the sorts of revenue figures cited by the article. The negative economic effects of these tax increases would then reduce these revenues considerably.

I’d like to think Scott’s analysis will change minds and cause statists to reassess their desire to impose high tax rates.

But I’m not overly hopeful. Let’s not forget that some of these people aren’t particularly interested in generating more revenue for politicians. Their real motive is hate and envy.

P.S. Let’s hope American statists never learn about Francois Hollande’s flat tax.

P.P.S. Speaking of which, here are some amusing cartoons about class-warfare tax policy.

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