The Least, First

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Why cutting rich folks’ taxes doesn’t stimulate the economy

with 2 comments

And what does.

Another fascinating post comes from the ever-excellent True Conservative.

Consider: In 2007, only 9% of privately-held U.S. businesses … cited a “shortage of long-term finance” as a constraint on expansion. “Shortage of skilled workers” is No. 1.

So how do you increase the number of skilled workers? Here’s the story:

clipped from trueconservative.typepad.com
Here’s the central tenet of supply-side/trickle-down/voodoo Reaganomics:
If rich people get (and keep) more money, they will invest it and promote economic growth, so everyone will prosper.
That would (perhaps) be true if a shortage of investment were an important constraint on businesses […]
But availability of investment money is the least important constraint […]
[I]t ranks dead last on the list of business constraints. […]
A shortage of skilled workers in now the #1 constraint […]

Constraint 2
[This is the] economic view so ably explicated by James Livingston, which I summarize and link to here […]
The fact is that wealthy people can’t find truly productive investments offering sufficient returns, so they turn instead to investments that don’t have anything to do with production or productivity. (Think: MBSes, CDOs, CDSes, etc.)[…]
Since the greatest constraint on growth is currently a shortage of skilled workers, the best path to prosperity seems to be taxing those unproductive dollars and investing them in the thing that … is prosperity-producing: education.
Making sure that wealthy people have plenty of money is not the way to produce prosperity. That’s a self-serving myth […]
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Provocative, eh?


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Written by Monte

November 21, 2008 at 10:50 pm

Low income Iowans pay higher tax rates

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Hmm—and we thought taxation in America was progressive. None such here in my state. In fact, it’s tilted against those who have the least.

If you’re poor, you pay a higher net rate—especially in states that shift the burden away from income tax and onto sales tax. Details:[h/t Lori, via the newspaper of our youth, the Burlington Hawk-Eye.]

clipped from www.thehawkeye.com

Study finds low-income Iowans pay higher taxes

the bottom 60 percent of Iowa taxpayers pay roughly 10 percent of their income in state and local taxes.
Those in the top 1 percent, making more than $320,000 a year, pay 6.3 percent of their income in state and local taxes, the study said.

“The state sales tax has doubled in the last 25 years while we have made big cuts in income tax,” Ralston said. “This is not a good tradeoff if we want a tax system that better reflects a household’s ability to pay.”

For low-income families making less than $16,000 a year, 7.3 percent of the household income goes for sales and excise taxes. Those taxes consume 2 percent of those with household incomes about $127,000.

The report recommended that lawmakers once again expand the earned income tax credit that goes to the working poor, as well as allow local option income taxes to augment or replace local option sales taxes.
warned against any additional increases in the sales tax
the most regressive of taxes
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Now suppose you make $16,000 a year.  When you pay taxes, you pay them instead of something you need.  You don’t fill your prescriptions.  You hold off repairing your car.  You don’t even think about going to the dentist or paying for a haircut, or getting your kid’s teeth straightened.

And you make it.  Until one thing goes seriously wrong.

Say, the car’s transmission fails.  No chance Read the rest of this entry »

Written by Monte

November 12, 2008 at 1:55 pm

Give to Caesar what’s his (readings for Sunday, Oct 19)

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The Imperial Denarius

The Roman Imperial Denarius

I hear from zealous anti-tax folks from time to time, who usually pop by to take issue with my Poverty, Government, and the Bible essay.

Some are eager to prove that government shouldn’t be involved in helping poor people—catch your breath and plunge in here—because taxation is theft because it’s taken against our will and since taxation is theft it obviously isn’t God’s plan for governments to help the poor because God would not be pleased by stealing the money it would take to do so nor by helping the poor against the will of the stingy.

Well, hokum. Read the rest of this entry »

Do lower taxes on top 1% boost the economy?

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Since the days of Reagan, many have held that the economy can be stimulated by cutting taxes on the incomes of people who have the most money to invest. An insightful analysis at LaneKenworthy.net offers evidence questioning that assumption. Consider some intriguing observations on the data graphed below.

Chart 1: Note that at the close of World War II, Americans in the top 1% of income paid a marginal tax rate of 90%. Now, it’s about 35%. I’m sure most Americans don’t realize how profoundly this rate has fallen.

Chart 2: As the rate dropped, government revenue from this group (as a proportion of GDP) plummeted. Find ‘the late ’90s through 2001; compare them with ’02-’05.

Chart 3: Finally, note the comparison of the top 1%’s marginal tax rate with the growth rate of the national GDP. Note that it’s pretty tough to find a link between the two.

clipped from lanekenworthy.net
The following chart shows the top marginal rate and the average effective rate on the top 1% of taxpayers since World War II

The following chart shows federal government tax revenues as a share of GDP by the effective tax rate on the top 1%. Read the rest of this entry »

Written by Monte

January 16, 2008 at 7:50 pm

Posted in Politics

Poverty, government, and the Bible

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[Please note that many helps came via Ron Sider’s excellent but aging book Just Generosity: A new vision for overcoming poverty in America. This page is also saved as a post, under the title A Bible Argument for Government Aid to the Poor. The text is about the same there, but the comments of others—and my responses to them—are different. Thanks for thinking along!]



Madison Free ClinicEvangelicals often struggle with the idea of a government role in addressing poverty. Often, I hear questions like these, from an honest blogger called RenaissanceGuy:

  • I want to hear a reasoned biblical argument for government-run health care.”
  • … if people are coerced, though the income tax code, to support the poor, then are they actually pleasing our Lord?”

Others put it like this:

  • “Is it government’s job to care for the poor, or should the church and their families do it?”

While sectarian government is antithetical to American democracy, people of faith in the USA do have the privilege of holding and sharing political values consistent with what they understand to be good. Those values may not well fit in either conservative or liberal camps, but there will be common ground that can be shared with both.

In order to do that, people of faith have to be deeply aware of their own faith, and not just the arguments of right or left. So here’s an attempt to think aloud on one of those issues.

Especially for evangelicals:

a Bible argument for government aid to the poor:

First, some assumptions on which I think all can agree:

1. Jesus, as described in the gospels, is much more focused on the poor than our evangelical theologies have been. Read the rest of this entry »

Written by Monte

January 12, 2008 at 12:24 am

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