Ethersnap

WSJ explains the difference between marginal and average tax rates, and why Kim Kardashian does not actually pay only 1% more in taxes than your average Californian tax payer.

Hilarious since I remember one of their opinion columns made (basically) the same mistake a couple months back.

Representative Michele Bachmann noted recently that 47 percent of Americans do not pay federal income tax; all of them, she said, should pay something because they benefit from parks, roads and national security. (Interesting that she acknowledged government has a purpose.) Gov. Rick Perry, in the announcement of his candidacy, said he was dismayed at the “injustice” that nearly half of Americans do not pay income tax. Jon Huntsman Jr., up to now the most reasonable in the Republican presidential field, said not enough Americans pay tax.

Representative Eric Cantor, the House majority leader, and several senators have made similar arguments, variations of the idea expressed earlier by Senator Dan Coats of Indiana that “everyone needs to have some skin in the game.”

The article is about how some politicians are now advocating raising taxes on the working class while lowering taxes on the rich. It is actually disgusting that anyone could say these things in good conscience. 

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Amen, Warren Buffet.

I said a long time ago that I oppose reading the WSJ on principle, but sometimes it’s a lot of fun to see what shenanigans they’re up to.

his means GOP leaders Mitch McConnell and John Boehner have to be especially careful in their choice of appointees. No one from the Senate Gang of Six, who proposed tax increases, need apply. The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.

LOLOLOLOL WSJ

Kyl is that guy who said that 90% of what Planned Parenthood does is abortion, and then claimed that his comment “was not intended to be a factual statement.” 

Ryan is the one who previously brought you such great ideas as abolishing SCHIP (we hate sick kids!), eliminating capital gains taxes (yay rich people!), and privatizing Medicare (old people don’t need affordable healthcare, right?). 

Yeah, we really need more people to follow their lead…

“The Constitution has a list of things that the government’s not allowed to do ever, ever, ever. The government’s not allowed to tell you what church to go to. Ever. Period. It’s just not. So you say, ‘What if God comes down and tells everyone He’s an Episcopalian? Can we do it then?’ No! Not then. Even then we cannot do it. Got it? It’s not allowed. We can’t steal your guns. ‘Well, what if I want to? What if a bad person has a gun?’ No. Uh-uh. No.” His omelet was virtually untouched.

Hmmm…Somehow I don’t remember “tax increases” being one of those things that the government’s not allowed to do ever, ever, ever.

I’m really surprised that an op-ed like this got published in the WSJ. Actually, scratch that. I’m not surprised at all, seeing as the WSJ is part of NewsCorp…

There are so many things misleading and disingenuous here that I don’t even know where to start.

 First, as college students learn in Econ 101, higher marginal rates cause real economic harm…Thus tax rates need to be kept as low as possible, on the broadest possible base, consistent with financing necessary government spending.

Boskin, is this how you teach Econ 101 at Stanford? If so, I’m glad I got rejected there. So if you don’t care about issues of equity at all you might be right on this account. Maybe. There’s more to economics than simply considerations of efficiency.

Second, as tax rates rise, the tax base shrinks and ultimately, as Art Laffer has long argued, tax rates can become so prohibitive that raising them further reduces revenue—not to mention damaging the economy. 

Misleading. Laffer argued that after a certain tipping point, raising taxes may be counterproductive. Boskin makes no mention of which side of the Laffer curve we’re on. Granted, the existence of such a curve and the rate that constitutes the tipping point are both highly controversial, but that just makes Boskin’s statement all the more misleading, as if there was no argument over where this rate should be (and whether the same rate applies across income groups).

Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States—a permanent difference many times the temporary decline in the recent recession and anemic recovery.

Cool story, bro. So what? What about the part where people go bankrupt due to medical expenses? Per-capita income doesn’t tell the whole story about overall quality of life and purchasing power.

Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO’s projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages.

How is this man even a professor? Does he even know basic arithmetic? Marginal tax rate is not the same as effective tax rate. The guy who got a C+ in my Public Finance class could tell you the difference, and a tenured Stanford professor can’t?!

A marginal tax rate of X% means that you’re taxed X% on the next dollar of income, not X% on all the income you’ve earned overall. A guy who makes $1 million in wages per year is taxed the same rate on the first $10,000 as the guy who works part-time at Starbucks and makes only $10,000 total. But the difference is that the millionaire pays progressively higher marginal taxes as he advances up the tax brackets. Otherwise, you’d have the trippy situation where higher pre-tax wages translate into lower real post-tax income. So even if it were the case that the teacher faces a 71% marginal tax rate, she will keep far more than 29% of her pre-tax wages.

I’m not gonna go through the rest of the errors here, but rest assured, the 1000+ comments are probably pretty comprehensive in attacking Boskin.

TL;DR? If you’re gonna name drop economists, you should back it up with actual econ, not just hand-wavy assertions that make it sound like all you did was skim Wikipedia prior to writing the piece.