aflanigan wrote: 
Ummm...

 Lazy8 wrote: 

Well, I think we've exhausted this topic without agreement, so I'll give you the last word.

 aflanigan wrote:
Personal income tax revenue/GDP tracks general revenue/GDP quite well, as the article I posted shows (one of the graphs tracks both). It has drifted up a few points, but that has happened against a general trend downward in top tax rates.

Yes, I realize that the graphs show revenue/GDP. That's why I used the term "revenue/GDP" in my post.

Economic data, like most things we measure (and all things having to do with human behavior) has noise in it—changes in the output variables that have nothing to do with the input variable. Like climate data: there are swings from season to season, day to day, hour to hour, but over time trends emerge. The fact that I'm looking out my window on April 22nd at 4" of fresh snow on the ground doesn't mean the planet isn't warming.

Just for giggles you can try a plot showing top marginal tax rates as the independent variable and revenue/GDP (take your pick, personal income tax revenue/GDP or general revenue/GDP) as the dependent variable. You'll get a fuzzy horizontal line. You won't see any kind of monotonic dependency. Maybe this would convince you, but you seem to be willing to go to great length to miss this point.

What Hauser's observation shows is the absence of an empirical relationship between top marginal rates and revenue/GDP. If you want to imply there is one the data's right there, go for it.

 Lazy8 wrote:  I didn't realize that Clinton was that clever!!  How did the Republicans ever get him out of the White House???

Yes, we all understand that when the economy is growing (and GDP is growing), tax revenues in absolute terms go up, even if rates stay constant.  However, if you notice the graph I posted shows tax revenue as a percentage of GDP, so it takes into account the rise and fall of GDP.  If you plotted revenue in absolute terms (such as dollars adjusted for inflation), it would undoubtedly show a steeper rise.  If Hauser's "Law" were valid, there would be no rises or drops in the graph I plotted.

The only way Hauser is able to make his graph appear to show a valid empirical relationship is to lump in other revenue streams such as corporate taxes and social security taxes.

 aflanigan wrote:
Clinton's (well, Congress'—the executive branch can't set tax rates) timing was impeccable—it caught the dot-com bubble nicely. The tax rate changes were a step function, but revenue/GDP rose steadily between 1994 and 2000. But that wasn't the only tax increase during that era; top marginal rates were also increased in 1991 as well. What happened then? Slight drop in revenue/GDP. Your confirmation bias is showing.

But after the millennium—evil George Bush! That was one powerful tax cut—it caused revenue/GDP to start dropping two years before it was enacted. The above chart is really hard to read, but the tax cuts (Congress again) took effect in 2002. Revenue/GDP peaked in 2000, as the dot-com bubble burst. It then rose again, showing a local maximum in 2007, before dropping again. All without any changes in tax rates.

But that tax cut (from 39% to 36%) was small potatoes compared to what happened in 1986: 50% dropped to 28%. Revenue crashed, right? Well, no—it rose slightly.

You're looking for a correlation that isn't there. Period.

But the beer...yes. Here's to statistics!

 Lazy8 wrote: 

Well, I can see where this is going.  Between the two of us we will split hairs, talk past each other, and yield no concessions.  Fun, ain't it?

Maybe the point Hauser and others are really trying to make (and somewhere in the commentary regarding his "Law" I know it has been made) is that wealthy taxpayers, who can afford the best legal advice, including tax avoidance and sheltering income from being taxed, make it difficult to significantly raise revenue over the long term via marginal adjustments in income tax rates.  I'll concede that in a heartbeat.

As to your final contention above:  Look at this graph of individual tax revenue as a percentage of GDP



And recall that in 1993 Clinton, over the objection of the Republicans in Congress, raised taxes on the wealthiest 1.2% of Americans (to the tune of $240 billion in additional taxes, according to THIS abstract/excerpt of a 1994 WSJ article).  Guess what the curve does between 1994 and 2001?  Of course, in 2001 Bush began cutting the tax rates on the wealthiest, and the effective rate that the top 1% or so paid (and their percent contribution to tax revenue overall) begann dropping.  Which corresponds with the dip in the curve subsequent to 2001.

Let's crack a cyber beer, even though Friday is a day away, and drink to the dismal science!

 aflanigan wrote:

Um, ok.

Hauser's observation shows that total government revenue will be a reasonably constant fraction of GDP, regardless of top marginal income tax rates. We now have several articles vehemently denying this...while proving it essentially correct.

You can complain that several different taxes are lumped together to form the sum "government revenue", but that's what government revenue is. If you want to talk about personal income tax alone we can restrict the discussion to that; go look at the graph Jelveh shows of personal income tax revenue/GDP. The average rises very slightly over the period from 1953-present...despite top marginal rates dropping from 93% to the current 33%.

I could just say "QED" but I'm going to get back to the point: raising the top marginal rates will not increase tax revenue. It hasn't for the last 60 years and it won't now.

 Lazy8 wrote: 
Okay, but the two sides we are hearing from are the ones who are a)dominating the debate, and b) making policy based on their claims/assumptions.

Since both sides make shakey claims supporting their position and have rather decent data disproving the other side, I say we take the good data from both and declare that both are wrong. Raising the top tax rate won't dramatically increase revenue, and it won't cause the rich to flee for greener shores elsewhere.  We do need taxes because we have to fund the operations we demand of our government. We need to not make demands that exceed the ability to pay for them with present revenues and *reasonable* borrowing.  We need a change of spending policies and taxation policies. We need to not subsidize healthy businesses (or sick ones for that matter either), or penalize small businesses.We need to restructure the entire tone of the debate..... maybe nationally.... on all topics.

 Lazy8 wrote:  
Sorry you missed it the first read through.  Here it is again:

The issue  is not the empirical data collected in support of Hauser's "Law", but rather how the data have been selectively presented (by lumping together different revenue streams) and used as the basis for a conclusion that is inconsistent with this data (in other words, a postulate as to how changing tax rates on the wealthy, irrespective of other revenue stream adjustments, will affect overall revenue as a percentage of GDP).
(snip)

. . . Jelveh's pointing out the disparity in the data collected to form the chart behind Hauser's "Law"  and the conclusions being drawn by Ranson in the WSJ is fairly straightforward:  Hauser's analysis doesn't prove that raising taxes on the rich will lower growth (and Jelveh's analysis doesn't prove that it won't).

You say "we're not talking about whether raising taxes will reduce growth", etc. but it seems to me that the main argument offered by Ranson was based on precisely that premise:

p.s. Here is a link to a version of Jelveh's commentary with viable graphs:

Lying With Charts:  WSJ Edition

 romeotuma wrote: 
I forwarded this to my daughter, that is her field. Thanks!

 islander wrote:

There are more than two sides. Neither of the two you are hearing from understand this, or at least don't think you can be trusted to understand this.

 aflanigan wrote:

OK, never mind where it came from: tell us what you see in the article that's so compelling. I see obfuscation, not a real argument against Hauser's law. Maybe you got something else out of it.

We aren't talking about whether or not raising taxes will reduce growth, we're talking about whether or not raising taxes will increase revenue. Growth is the slope of the GDP curve, and in a curve that represents a ratio of something that scales with GDP to GDP all you'll see is the scale factor, not any trend in GDP. We have to have a separate argument about that.

 Lazy8 wrote: 
So why are both sides trying to tie the two together?  It's the entire policy of revenue generation and budgeting that needs to be addressed, from top to bottom. Single solutions won't work with a system this complex.

 Lazy8 wrote: 
Well, on the one hand you insinuate that I am engaging in guilt or "discredit by association" and then freely engage in it yourself ("somebody from the New Republic saying "no it isn't" isn't much of an argument").  I could easily have pointed out that the reason we are discussing this is really because of an editorial in the WSJ, and disparage their editorial board as unfailingly pro-business and thus has suspect objectivity where economic policy is concerned, but I refrained from this sort of tactic and tried to speak to the merits of the issue of tax rates on the wealthy and how they affect revenue. 

The issue  is not the empirical data collected in support of Hauser's "Law", but rather how the data have been selectively presented (by lumping together different revenue streams) and used as the basis for a conclusion that is inconsistent with this data (in other words, a postulate as to how changing tax rates on the wealthy, irrespective of other revenue stream adjustments, will affect overall revenue as a percentage of GDP).

Jonathan Chait is merely one of several commentators cited in the Wiki article, and at least one appears to be an economist (I know, aren't you impressed?).  It's unfortunate the links to Jelveh's graphs are broken, I know how much of a visual person you are.  But the upshot of Jelveh's pointing out the disparity in the data collected to form the chart behind Hauser's "Law"  and the conclusions being drawn by Ransom in the WSJ is fairly straightforward:  Hauser's analysis doesn't prove that raising taxes on the rich will lower growth (and Jelveh's analysis doesn't prove that it won't).

If you must have pretty charts to stare at hypnotically, you can try perotcharts.com, although the links to these seem to be slow/broken.

 aflanigan wrote:
Not sure where you're going with this. Hauser's Law doesn't depend on the Laffer curve; Laffer's observation (while trivially true) is theoretical, not empirical. Hauser's Law is an observation of easily-verifiable facts. Feel free to try to discredit it by association, but the truth doesn't depend on who believes it.

The deficit WILL be dealt with, one way or another—we will either generate the political stones to admit that we can't afford all the goodies we want or our creditors will do it for us. If the spending doesn't decrease dramatically, and soon, the debt/GDP ratio will convince bond holders to find somebody else to loan massive amounts of money to and interest costs will eat even more of the budget than they do now. Eventually borrowing money to pay your creditors always fails.

We can probably get more revenue, but not by raising the top marginal tax rates. We can quit pretending Social Security is anything but a welfare program and raise the cap on incomes that pay the FICA tax, that'll help a little. We can raise the retirement age. We can means-test Medicare, that'll help another little bit. You can pretend that these measures are soaking the rich if it makes you feel better, but if we're going to squeeze taxpayers for more revenue there will be less left in those pockets to fund real GDP growth.

The Bowles-Simpson commission had some very practical suggestions for getting there, and of course it fell into the Pit of Demagoguery that is Congress, never to be seen again. Ultimately it will require actual leadership from our leaders to get out of this mess. I don't see it at the moment either, but that's all that's going to work. Assuming we don't just fail. That's still an option.

 aflanigan wrote:
I've read the wikipedia article. Somebody at New Republic saying "no it isn't" isn't much of a response; perhaps you could point out what you found so compelling about his argument. If he meant to show that increasing the top tax rates does, in fact, increase revenue he failed utterly—the two variables don't correlate at all, even with the scale of the revenue/GDP chart blown up to maximize the noise.

The other article is illustrated with graphs that don't load. Kinda hard to see what he's saying; have you got a link with the graphics intact? From the text he doesn't seem to dispute Hauser's observation, just quibbles on how the revenue is distributed among the various forms of taxation. That people with the resources to earn income in the higher tax brackets shift their earnings to less-taxable forms to minimize their tax burdens shouldn't be a surprise.

If you're trying to look for a cause/effect relationship sweeping one variable between 28% and 93% ought to bring it to light. We've done that sweep, the correlation didn't appear.

How's this for history:  our government, like pretty much every government on the planet, is in debt up to its eye sockets because people want government to do everything for them but they don't want to pay for it. (ours is probably worse off because we feel the need to bail everybody else out)  They want something for nothing - or for not much.  Go figure.  Both sides squeal like little girls and point fingers and nobody is willing to actually do anything about it.

blah, blah blah... yada, yada   ...same story, a few new characters every couple of years - nothing changes. 

 Lazy8 wrote: 

Perhaps you'd prefer the commentary collected in the wikipedia article on Hauser's "Law"

This article in particular is interesting.

 Lazy8 wrote: 

This sounds like the same old voodoo economics (EDIT:  see the wiki article above regarding the Laffer Curve being the basis for Hauser's "Law").  We need to have a rising GDP so we need to cut taxes to spur the economy.  Paul Ryan channels David Stockman!!!

How do you propose to deal with the deficit?  Do you agree that some combination of increased revenue and reduced spending is needed (as it was in 1993)?  Do you honestly think spendthrift politicians are going to make significant cuts in the big spending items in our budget?  Virtually all of the big ticket items are coveted by voters; the big budget item least popular with voters (defense spending) is still considered by over half the voters as being an area that should not be cut.  Greater majorities of voters insist that soc sec., medicare/medicaid, etc. should not be cut.  Foreign aid is consistently the only budget item that majorities support cutting in polls.  Do you really think MOCs up for reelection are eager to cut their throat?

The only way such cuts can be made politically palatable is to combine them with revenue increases (even if the current complicated system means that corporations and wealthy taxpayers may find loopholes to avoid paying more taxes, thus reducing the expected revenue increase).  How do you propose we raise revenues if not through a combination of rate increases (such as undoing the Bush 43 rate adjustments), tax law revisions, etc?

Further on the above, I'm all for revising the tax code to try and make it more difficult for corporations and wealthy individuals to escape tax liability.  Unfortunately, we're in a precarious financial situation (and have been for the past few years), and I doubt Congress has the will to wrestle with two giant problems at once.